Vat on hire of machinery
Querist : Anonymous
one of my clients had purchased interstate of hitachi and other machines for quarrying purpose against 2% CST and issued C forms for the same.
NOw he is giving the machineries on hire basis and filed the monthly Vat returns as NIL as there is no sales TO.
Now the inspection officer had issued the notice that no sales and output has been since long and proposed penalty of one and half times of the rate of vat tax (14.5%) on purchase value.
my contention is this purchase is capital good not a trade commodity
plz guide me with case laws
thanks in anticipation
Here a distinction is to be made between hiring and leasing.Leasing is taxable ,whereas hiring is not.If the owner hands over the machines to the user entirely with an agreement for a certain period it becomess leasing and the receipts are taxable. When the owner keeps full control of the machinery,with his driver,fuels,lubricants and other maintenance,then the receipts are taken as hire charges and not taxable
If these conditions are not fulfilled same may attract penalty provision under CST Act.
Querist : Anonymous
the dealer had purchased machineries against 2% CST for purpose of using it in his own quarrying purpose as below;
(b)(i)For use in the manufacture or processing of goods for sale 52.00 04/07/2011 MACHINERY AND PARTS COMPRESSOR, TIPPER, HITACHI, EXCAVATOR
Since the quarry lease permit is still pending in order to pay the interest and installments the same machineries are given on rent and hence filed the NIL Vat returns.
the officer has now issued notice U/s 10-A of CST Act for misutilization of C_Form and levied 1 & 1/2 times of 14.5% VAT. quoting M Pais and sons and another V/s State of Mysore 1965 STC161(Mys) case law.
Is the notice issued by officer is proper please help me with contra case laws.
thanks a lot Sirs..
Whether own mining business was shown in registrations obtained under CST & local Act?
Querist : Anonymous
yes shown in both registrations.
A decided case of State of Tamilnadu Vs. Photo Centre (1997) 114 STC 55 (Mad) may be of help if the facts are similar. It is not necessary to operate the machine for own mining business, if it is used for mining work of others that will not be treated as contravention to attract penalty.
Mob. 919850350854 (Mah.)
Kindly hire good CA and represent your case properly nothing will happen.
Under Sales Tax Act The transfer of right to use any goods for any purpose is covered by definition of sale. In some of the states receipts from Hiring and/ or leasing are covered by definition of sale, attracts liability for VAT also.
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