The Delhi High Court has quashed the VAT demand of Rs. 176 Crore on Pawan Hans and held that agreements for helicopter use does not constitute “transfer of right to use”.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has quashed the ruling of the Value Added Tax Appellate Tribunal by which it was held that Pawan Hans had transferred effective control and possession and qualifying the precepts of a transfer of right to use goods as contemplated under Section 2(g)(vi) of the CST Act and Section 2(zc)(vi) of the DVAT Act.
The issue raised was whether the supply of helicopters by the appellants to the Andaman and Nicobar Islands Administration constituted a “transfer of a right to use” and thus exigible to tax under Section 2(g)(vi) of the Central Sales Tax Act, 1956 and Section 2(zc)(vi) of the DVAT Act.
The agreement takes note of the appellant, Pawan Hans was described as the Lessor, as being the owner of a fleet of helicopters and engaged in the business of providing helicopter support services to customers by leasing those helicopters. The Andaman and Nicobar Islands Administration was described in that agreement to be the “Charterer” or Lessee.
In the course of assessment, the appellant had submitted objections in respect of the default assessment notices which came to be issued. From the details which have been taken note of by the Tribunal, the notices of default assessment of tax and interest under Section 9(2) of the CST Act for FYs 2006-07 to 2009-10 came to be framed on 09 March 2011.
The authority under the DVAT Act also proceeded to reject the objections taken holding that the terms of the agreement were liable to be acknowledged as constituting a “transfer of a right to use”.
The appellant, Pawan Hans contended that the agreement dated 11 February 2003, and which constituted the repository of the bargain between the parties did not involve a “transfer of a right to use”.
Pawan Hans urged that tested on the principles underlying Article 366(29A)(d) of the Constitution, the tax authorities as well as the Tribunal have clearly erred in holding to the contrary.
The court held that Article 366(29A)(d) is not concerned with delivery of goods for use but envisages the levy of a tax on the transfer of a right to use goods. Clause (d) of Article 366(29A) cannot be placed in the same category as that of bailment where goods are left in the possession of the bailee solely for the purposes of use on a hire basis. Proceeding ahead, the Supreme Court also underlined the importance of a transfer and vesting of effective and general control.
The court allowed the appeal of Pawan Hans and quashed the demand of Rs. 176 Crore.
Case Details
Case no. ST.APPL. 1/2023 & CM APPL. 1317/2023
Case Details: M/S Pawan Hans Limited (Formerly Known As Pawan Hans Helicopters Limited) V/S Commissioner Of Trade And Taxes
Counsel for the Petitioner: Mr. Tarun Gulati, Sr. Adv. with Mr. Rajat Bose, Mr. Ankit Sachdeva and Ms. Shohini Bhattacharya
Counsel for the Respondent: Mr. Rajeev Aggarwal, ASC alongwith Mr. Shubham Goel and Mr. Mayank Kamra
