The order of the court was made by

Chitra Venkataraman, J.:— These tax case revisions and the writ appeal arise out of the order of the Sales Tax Appellate Tribunal, relating to the assessment years 1992-93 to 1997-98. The Revenue is, on revision before us. Since the issues raised in all these revisions are common and the Tribunal had also considered the issues in respect of the assessment years 1992-93 to 1994-95 under a common order and with reference to the Subsequent years, under a separate order, we feel, it is better that the entire case is dealt with under a common order.

2. The substantial questions of law raised in the revision cases are as follows:

T.C (R) No. 184 of 2006

(i) Whether the Sales Tax Appellate Tribunal is right in holding that both the execution of contract as well as the act of passing of the control/domain of the goods should take place for the transfer to be completed and for levy of tax under section 3A of the Tamil Nadu General Sales Tax Act, 1959?

(ii) Whether the Sales Tax Appellate Tribunal is right in holding that the impugned transactions are eligible for deduction in section 3A(2)(a) of the Tamil Nadu General Sales Tax Act, 1959?

TV C. (R) Nos. 1563, 1589 and 2590 of 2006

(i) Whether the Tribunal has erred in treating the leasing of ship as not falling under section 3A of the Tamil Nadu General Sales Tax Act, 1959?

(ii) Whether the Tribunal, after accepting all the contentions put forth by the Revenue that the leasing transactions involved would attract tax under section 3A, is right in holding that the transactions would fall under section 3A(2)(a) of the Act when there are no findings in regard to inter-State trade, commerce, etc.

(iii) Whether the Tribunal is correct in arriving at such a conclusion that the transactions would fall under section 3A(2)(a) of the Act when such a ground was not raised either before the assessing authority or before the first appellate authority?

(iv) Whether the order of the Tribunal is legally tenable in the context of the order of the apex court reported in 20th Century Finance Corpn. Ltd. v. S tate of Maharashtra, [2000] 119 STC 182 (SC) since the situs of sale of a deemed sale would be the place where the contract is executed?

(v) Whether the Tribunal has erred in observing that the sale of used and discarded ships did not conclude within the State of Tamil Nadu as per Explanation 3 to section 2(n) of the Tamil Nadu General Sales Tax Act, 1959, read with section 4(2) of the Central, Sales Tax Act, 1956?

(vi) Whether the order of the Tribunal in deleting the consequent penalty levied is valid in law?

3. T.C Nos. 1589, 1590, 1563 and 184 of 2006 and W.A No. 1140 of 2010 relate to assessment years 1992-93, 1993-94, 1994-95, 1995-96 and 1997-98, respectively. The assessments for the assessment years 1992-93 and 1994-95 were made originally on M/s. South India Shipping Corporation Ltd., which got amalgamated with M/s. Essar Shipping Ltd., with effect from April 1, 1996. The assessment for the assessment year 1993-94 was made on the present assessee and the assessment orders for all the assessment years concerned herein, were served on the assessee herein. The assessee herein is a public limited company. The assessee owned fleet of ships used for transport of cargo and passengers. The business of the assessee included entering into charterparty agreement to hire out the vessels to charterers. It is stated that in the course of assessment year 1992-93, the assessee-company had let on hire, 11 ships owned by them, to various parties within and outside Tamil Nadu and also parties outside India and collected charges on rendering services. Of the several parties, M/s. Poom-puhar Shipping Corporation Ltd., Chennai, is one with whom the assessee had time charter agreement in respect of three vessels, by name, Chennai Valarchi, Chennai Veeran and Chennai Polivu. Time charter, agreements were executed on February 25, 1992 as regards Chennai Valarchi and Chennai Polivu on February 25, 1992 and Chennai Valarchi on January 12, 1993 for M/s. Poompuhar Shipping Corporation Ltd, to transport coal to the Tamil Nadu Electricity Board. It is stated that apart from the above, the assessee also sold ships and old assets. Similar to the transaction relevant to the assessment year 1992-93, the assessee had entered into time charter agreement during the subsequent relevant assessment year too. The terms of the time charter agreement are one and the same.

4. It is seen that the assessee was nbt originally registered as a dealer under the provisions of the Tamil Nadu General Sales Tax Act (hereinafter referred to as, “the Act”). It is stated that on August 8, 1996, the place of business of the assessee was inspected and the accounts were called for and checked. Based on this, the Revenue viewed that the transaction under the charterparty agreement was lease of the ships for valuable considera-tion, attracting charge under section 3A of the Act. The assessing officer viewed that as per the agreement, there was a transfer of possession of the vessels to the charterers. Thus, going by the terms of lease, the receipt of lease rentals was held as assessable to tax under section 3A of the Act.

5. The petitioner objected to the proposal, contending that the essential control of the vessel remained with the owner/assessee. Considering the nature and characteristics of the time charter agreement) in contradistinction to bareboat charter and voyage charter, the actual possession of the Vessel remained always with the owner. Referring to the various clauses in the agreement, the essential ingredients of transferring possession for effective control not being there, there was no liability to be met by the assessee. The contention thus taken by referring to various clauses in the agreement was, however, rejected by the assessing officer. He held that the clauses in the agreement clearly spelt out on giving possession and control over the vessel to the charterer and redelivery by the charterer at the end of the lease period. So too, the claim on the sale of ships was also rejected. Thus ultimately, the order of assessment was made on the assessee, treating the transaction as transfer of right to use, hence a deemed sale, attracting charge under section 3A of the Act. So too the sale of the named ships as local sale. Thus on the time charter, apart from tax, penalty was also imposed under section 12(5)(1) and 12(3)(a) of the Act for the assessment year 1993-94 and under section 12(5)(i) of the Act for the assessment years 1994-95, 1995-96, 1996-97 and 1997-98. Aggrieved by the abovesaid assessments, the assessee preferred statutory appeals before the Appellate Assistant Commissioner.

6. Reiterating the contention that the time charter agreement did not involve transfer of possession of the vessel from the assessee to the charterer and referring to the various clauses in the agreement, the assessee submitted that the charterparty agreement did not involve demise of the ship; the master of the ship and the crew ever remained the employees of the assessee. Referring to the phrases used, namely, “let”, “hire”, “delivery” and “redelivery”, learned senior counsel submitted that courts have held that these terms in time charter agreements are not to be understood in a literal sense and that these generally used terms; however, do not mean that under the time charter, the owner of the vessel parted with the possession of the vessel. Thus, he relied on the decision, of the apex court reported in (1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries) and submitted that the agreement has to be read as a whole to ascertain the intention of the parties. After going through the various clauses in the agreement, the Appellate Assistant Commissioner agreed with the assessee that the time charter agreement did not involve transfer of right to use the goods. Thus ithe assessment under section 3A of the Act was set aside. As regards the sale of ships, when the contract of sale in respect of specific vessels; was entered into, they were outside the State of Tamil Nadu. In the above circum-stances, sale being one of ascertained goods, the assessment made on the sale of ships was set aside. However, on other aspects regarding sale of bunders, the Appellate Assistant Commissioner remanded the same for fresh consideration. On the penalty levied under section 12(3)(a), (for the assessment year 1992-93, the same was reduced, similarly for the other assessment years, penalty stood modified.

