THE STATE OF TRIPURA & ANR versus CHANDAN DEB & ORS.

Citation: [2023] 3 S.C.R. 1134 · Decided: 24-03-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 3 S.C.R.
   [2023] 3 S.C.R. 1134
1134
THE STATE OF TRIPURA & ANR.
v.
CHANDAN DEB & ORS.
(Civil Appeal No. 6500 of 2008)
MARCH 24, 2023
[M. R. SHAH AND KRISHNA MURARI, JJ.]
Tripura Sales Tax Act, 1976 : ss. 3A, 3AA – Tripura Sales Tax
Rules, 1976 – r. 3A(2) – Sub-rule (2) of the r. 3A, if ultra vires to the
provisions of the TST Act – On facts, issuance of work order for
hiring vehicles by ONGC, GAIL, FCI in favour of writ petitioners-
suppliers of the vehicle – Writ petitioners challenging vires of r.
3A(2) and for refund of the amount so deducted as sales tax on
transfer of the right to use goods – Single Judge held r.3A(2) as
ultra vires the TST Act which was upheld by the Division Bench –
Single Bench also held that suppliers are liable to pay sales tax u/s.
3AA but the same was set aside by the Division Bench – On appeal,
held: On combine reading of s. 3 r/w s.2(b) & 2(g), any transfer of
the right to use any goods (including the vehicles) shall be deemed
to a ‘sale’ and the transferor of the right to use any goods/vehicles
can be said to be a dealer and thus, liable to pay the tax at the rate
of 4% on any transfer of the right to use any goods as per proviso
to s. 3(1) – Liability to pay the tax at the rate of 4% on any transfer
of right to use any goods shall be u/s. 3(1) – r. 3A(2) provides only
for a machinery/mechanism where the person buying the goods is
required to deduct the tax at source and deposits the same with the
Revenue – It does not in any manner change the chargeability of
the tax or liability of the tax which is u/s. 3(1) r/w s. 2(b) & 2(g) –
Thus, High Court erred in declaring r. 3A(2) ultra vires to TST Act
and in quashing and setting aside the memorandum issued in 1992
by the State Government requiring the hirers-ONGC and GAIL to
deduct 4% tax at source u/s. 3A out of the respective bills of the
suppliers of the vehicles.
Allowing the appeals, the Court
HELD: 1.1 On combine reading of Section 3 read with
Section 2(b) & 2(g) of the Tripura Sales Tax Act any transfer of
the right to use any goods (including the vehicles) shall be
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deemed to a ‘sale’ and the transferor of the right to use any goods/
vehicles can be said to be a dealer and therefore liable to pay the
tax at the rate of 4% on any transfer of the right to use any goods
as per proviso to Section 3(1). Therefore, the liability to pay the
tax at the rate of 4% on any transfer of right to use any goods
shall be under Section 3(1). Therefore, the submissions on behalf
of the respondents-suppliers/transferers that as there is no sale
or transfer of the goods and that they are not registered with the
TST Act and therefore, the liability to pay the tax at 4% does not
arise cannot be accepted. The liability to pay the tax shall be on
the transferer who transfers the right to use any goods as per
proviso to Section 3(1) read with Section 2(b) and 2(g) of the TST
Act. [Para 8.3][1148-A-D]
1.2. As regards, the question whether Rule 3A(2) and the
memorandum issued by the Government to deduct the tax at 4%
and the bills to be paid to the transferers can be said to be ultra
vires to TST Act, it appears that the High Court held the said
provision as ultra vires by observing that there is no such
provision for tax deduction at source under the TST Act and thus,
the Rule cannot go beyond the Act. The said view taken by the
High Court is absolutely fallacious. Rule 3A(2) can be said to be
a recovery machinery/mechanism. Rule 3A(2) provide only for a
machinery/mechanism where the person buying the goods is
required to deduct the tax at source and deposits the same with
the Revenue. It does not in any manner change the chargeability
of the tax or liability of the tax which is u/s.3(1) read with s.2(b) &
2(g) of the Act. [Para 9][1148-E-G]
1.3. The rules are framed in exercise of Rule-making power
under Section 44 of the Act and in that view of the matter and as
the liability to pay the tax on transfer of right to use the goods
shall still be continued under proviso to Section 3(1), mere
providing for mode of recovery and/or providing for machinery/
mechanism to recover the tax to be paid by the transferer/supplier
from the person buying the goods deducting the tax at source
and depositing the same with the Revenue cannot be said to be
ultra vires to TST Act and the Rules as observed and held by the
High Court. Rule 3A(2) does not in any manner change the
THE STATE OF TRIPURA & ANR. v

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