The Delhi High Court on Thursday quashed the Commissioner of Trade and Taxes’ demand of Rs 176 crore VAT against Pawan Hans, which is in the business of chartering helicopters, for the period 2006 to 2010.
A bench comprising Justices Vibhu Bakhru and Amit Mahajan said the Appellate Tribunal, Value Added Tax, Delhi’s “had clearly erred in coming to the conclusion that the appellant (Pawan Hans) had transferred effective control and possession and thus qualifying the precepts of a transfer of right to use goods as contemplated under Section 2(g)(vi) of the Central Sales Tax Act, 1956 and Section 2(zc)(vi) of the Delhi Value Added Tax Act, 2004.”
The principal question before the tribunal was whether the supply of helicopters by Pawan Hans 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, 19565 and Section 2(zc)(vi) of the DVAT Act.
“We find ourselves unable to appreciate how a confidentiality or security clause could have any bearing on the issue of taxability and whether the agreement constituted a transfer of a right to use as contemplated under Article 366(29A)(d) of the Constitution,” the HC observed.
While Pawan Hans had entered into agreements with various state governments and public sector entities that hired its helicopters, tax authorities claimed that these agreements entailed transfer of the right to use and therefore, the consideration would be taxable under the Delhi Value Added Tax Act, 2004.
Pawan Hans had contended that the February 2003 agreement, which constituted the repository of the bargain between the parties, did not involve a “transfer of a right to use”.
Senior counsel Tarun Gulati, appearing for Pawan Hans, argued that the helicopters continued to be in possession and control of the assessee, the pilots manning the aircraft were under its rolls and even the maintenance of the helicopters was done by Pawan Hans.
Pawan Hans was registered with the service tax authority for rendering the service of “Supply of Tangible Goods for Use Services” and had duly paid the service tax as chargeable under the Finance Act, 1994, the senior counsel, adding that the appellate tribunal’s order was “palpably erroneous”. Notwithstanding the same, if it was held that there had been a transfer of right to use the aircraft, Pawan Hans would not be liable to pay any service tax as both the taxes were mutually exclusive, Gulati said.
The HC agreed with Gulati’s stand that there was also no transfer of permits and licenses which were necessarily required in order to undertake the operations contemplated under the agreement. Those permits and licenses undisputedly remained in the hands of the appellant, it noted.