7. Aggrieved by this, the Revenue went on appeal before the Tamil Nadu Sales Tax Appellate Tribunal. Agreeing with the Revenue that the lessee had the control over the economic benefit of the vessel hired, the Tribunal referred to the decision reported in [1999] 113 STC 403 (TNTST) (Upasana Finance Ltd. v. State of Tamil Nadu) and held that the transaction attracted the charge under section 3A of the Act. The assessee took an alternate plea that at the time of entering into the charterparty agreement, the vessels were not inside the State. Further, the object of the charterparty agreement was transportation of coal from outside; thus with the inter-State movement providing for bringing coal under the charterparty, the Tribunal accepted the plea of the assessee, holding that the transactions of interstate sale for the entire transactions were not assessable under section 3A(2) of the Act. The Tribunal pointed out that at the time of entering into the charterparty agreement, the vessels were berthed in different States and thus, they were not available for delivery within the State. Thus the Tribunal held that even though the transactions are assessable under section 3A of the Act, the assessee was entitled to deduction under section 3A(2)(a) of the Act. The Tribunal relied on the decision reported in [1986] 63 STC 391 (Vinay Cotton Waste Company v. The State Of Tamil Nadu) and concluded that even though the seller and the purchaser might be in the same State, yet, there could be an inter-State sale. As regards the sale of ships, the Tribunal upheld the order of the Appellate Assistant Commissioner, holding that they were not taxable, since the same were outside the State of Tamil Nadu. Thus the Tribunal also upheld the deletion of penalty.

8. Apart from reiterating the grounds taken in the tax case revisions, learned Advocate-General appearing for the Revenue took us through the time charterparty agreement and the provisions of section 3A of the Tamil Nadu General Sales Tax Act and pointed out that in terms of the charterparty agreement. M/s. Poompuhar Shipping Corporation had taken possession of the vessels for use by the said party. Going by the amendment brought forth under article 366(29A) of the Constitution and the corresponding provisions under the Tamil Nadu General Sales Tax Act under section 3A, treating the transfer of right to use as a deemed sale, with possession thus transferred to the other contracting party, the transaction dearly falls under the charging provision under section 3A, of the Act. He pointed out that the assessee had received consideration on the transfer of right to use the vessel by the contracting party. He pointed out that it is not, denied by the assessee that M/s. Poompuhar Shipping Corporation had the possession to use the vessel for transporting coal from Tuticorin to different places. On the admitted fact that the named vessel was outside the State of Tamil Nadu for movement to other State, he submitted that it is clear that the Cause of action had arisen in Chennai and hence, the same was liable to be taxed under section 3A of the Act. He further pointed out that even though the Tribunal had accepted that the transaction is exigible to tax under section 3(a) of the Central Sales Tax Act, it committed a serious error in granting the relief under section 3A(2)(a) of the Tamil Nadu General Sales Tax Act when that was not the case of the assessee too. On the question as to whether the inter-State trade and commerce would qualify for deduction, on the facts thus fitting in with section 3A of the Act, no exception could be taken to the order of the assessing officer in bringing them to tax under the provisions of the Tamil Nadu General Sales Tax Act.

9. In this connection, he placed reliance on the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), particularly to paragraph 27, that on the admitted fact that there was a written contract between the parties, the place of execution shall be the place where transaction took place. Hence, the provisions of the Tamil Nadu General Sales Tax Act stood attracted. He also referred to the decisions reported in [1999] 113 STC 317 (SC); (1999) 9 SCC 182 (Aggarwal Brothers v. State of Haryana) and [2007] 8 VST 314 (Gauhati) at page 328. (HLS Asia Ltd. v. State of Assam), to contend that Once possession is handed over to the contracting party, the provisions of section 3A of the Tamil Nadu General Sales Tax Act stood clearly attracted. Going by the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), it is immaterial where the goods were delivered. Since the transfer of right to use is a deemed sale and the lease is effective only when the ships are put into lessee's economic benefit, the assessee is not entitled to deduction under section 3A(2)(a) of the Act. The learned Advocate-General further submitted that when the assessee had not filed any tax case to challenge the order of the Tribunal as regards its finding on possession, on the admitted fact that possession had been given to the contracting party, the assessee cannot, in any manner, dispute the said aspect.

10. As regards the sale of ships, learned Advocate-General pointed Out to section 3(29) as well as section 28 of the Merchant Shipping Act, 1958 and submitted that the port of transport assumes significance in the matter of fixing the chargeability under the provisions of the Act.

11. Countering the submissions Of the learned Advocate-General, Mr. C. Natarajan, learned senior counsel appearing for the assessee, made submission first on the fallacy in the reasoning of the Tribunal as to the applicability of section 3A of the Tamil Nadu General Sales Tax, Act to a time charterparty agreement. Making his submission on the maintainability of the abovesaid contention from the assessee in the tax case filed by the Revenue, he placed reliance on the decisions reported in [1998] 109 STC 205 (Mad) (Sree Ayyanar Spinning and Weaving Mills Limited v. State of Tamil Nadu), (1980) 121 ITR 572 (SC), at page 579 ( v. ) and [1959] 10 STC 584 (State Of Madras v. Asher Textiles Ltd., Tiruppur), only to contend that the tax case revisions before this court are also in the nature of appeal proceedings; that even though the assessee might have succeeded on a different ground and hence there was no tax case by it, yet, in a tax case filed by the State, it is open to the assessee to place his objections as to the fallacy in the reasoning of the Tribunal that the time charter amounted to transfer of right to use, goods and hence, deemed sale assessable under section 3A of the Tamil Nadu General Sales Tax Act. He submitted that it is no doubt true that the State's appeal was dismissed by the Tribunal holding that the assessee was entitled to claim deduction under section 3A(2)(a) of the Act. The contention of the assessee throughout had been that the provisions of section 3A of the Act never stood attracted to the assessee's case. He stated that the fact of mere handing over of possession, by itself, did not attract the changeability under section 3A of the Act. Taking us through the nature of the different charterparty agreements and the distinction that time charterparty agreement has over voyage charter and bare boat charter, he placed reliance on the decisions of the Supreme Court reported in (1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew. Industries) and that of this court in the decision reported in 99 L.W 517 (Transworld Shipping Services (I)(P) Ltd. v. Owners) and submitted that in a time charterparty agreement, neither the legal ownership nor the beneficial, ownership or equitable ownership, is given to the charterer. He further submitted that going by the clear distinction recognised world over between the voyage charter, time charter and charter by demise, the agreement being one of time charter, the question of giving effective possession to the charterer does not arise at all. Learned senior counsel further took us through the standard format of the time charter-party agreement and the decisions in particular on the aspect of transfer of possession under the time charterparty agreement, contending that all that had been given in the time charterparty to the charterer was only a right to use the vessel and the hours of operation.

