The appellant owned a tug (towing vessel). It entered into a Character Party Agreement with New Mangalore Port Trust on 8.1.1998. It agreed to make available the services of tug, for the purposes provided in the agreement along\u00a0 with the\u00a0 master and\u00a0other personnel of\u00a0 the\u00a0 company to\u00a0 the\u00a0 port trust for 6 months.<\/p>\n
\u00a0<\/p>\n
Whether the State of Karnataka had jurisdiction to levy sales tax under Section 5C\u00a0 the KST Act in respect of the Charter PartyAgreement dated 8.1.1998?<\/p>\n
\u00a0<\/p>\n
The Supreme Court considered the various terms and conditions of the Charter party agreement (Annexure 1), and observed that when the terms were perused, clause 1 provided that the contractors \u201clet\u201d and the charterer \u201chire\u201d the goods vessel for 6 months. The expression \u201clet\u201d had been used and the vessel, most significantly during the charter period had been placed at the \u201cdisposal\u201d of the charterers and under their control in every respect. The charterers had been given the right to use all outfits, equipment and appliances on board the vessel at the time of the delivery, including the whole reach, burthen and deck capacity. Thus, the Court observed that in their considered opinion, effective control for the entire period of 6 months had been given to the charterers. To\u00a0 constitute a transaction of\u00a0\u00a0\u00a0\u00a0 a transfer of right to use, essentially goods must be available for delivery. In the instant case, the vessel was available for delivery and in fact, had been delivered. There was no dispute as to the vessel and the charterer had a legal right to use\u00a0\u00a0\u00a0\u00a0 the goods and the permission\/license had been made available to the charterer to the exclusion of the contractor. Thus, there was complete transfer of the right to use.<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
The Supreme Court followed their judgement in the case of 20th Century Finance Corp. Ltd. v. State of Maharashtra (2000) 6 SCC 12 <\/em><\/strong>and held that since the agreement was signed in the State of Karnataka, the situs of the transfer of right\u00a0\u00a0\u00a0\u00a0 to use was within the State of Karnataka and therefore that State was competent\u00a0\u00a0\u00a0 to tax it.<\/p>\n The Court did not go into the question of imposition of tax in territorial waters\u00a0\u00a0 and have kept the question open.<\/p>\n \u00a0<\/p>\n The Charter Party Agreement resulted in a deemed sale as there was a transfer of right to use the vessel. The transaction was liable to be taxed by the concerned authorities in the State of Karnataka. (CA No. 3383 of 2004 dt. 4-12-2019)<\/p>\n Editorial<\/em><\/strong>: The statutory framework for under GST has now changed and this decision is not relevant from the levy point of view, but can be used for the purposes of classification.<\/p>\n \u201cA true lawyer is one who places truth and\u00a0 service in the first place and the emoluments of the profession in the next place only.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" Karnataka Sales Tax Act, 1957Held<\/h3>\n
\nS. 5C:Levy of tax on the transfer of the right to use any goods- Transfer of right to use \u2013 Charter Party Agreement [ Andra Pradesh General Sales tax Act 1957 , S 5E, Constitution of India , Art, 28, 246(4), 286, 297(3), 366(29A)(d) ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-13117","post","type-post","status-publish","format-standard","hentry","category-gst-law"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3pz","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13117","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13117"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13117\/revisions"}],"predecessor-version":[{"id":13118,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13117\/revisions\/13118"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13117"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13117"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13117"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}