12. In sum and substance, he submitted that all that the agreement herein provided for was only service by use of the vessel in the context of charter hours. The word “possession”, as used in the time charter, cannot be understood as had been normally understood. Thus going by the characteristics of the time charterparty agreement, the question of bringing the transaction under the provisions of section 3A of the Act does not arise. In support of this contention, he placed reliance on the decisions of the apex court reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), [2002] 126 STC 114 (SC) (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.), [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR. 273 (SC) (Bharat Sanchar Nigam Ltd. v. Union of India), [2008] 16 VST 193 (Orissa) Srei International Finance Ltd. v. State of Orissa) and [2011] 39 VST 257 (SC) (Hyderabad Engineering Industries v. State of Andhra Pradesh), that in the absence of any effective control and possession given to the charterer, the right of invoking section 3A of the Act does not arise.

13. On what would constitute transfer of right to use, learned senior counsel also referred to the decisions reported in [1959] 10 STC 584 (State Of Madras v. Asher Textiles Ltd., Tiruppur), [1998] 109 STC 205 (Mad) (Sree Ayyanar Spinning and Weaving Mills Limited v. State of Tamil Nadu), (1980) 121 ITR 572 (SC), at page 579 ( v. ), (1969) 2 SCC 74 : AIR 1970 SC 1 (Shankar Ramchandra Abhyankar v. Krishnaji Dattatreya Bapat) and [2008] 16 VST 193 (Orissa) (Srei International Finance Ltd. v. State of Orissa) and submitted that the transaction under the time charter was more in the nature of service rather than in the nature of deemed sale, to fit into the concept of “transfer of right to use the property' in goods”, a phrase as has been judicially interpreted. He pointed out to the decision reported in (1984) 145 ITR 124 (Commissioner Of Gift Tax v. H.H Sethu Parvathi Bai) that in a contract of transfer of right to use, the contracting party must have the possession of the articles or goods' to attract the charge section 3A of the Act: Referring tb various' clauses in the agreement and to the provisions under (The Indian) Carriag of Goods by Sea Act, 1925, he submitted that the bill of lading in respect of the goods transported rested only with the master of the ship, who happens to be the employee of the owner of the vessel. Thus going by the definition of “owner” in section 3(23) of the Merchant Shipping Act and the decisions reported in [2004] 136 STC 519 (Karn) (Great Eastern Shipping Company Limited v. State of Karnataka), [2008] 16 VST 381 (All) (Commissioner, Trade Tax, U.P, Lucknow v. Nand Transport Co) and [2004] 135 STC 107 (Alpha Clays v. State Of Kerala), possession” given under the agreement has to be read in the context of the obligation under the agreement to render service. Placing reliance on the decision of the Supreme Court reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), he submitted that in the absence of any effective control and delivery of possession given, which is the very essence in the transfer of right to use goods, the transactions are not assessable under section 3A of the Act.

14. On the issue as to whether the transaction would attract the charge under the Central Sales Tax Act, learned senior counsel pointed out that the transfer of right to use as deemed sale was inserted under the definition of “sale” only in section 2(8) of the Central Sales Tax Act under the Finance Act, 2002, with effect from May 11, 2002. Prior to the amendment to the Central Sales Tax Act, there was no provision to bring in “the transfer of right to use for any purpose” as a deemed sale under section 2(g) of the Central Sales Tax Act. Placing emphasis on the decision of the apex court reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), he pointed out that taxation on deemed sale under the State Act is also subjected to the provisions of the Central Sales Tax Act. In the absence of any material to show that the charter contemplated movement of goods inter-State or that the movement was the result of or incidental to the agreement between the parties, the question of bringing the agreement under any of the provisions of the Central Act does not arise.

15. In support of his contention that the time charter is only in the nature of providing of service, learned senior counsel pointed out to the service tax provisions of the Finance Act, 1994, as amended by the Finance Act, 2010, dated May, 8, 2010, with effect from July 1, 2010 in particular, as to the definition of “taxable service” under section 65(105)(zzzzj) to include the service provided or to be provided to any person by any other person in relation to supply of taxable goods for use without transferring right Of possession and effective, control of the machinery, equipment and appliance. He also referred to the provisions of the Income-tax Act under Chapter XIIG under section 115V to the definition of “bare boat charter” with reference to the provision relating to income of shipping companies. In the context of the service tax provisions and the well-recognized distinct Characteristics, of the time charter agreement, learned senior counsel submitted that possession given under the time charter was never treated as an effective possession transferred to the charterer so as to result in transfer of right to use goods, to attract the charge under section 3A of the Act. The consistent view taken by courts on the nature of possession given under the charterparty agreements, thus assumes significance, that on facts, the possession given to the charterer has to be understood in the context of the services rendered by the assessee to enable the contracting party to transport the coal from one place to another. He also took us through the provisions of the (The Indian) Carriage of Goods by Sea Act, 1925 with reference to the responsibilities of the owner of the goods and the definition of “owner” under the Merchant Shipping Act. In the light of the above provisions, he contended that considering the peculiarity of the transactions under the time charterparty agreement, the term “possession”, hence, has to be understood in the background of the well-settled propositions of law in India and elsewhere.

16. As regards the outright sale of vessels, he pointed out that even though the agreement had been entered into in Tamil Nadu, the appropriation of vessels took place only outside the State of Tamil Nadu. The agreements specifically named the ships sold. Going by the Explanation to the definition of “sale” under section 2(n) of the Act, rightly, the Tribunal agreed with the assessee and hence, no exception could be taken to the reasoning of the Tribunal.

17. Heard learned Advocate-General for the Revenue and the learned senior counsel appearing for the assessee and considered the material placed on record.

18. On the preliminary objection raised, objecting to the assessee's right to question the very levy of sales tax under section 3A in a tax case filed by the State, we do agree with the assessee that even in the absence of a separate tax case filed by the assessee and the Tribunal had granted relief to the assessee as by way of deduction under section 3A(2)(a) of the Tamil Nadu General Sales Tax Act, the assessee is entitled to canvass the legal issue as to its liability under the Tamil Nadu General Sales Tax Act.

19. As to the right of the assessee to question the very applicability of section 3A of the Tamil Nadu General Sales Tax Act to the transaction of the assessee in a revision filed by the State, even in the absence of any revision filed by the assessee, we agree with the submission of the learned senior counsel appearing for the assessee.

20. The decision relied on by the assessee reported in [1959] 10 STC 584 (State Of Madras v. Asher Textiles Ltd., Tiruppur), provides direct answer to the objection made by the Revenue. We have no hesitation in following the time tested law laid down by this court as early as 1959; on the jurisdiction of this court under section 12B(4) of the Madras' General Sales Tax Act; which is equivalent to section 34 of the Tamil Nadu General Sales Tax Act, 1959.

21. The issue therein in the reported decision related to the effect of the Sales Tax Laws Validation Act (Act VII of 1956), as regards the “explanation sales” during the period April 1, 1951 to September 6, 1955. The validation Act passed subsequent to the decision of the Tribunal had the effect of validating the assessments on explanation sales, the correctness of which were pending before various forums. In the revision preferred as against the order of the Tribunal cancelling the assessment, the Revenue contended therein that on the date when the Tribunal passed the orders on the “explanation sales”, no doubt, the assessee had the benefit of the decision rendered in the case of Bengal Immunity Company Limited v. State of Bihar reported in [1955] 6 STC 446 (SC). However, subsequent Ordnance and enactment had the effect of validating the assessment and hence, the Revenue took the plea that the Tribunal's order was to be set aside.

22. The assessee objected to the court applying the provisions of the Act to set aside the order of the Tribunal, since the powers of the court in revision would be limited to considering the question of correctness of the order of the Tribunal made in the light of the law existing when the Tribunal passed the order. Repelling such a contention, this court considered the ambit of revisional jurisdiction under section 12B(4) of the Madras General Sales Tax Act.

23. This court pointed out that the authority of the court “to take note of the change in law subsequent to the original court's decision and mould the relief in accordance therewith does not rest merely on the provisions like order 41, rule 33, C.P.C” Such power is inherent in the very nature of the appellate, jurisdiction possessed by it. In considering the nature of revisional jurisdiction under section 115, C.P.C, this court held that the jurisdiction therein is wider than the jurisdiction of an appellate court, that the High Court can call for reference of the case suo motu. It observed (page 594 in 10 STC):

“….Although the party had not moved in the matter, the High Court could, interfere with the order of the lower court within the ambit on the provision, irrespective of the fact that the party against whom the order was passed did or did not complain against it, whereas, in an appeal the powers of the court would be circumscribed or limited, to the actual matter in dispute before it, and would not extend to the matter which was not the subject-matter of the appeal.”

24. Touching on the scope of section 12B of the Madras General Sales Tax Act, 1939, this court pointed out that it is a special jurisdiction conferred by a statute. Referring to the decision, of the Full Bench in the case of Chidambdra Nadar v. Rama Nadar reported in ILR 1937 Mad 616, this court further held that a court of revision would have all the powers of an appellate court except that the conditions of interference would have to be in accordance with the relevant statutory provisions. Thus it is open to the revisional court to take note of the subsequent change in law and grant relief to the parties on the basis of such law.

25. Thus, on the scope of section 12B(4) of the Madras General Sales Tax Act, this court pointed out that the provisions, therein give a wider jurisdiction than even section 115, C.P.C.P this court and that the court has plenary powers of interference where there is an error of law. The said errors of law would include an error calling for interference by reason of any subsequent retrospective enactment and a validation provision. Thus this court viewed that in cases of errors of law, the court has every jurisdiction to rectify it under section 12B of the Madras, General Sales Tax Act.

26. This court referred to the decision in the case of Chappan v. Moidin Kutti, ILR 22 Mad 68, holding that the power to review or revise may be confined to points of law or may extend to matters of fact also.

27. In dealing with the scope of advisory jurisdiction under the Income-tax Act, in the decision reported in (1980) 121 ITR 572 (SC), at page 579 ( v. ), the apex court pointed out that on a reference application filed by an aggrieved party, it was open to a non-applicant to ask for a reference of those questions of law also which arise on its submissions but negatived in the appeal by the Appellate Tribunal. The apex court-pointed out that even though the non-applicant might have succeeded before the Tribunal on some other ground, but rejecting one of the grounds taken therein, nevertheless, it was open to the non-applicant to seek a reference on a point which went against the assessee. The apex court pointed out that “… it is as it were recognising a right in the winning party to support the order of the Appellate Tribunal also on grounds raised before the Appellate Tribunal but negatived by it.”

28. This court reiterated the above principles in the decision reported in [1998] 109 STC 205 (Mad) (Sree Ayyanar Spinning and Weaving Mills Limited v. State of Tamil Nadu) and pointed Out that as a revisional authority, this court is certainly possessed of the jurisdiction to intervene with the order of the Tribunal, if travesty of justice results in to the parties by wrong construction or interpretation of the provisions of law. This court viewed that if Such mistake of law is not rectified, while sitting in revision, not only the manifested injustice resulted to the party aggrieved could, not at all be removed, but also such injustice would be inflicted on the litigant public, in the system of administration of law. In the background of the well-settled principles laid down as regards the jurisdiction of this court, that the ultimate endeavour in recognising such a right in the opposite party in a tax litigation being one of arriving at appropriate and correct tax adjustment, we hold that the assessee is entitled to make its submission on the very applicability of section 3A of the Act to the facts of this case.

29. A perusal of the order of the Tribunal shows that it rejected the plea of the assessee on the aspect of possession and upheld the chargeability of the transaction under section 3A of the Act. It is not denied by the Revenue that having regard to the fact that the assessee had succeeded in the appeal on the other contentions taken, there did not arise the need for filing a revision. Thus as laid down in the judgment of this court in the decision reported in [1959] 10 STC 584 (State Of Madras v. Asher Textiles Ltd., Tiruppur), even if the assessee had not filed a separate revision as against the order of the Tribunal on account of the relief granted on some other aspect, the assessee, nevertheless, can raise issues taken by it on the assessment under section 3A but negatived by the Tribunal. The issue raised, being principally a legal issue, the answer to it does not require consideration of fresh materials or facts. Hence, while supporting the plea that it had taken before the Tribunal, learned senior counsel made his submission on the aspect of possession in the matter of invoking section 3A of the Act. Quite apart, even for considering the claim of the Revenue as to the assessability of the transaction under section 3A, it is necessary that this court should permit, the assessee to make his submission as to the nature of transaction, its legal effect and the applicability of section 3A of the Act to the transaction without which we do not think that one can arrive at the legal effect of the transaction to consider the claims of either party herein relating to the assessment under section 3A of the Act. It is a well-settled principle of law that unless the transactions fall within the four comers of the charging provision, the same cannot be brought to tax under the Act. In this, the State is bound to prove that the transaction in question attracts the charge Under the provisions of the Act. Thus this court is bound to consider the claim of the assessee that the time charter would not attract the charge under section 3A of the Act. Hence, we overrule the Revenue's objection.

30. Before going into the various contentions of the parties herein, we need to note what a charterparty is, the types of charterparty and how courts have judicially interpreted certain phrases used therein—in particular, phrases like “delivery”, “redelivery” and “possession”. The decisions on the various clauses therein, in particular, on “delivery”, “redelivery”, and “possession”, have relevance in understanding the contentions of the Revenue, treating the time charterparty agreement between the assessee and the contracting party, as assessable under section 3A of the Tamil Nadu General Sales Tax Act, resulting in transfer of right to use and hence a deemed sale. The first of the agreements Herein between the parties relates to a time charterparty agreement between the assessee and M/s. Poompuhar Shipping Corporation dated January 12, 1993, relating to the assessment year 1992-93. The clauses in all the agreements relating to various assessment years before us are one and the same and they follow the form on time charter as approved by New York Produce Exchange published in “Time Charterer” 5th Edition by Michael Wilford.

31. Charterparty contract is a contract of affreightment in writing, by which the owner of a ship or vessel let the whole or part of her to a person for the conveyance of goods on a particular voyage in consideration of the payment of freight.

32. Black's Law Dictionary defines “charterparty” to mean, a contract by which a ship or principal part of: it is let by the owner, especially to a merchant, for the conveyance of goods on a predetermined voyage to one or more places; a Special contract between the ship owner and charterers, especially for the carriage of goods, etc. Contracts of affreightment may be either in the form of bill of lading or charterparty. While bill of lading is, pure and simple; a contract to carry goods, a charterparty may involve the hiring of the ship itself. In the decision reported in (1990) 3 SCC 481 (British, India Steam Navigation Co. Ltd. v. Shanmughaviliis Cashew Industries), the apex court pointed out that a bill of lading is intended to provide for the rights and liabilities of the parties arising out of a contract of affreightment. When a ship is under charter and the stipulations in the charter are expressly incorporated in the bill of lading, the bill of lading has to be read subject to the charterparty stipulations. Thus when a claim arises as regards the short landing of the cargo, it would be necessary-tb know hot only the stipulation between the shipper, i.e, the owner of the cargo and the charterer evidenced by the bill of lading, but also those between the charterer and the owner of the ship. Thus one has to know the kind of charterparty entered into, to fix the liability bf the parties.

33. Charterparties are broadly classified into three general categories demise or bare boat charter, time charter and voyage charter. Demise charter is one wherein, in return for payment of hire/the pbssession of the chartered ship is given to the charterer; the charterer provides the crew arid pays all running costs and undertakes the responsibility of the shipowner to those, whose goods are carried on in the vessel. Time charter, whether it is for a period or for a trip, are those wherein, for the payment of hire charges the vessel's employment is put under the order of the charterer, while possession remains with the owner who provides: the crew and pays the running costs, excluding the voyage costs such as fuel and cargo. Voyage charters are those by which the owner agrees to perform one or more of the designated voyages in return for the payment of freight. Whether the charterparty is a voyage charterparty or time charterparty or charter by demise or not, depends upon the intention of the parties.

34. According to Black's law Dictionary, a time charterparty is distinct from a charter by demise. Time charterparty is a charter for a specified period rather than for a specific task or for a voyage where the ship owner agrees to the charterer to render services through his master and crew to carry the goods that are put on board the ship by the charterer. The ship owner continues to manage and control the vessel and the charterer merely designates the ports of call and the cargo carried and each party bears the expenses related to its function, and for any damage it causes. The ownership and possession in this case remain with the owner of the ship through the master and the crew, even though the charterer may have the temporary right to have his goods loaded and conveyed in the vessel. In a charter by demise, there is a lease of a ship itself and the charterer becomes, for a time being, the owner of the vessel; the master and the crew become his servants and through them; the possession of the ship is with him.

35. Scrutton on “Charter-Parties” (Seventeenth Edition, 1964), defines “time charterparty” as a contract whereby the ship owner, during a certain period, agrees to do certain work for the charterer; but it is not a contract under which the charterer has any interest in the ship, except that the ship owner has to do the agreed work with the use of his vessel;

36. Dealing with the nature of rights that a charterer has over the vessel under a time charter, in the decision reported in (1978) 113 ITR 307 (SC); (1978) 3 SCC 23 (The Union Of India v. Gosalia Shipping (P) Ltd.), the Supreme Court quoted from “law of carriage by sea” by B.C Mitra, that “a time charter is one in which the ownership and also possession of the ship remain in the original owner, whose remuneration or hire is generally calculated at a monthly rate on the tonnage of the ship, while a voyage charter is a contract to carry specified goods on a defined voyage on a remuneration or freight usually calculated according to the quantity of cargo carried”. Thus the consistent view of the courts in India and elsewhere is that under the time charter, the owners provide services for the-charterer with their ship, their Officers and the crew for an agreed period of time. In the decision reported in [2001] 1 Lloyds Rep 147; at page 156 in the case, of the Hill Harmony, Lord Hobhouse said, the owner who time charters his ship, transfers to the time charteren in return for payment of hire, “the right to exploit the earning capacity of the vessel”. It was pointed out that despite the fact that certain key words are used in most standard forms of the time charter such as “let” “hire”, “delivery” and “redelivery”, there is no hiring in the true sense (Refer: The London Explorer, [1971] (1) Lloyd's Rep 523). Keeping in line with the well established and well understood characteristic features on time charter, in the decision reported in 99 LW 517 (Transworld Shipping Services (I)(P) Ltd. v. Owners), this court held that in respect of an interim prayer made for arrest of the ship, for the alleged amount due and payable by the charterer to his agent, neither the legal ownership nor the beneficial ownership or equitable ownership was in the hands of the charterer in the case of time charter agreement. Thus this court viewed that for the amount due and payable by the charterer, unless the relationship of agency had been established between the owner and the charterer, the question of arrest of the ship did not arise. Time charterparty not being the demise of the ship but a contract for hire of services, thus viewed as not resulting in giving possession to the charterer to result in delivery or redelivery as is normally understood or to be literally construed as though on the delivery of the vessel, the Owner lost control to resume the same on the expiry of the period of time charter. Courts have also viewed that “delivery” and “rede-livery” are not apt words to express the obligations of either party to the other under the contract. So long as the contract does not go as a charter by demise, when the owner gives the services through the ship along with her captain and the crew to transport cargo to the directions of the charterer for a specific period on certain terms, the only redelivery possible is to make such arrangements as would enable the owner to put the ship for his own convenience. Nevertheless, throughout the service extended, the master and crew remain the servants of the owner, to represent his interest in the vessel. Thus the word “delivery” normally understood in a time charterparty denotes the charterer giving directions to the course that the ship will take to determine the voyage. In the decision reported in Hyundai Merchant Marine Co. Ltd. v. Geswri Chartering Co. Ltd. (The Peonia)., [1991] (1) Lloyd's Law Reports 100 at 107, referring to the decision reported in [1975] (1), Lloyds Law Reports 422 (Berge Tasta), the English court pointed Out “references to ‘delivery’ and ‘redelivery’ are strictly inaccurate, since, the vessel never leaves the possession of the shipowner, but the expressions are conventionally used to describe the time when the period of the charter begins and ends (The Berge Tasta, [1975] 1 Lloyd's Rep. 422, at para 424)”.

37. The learned senior counsel for the assessee placed before us the various 38 references contained in Venkatararnaiya's, “Law Lexicon with-Legal Maxims”, as to the meaning of various terms used, in particular, the concepts on “delivery”, “redelivery” and “possession” in “time charter-party”, which reads as follows:

“A time charterparty is, in fact, a document which is of a very misleading nature, because the real nature of what is undertaken by the shipowner is disguised by the use of language dating from a century or more ago—language which was then appropriated to a contract of a totally different character. A century ago a time charterparty, then known as a demise charterparty, was an agreement under which the charterer was handed over the possession of the ship of the ship-owner to put his servants and crew upon her and to sail her for his own benefit. That form of charterparty, which, as I say, was called a demise charterparty, has long since been obsolete. The modem form of time charteparty party is, in essence; one under which the shipowner agrees with the time-charterer that, during a certain named period, the shipowner will render service as a carrier by his servants and crew to tarry the goods which are put on board his ship by the time-charterer. Certain phrases surviving in the printed form now used are only pertinent to the older form of demise charter-party. Those phrases are, as in the present case, ‘the owners agree to let the steamer,’ and ‘the charterers agreed to hire the steamer’. There is no ‘letting’ or ‘hiring’ of the steamer, or anything of the sort, here. Then, at the end of the period; it was Solemnly provided that the vessel should be redelivered by the time charterers to the shipowners. ‘Redeliver’ is only a pertinent expression if there has been a delivery or handing over by the shipowners, to the charterers. There never has been anything of that sort here. The ship has at all times been in the possession of the shipowners, and they simply undertook to do services with their crew in carrying the goods of the charterers: As I ventured to suggest in the course of the argument, in the two forms of contract there is all the difference between hiring a boat in which to row yourself about, in which case the boat is handed over to you, and contracting with a man on the beach that he shall take, you for a row, in which case he merely renders services to you in rowing you about. Now, having that in mind, the essential nature of this contract is that the shipowners; during a certain period of time, agree to perform certain services for the charterers.-Re An Arbitration between Sea and Land Securities Ltd. and William Dickinson &.Co. Ltd., The Alresford, [1942] 1 All E.R 503; Buirow's Words and Phrases.”

38. Thus the law on the distinct nature and characteristics of a demise charter and bareboat, lease and time charter, shows that while in the former the legal owner gives the charterer sufficiency of the right of possession and control thereby the charter operates as a lease of the ship, time charter, in essence, contracts for providing service. Thus the question as to whether a particular charter is a charter by demise or made the charterer only an agent of the owner, needs to be seen only from the terms of the charter, to ascertain the extent of privity established between the shipper and the shipowner as stipulated in the bill of lading. “If the charter is by way of demise the problem would be simple inasmuch as the bill of lading will be purely between the shipper and the charterer. In cases of a ‘voyage charter’ or a ‘time charter’ one has to find out the actual terms of the charter to ascertain whether they operated as charter by demise or made the charterer only as an agent of the shipowner, and if so to what extent so as to ascertain the extent of privity established between the shipper and the shipowner as stipulated in the bill of lading.—Refer (1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries).

39. Keeping in mind the distinct character of time charter as providing for services only, under the Finance Act, 2010 (Act 14. of 2010) Chapter V of the Finance Act, 1994, amendments were introduced, whereunder, by inserting, sub-clause (zzzz) to sub-clause (105) of section 65 of the Finance Act; under service tax, whereunder, sub-section (105), defining “taxable service”, the amendment sought to include services provided or to be provided to any person by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances.

40. In the notification issued by the Government of India, Ministry of Finance, to the President, Indian National Ship Owners Association, Mumbai, by proceedings in R. No. 146 F, North Block, New. Delhi, dated June 18, 2008, with reference to the charterparty agreement to grant charterparty to the charterer who acquired the night to use the vessel for transportation of merchandise, his own or of another person or passenger, without having the right of possession and effective control of the vessel, it was pointed out that considering the object being chartering of vessel, the nature of services attracted service tax under section 65(105)(zz2zj).

41. Chapter XIIG of the Income-tax Act contains special provisions relating to income of shipping companies. The method of Calculating the income in respect of the vessels operated on tonnage basis was sought to be considered in the light of certain definitions therein. Section 115V, containing definitions, reads as follows:

“115V. Definitions.—In this Chapter, unless the context otherwise requires,—

(a) ‘Bareboat charter’ means hiring of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master arid crew;

(b) ‘bareboat charter-cum-demise’ means a bareboat charter where the ownership of the ship is intended to be transferred after a specified period to the company to whom it has been chartered

42. Thus a reading of various decisions on the subject of time charterparty shows:

(i) Time charter arid voyage charter are contracts of affreightment, pursuant to which, the owner agrees to carry goods by sea in return of a sum of money.—(1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries); Where the charter is a charter by demise, it is an ordinary contract, whereby possession of the ship stands with the charterer.

(il) In the case of time charter agreement, which is not a charter by demise, neither legal ownership nor beneficial ownership of equitable ownership is given in the hands of the charterer. 99 L.W 517 (Transworld Shipping Services (I) (P) Ltd. v. Owners) that it is impossible to construe the word “delivery” or “redelivery” in the literal sense.—[1919] 2 K.B 305 (Italian State Railways v. Mavrogordatos).

(iii). “Delivery” and “redelivery” are not apt words to express the Obligation of either party to the other side, Beyond the services rendered, there is no effective control given to the charterer. Thus the phrase “the owners agree to let and the charterers agree to hire for delivery” is held as anachronistic or misleading, as a charterer has no right of property or right of possession of the vessel.

(iv) References to “delivery”, “redelivery” and “possession” are expressions conventionally used to describe the time when the period of the charter begins and ends. Hence, the reference to. “delivery” and “redeliyery” are strictly inaccurate, since the vessel never leaves the possession of the shipowner.—Hyundai Merchant Marine Co. Ltd. v. Geswri Chartering Co. Ltd. (The Peonia)., [1991] (1) Lloyd's Law Reports 100 at 107 (the “peonia”).

(v) The charterer; hence, has Only a contractual right to his services of the Ship. A dhartetparty creates no right of property in a ship nor had any interest in the ship, except that it is a vehicle with which the ship owner is to do the agreed work.—[1974] ILR Delhi 650 (Indian Oil Corporation Ltd. v. Thakur Shipping Co. Ltd.) (Referred Scrutton's “Charterparties”).

(vi) Despite the standard wording like “possession”, “delivery” or “redelivery”, there is no letting, hiring, delivery or redelivery. The owners carry the risk of maritime contract and remain responsible for the safety and the navigation of the ship as when trading for their own account. To use the classic expression from an English decision, “the ship trades on time charterers' account”. The key to the bargain for the time charterer is the right to give orders as to employment.

43. In the context of the above, the various clauses in the time charter agree-ment need to be seen. As already pointed out, the various clauses in the agreements are one and the same.

44. In line 13 of the charter, it was specifically agreed that the owners of the vessel had agreed to let and the charterers agreed to hire the said vessel from the time of delivery. The place of delivery is given under line 18 as “vessel to be placed at the disposal of the charterers, at on passing the latitude of Madras in ballast north bound on passage to charterers nominated loadport any time day or night Sundays and holidays included”. Line 36 provides for the obligation of the owners, namely, the assessee herein and the obligation of the contracting party. It further stated that whilst on hire, the owners shall provide and pay for all provisions, wages and consular shipping and discharging fees of the crew, shall pay for the insurance of the vessel, also for all the cabin, deck, engine room and other necessary stores, including boiler water and maintain her class and keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service with classification and statutory certificates necessary to comply with current requirements at ports of call during the service; that the charterers have to provide and pay for all the fuel except as otherwise agreed, port charges, pilotages, agencies, commissions, consular charges (except those pertaining to the crew); and all other usual expenses except those before started, but when the vessel puts into a port for causes for which vessel is responsible, then all such charges incured shall be paid by the owners. It further states that the charterers, at the port of delivery, and the owners, at the port of re-delivery, shall take over and pay for all fuel remaining on board; that the charterers shall pay for use and hire of the said vessel at the rate of Rs. 3,20,000 (rupees three lakhs twenty thousands only) per running day of 24 hours or pro rata for part of a day including Overtime, commencing on and from the date of her delivery The captain (although appointed by the owners); shall be under the orders and directions of the charterers as regards employment and agency, and charterers are to load, slow and trim, tally and discharge the cargo at their expense under the supervision of the captain, who is to sign the bills of lading for cargo as presented, in conformity with mate's or tally clerk's receipts without prejudice to the charterparty, charterer indemnifying the owners against all consequences and liabilities by master signing the bill(s) of lading. Consistent with the law laid down on time charter that the ship owner retains possession of the vessel and the master and the crew are employed by him. Clause 26 of the agreement reads as follows:

“26. Nothing herein stated is to be construed as a demise of the vessel to the time charterers. The owners to remain responsible for the navigation of the vessel, insurance, crew, and all other matters, same as when trading for their own account.”

45. In the background of the abovesaid clauses and the decisions relied on by the assessee, the claim of the assessee is that when there was no possession handed over to the charterer to result in transfer of right to use in the sense of having effective control over the vessel as held by the courts in the cases relating to deemed sale on transfer of right to use for any purpose, the chargeability to section 3A of the Tamil Nadu General Sales Tax Act does not arise. The learned senior counsel submitted that what is true and applicable to the characteristics of a normal sale in the matter of handing over possession and control is equally applicable to a case of deemed sale. Thus when there is no handing over of possession in the true sense of the term, the question of assuming effective control does not arise.

46. section 3A of the Tamil Nadu General Sales Tax Act is the relevant charging provision to levy tax on the deemed sale relating to transfer of fight to use any goods for any purpose. Upholding the constitutional validity of the said provision under the Tamil Nadu General Sales Tax Act along with similarly worded provisions of other State enactments, in the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), the apex court held that the State cannot levy tax on the transfer of right to use goods on the basis that one of the events in the chain of events had taken place within the State. On the construction of subclause (d) of clause (29A) under article 366 of the Constitution, the apex court pointed out that the taxable event is the transfer of right to use goods, regardless of when or where the goods are delivered for use.

47. What would amount to transfer of right to use goods, however came up for consideration in the decision reported in [1990] 77 STC 182 (AP) (Rashtnya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhpatam)’ which was confirmed by the apex court in the decision reported in [2002] 126 STC 114 (SC) (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.). The said decision relates to a, case where, for the execution of the work at Visakhapatnam Steel Project,. Rashtriya Ispat Nigam allotted work to various contractors. To facilitate the work, it undertook to supply the machinery to the contractors, for which it received charges. On an assessment made under section 5E of the Andhra Pradesh General Sales Tax Act, which is similar to section 3A of the Tamil Nadu General Sales Tax Act, the Andhra Pradesh High Court held that since there was no transfer of right to use goods, there could be no occasion for levying tax under section 5E of the Andhra Pradesh General Sales Tax Act. A mere provision of a facility which involves the use of goods or even the right to use goods, per se, is not sufficient to attract the charging provision. “There must be a transfer of that right”. The High Court further held that “the transfer of right to use goods necessarily involves delivery of possession by the transferor to the transferee. Delivery of possession to a thing must be distinguished from its custody”. On the terms of agreement, it was held “Thus the essence of transfer is the passage of control over the economic benefits of the property, which results in terminating the rights and other relations in one entity and creating them in another”. Going through the agreement, the court held that all that the contractor was entitled was to make use of the machinery for the purposes of execution of the work for the assessee and there was no transfer of right to use as such, in favour of the contractor. The effective control of the machinery, even while it was in use by the contractor, was that of the assessee. Thus the High Court held that the charge under section 5E of the Andhra Pradesh General Sales Tax Act was not attracted.

48. Confirming the decision reported in [1990] 77 STC 182 (AP) (Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhap-atnam), in the appeal preferred by the State, in the decision reported in [2002] 126 STC 114 (SC) (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.), the apex court held that so long as the effective control of machinery was with the owner, even while it was in use of the contract done and the, contractor was not free to make use of the machinery for work other, than the project work or move it out during the period the machinery was in its use, the requirements for attracting the charge did not stand satisfied. The fact that the contractor would be responsible for the safe custody while it was oh the site, did not militate against the owner's possession and control of the machinery. Thus, the apex court, held that passing of an effective control of the machinery to the contractor was, a sine qua non for the purpose of attracting the levy under the concept of deemed sale relating to transfer of right to use goods. Thus the emphasis in the case of transfer of right to use goods, as laid down by the apex court in the decision reported in [1999] 113 STC 317 (SC); (1999) 9 SCC 182 (Aggarwal Brothers v. State of Haryana), is the transfer of the right to use goods and not transfer of goods. The abovesaid decisions came up for consideration in the decision reported in [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); (2006) 282 ITR 273 (SC) (Bharat Sanchar Nigam Ltd. v. Union of India).

49. Explaining the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), the apex court pointed out that the said decision cannot be cited as an authority for the proposition that delivery of possession of the goods is not a necessary concomitant for completing a transaction of sale for the purpose of article 366(29A)(d) of the Constitution. The apex court pointed out that the essence of right under article 366(29A)(d) of the Constitution is that, it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting transfer of right to use goods, but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. Referring to the decision reported in [2002] 126 STC 114 (SC) (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.) as well as the decision reported in [1999] 113 STC 317 (SC); (1999) 9 SCC 182 (Aggarwal Brothers v. State of Haryana), the Supreme Court Observed as follows (page 125 in 145 STC):

“77. But in the case of Aggarwal Brothers v. State of Haryana, [1999] 113 STC 317 (SC); (1999) 9 SCC 182 when the assessee had hired shuttering to favour of contractors to use it in the course of con-struction of buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and therefore, there was a deemed sale within the meaning of sub-clause (d) of clause (29A) of article 366. What is noteworthy is that in both the cases there were goods in existence which were delivered to the contractors for their use. In one case there was no intention to transfer the right to use while in the other there was.”

50. In the separate judgment, His Lordship Dr. Justice AR. Lakshmanan pointed out to the attributes in a transfer of right to use goods, as follows pages 130 and 131 in 145 STC):

“To constitute a transaction for the transfer of the right to use the goods the transaction must have the following, attributes:

(a) There must be goods available for delivery;

(b) There must be a consensus ad idem as to the identity of the good;

(c) The transferee should have a legal right to use the goods— consequently all legal consequences of such use including any permissions or licences required therefor should be, available to the transferee;

(d) For the period during which the transferee has such legal right, it has to be the exclusion to the transferor—this is the necessary concomitant of the plain language of the statute—viz., a ‘transfer of the right to use’ and not merely a licence, to use the goods;

(e) Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others.”

51. The apex court further pointed out that unlike in the case of composite contracts, namely, a works contract, hire-purchase contract, catering contract, where, by a legal fiction, a divisibility is brought into the contract to isolate the sale element and subject it to sales tax, as far as the transfer of right to use is concerned, there is no such divisibility to be read into the contract as one of transfer of right to use goods and rendering of service. Referring to the contract between telecom service provider and subscriber, the apex court pointed out as follows (pages 135 and 136 in 145 STC):

“119. It is not possible to interpret the contract between the service provider and the subscriber that the consensus was to mutilate the integrity of contract as a transfer of right to use goods arid rendering service. Such a mutilation is not possible except in the case of deemed sale falling under sub-clause (b). Nor can the service element be disregarded and the entirety of the transaction be treated as a sale of goods (even when it is assumed that there is any goods at all involved) except when it falls under sub-clause (f). This will also result in an anomaly of the entire payment by the subscriber to the service provider being for alleged transfer of a right to use goods and no payment at all for service. The licence granted by the Central Government fixes the tariff rates and all are for services.”

52. In the circumstances, the apex court held that the transaction was purely one of service and there was no transfer of right to use the goods at all. Thus the decisions referred to above show that in order to attract charge under the transfer of right to use any goods for any purpose as a deemed sale, what is emphasized is the intention to “transfer the right to use goods” which, in turn, implies transfer of, effective control for use. Read in the context of the decision reported in [2002] 126 STC, 114 (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.), so long as the owner retains effective control over the goods, on a mere possession given without a right accompanying thereto to result in’ the transfer of right to use the goods as he likes, the question of bringing the transaction within the comers of the charging provision does not arise. As the Andhra Pradesh High Court pointed out in the decision reported in [1990] 77 STC 182 (AP) (Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam), delivery of possession must be distinguished from its custody. Delivery of possession may be one of the elements of transfer of right to use, but without a transfer of right to use, the transaction in question cannot fall under the charging provision, since, as pointed out in the decision reported in [1999] 113 STC 317 (SC); (1999) 9 SCC 182 (Aggarwal Brothers v. State of Haryana), it is the transfer Of right to use and not transfer of goods which attracts the charge under the deemed sale under section 3A of the Tamil Nadu General Sales Tax Act.

53. The learned senior counsel took us through the decision of the Karnataka High Court reported in [2001] 124 STC 426 (Karn) (Lakshmi Audio Visual Inc. v. Assistant Commissioner of Commercial Taxes), particularly to paragraph of the judgment, on the aspect of possession. Referring to the decision reported in [1990] 77 STC 182 (AP) (Rashtriya-Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapainam), the Karnataka High Court pointed out that where a customer entmsted to the assessee the work of achieving a certain desired result and that involved the use of goods belonging to the assessee and rendering of several other services, the goods used by the assessee to achieve the desired result would mean that the same is in the effective and general control of the assessee, in which event, the transaction would not be a transfer of the right to use goods, falling within the extended definition of “sale”. The High Court pointed out that if the transaction is one of leasing/hiring/etting simpliciter under which the possession of goods, namely, effective and general control oft the goods, is to be given to the customer and the customer has the freedom and choice of selecting the manner, time and nature of use and enjoyment, though within the framework of the agreement, then it would be a transfer of right to use the goods falling under the extended definition of “sale”. The decisions thus relied on by the learned senior counsel lend support to the case of, the assessee that the transactions in question do not fall, under the charging provisions of the Act.

54. The assessee also relied on the decisions Reported in [2008] 16 VST 381 (All) (Commissioner, Trade-Tax, U.P, Lucknow v. Nand Transport. Co.), [2004] 135. STC 107 (Alpha Clays v. State Of Kerala) and [2004] 136 STC 519 (Karn) (Great Eastern Shipping Company Limited v. State of Karnataka)

55. In the light of the various clauses evidencing, the nature of transaction as one of rendering of service only, we have no hesitation in accepting the plea of the assessee that the use of the terms “let”, “hire”, “delivery” and “redelivery” is not to be understood in the literal sense of giving effective control and possession to the charterer. On the other hand, the same is referable to the time when the charter begins and ends. Even if the charterers have the right to direct the course that the vessel will take so long as the master and the crew remain the servants of the owner and the parties have understood that there is no demise of the ship in favour of the charterer, we do not find any legal ground to sustain the assessment.

56. As pointed out by the Supreme Court, in the decision reported in (1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries), to find out whether there had been an effective transfer of possession under the agreement, we may have to look at the terms of the agreement. It would also be of relevance to keep in mind that the understanding of the agreement has to go in line with the decisions on time charter. As already pointed out in the preceding paragraph, clause 26 of the time charter, stipulated as follows:

“Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers. The owners to remain responsible for the navigation of the vessel, insurance, crew, and all other matters, same as when trading for their own account.”

57. Clause 58 fixes the responsibility on the owners for any delay in delivery of the vessel/for loss or damage to the goods on board, etc. The said clause reads as follows:

“Notwithstanding anything to the contrary contained therein it is expressly agreed that the owners only to be responsible for delay in delivery of vessel or for delay during the currency Of the charter and for loss or damage to goods on board, if such delay or loss has been caused by want of due diligence on the part of the owners or their manager in making the vessel seaworthy and fitted for the voyage or any other personal act or omission or default of the owners of their manager. In the event of stoppages/strikes/restraints by the ship's personnel, time thus lost to be for Owners account.

Owners not to be responsible in any other case. Owners not to be liable for loss or damage arising out of of resulting from shore labour strikes, lockouts or stoppages or restraints.”

58. Causes 63 and 67 touch on the owners' right to substitute the chartered vessel with a sister vessel. The various' clauses of the charterparty explicitly deal with the nature of relationship between the master and the crew of the ship, the restriction on the use and weight of the cargo and the movement on the coast, that any deviation thereon would be subject to the approval and prior consultation with the owners. The contract further stipulates that port charges, pilotages, agencies, commission, except those pertaining to the crew, shall be paid by the owners. A reading of the various clauses enumerated in the time charter shows that the contract is not for the hire of the vessel but for hiring the services to be provided by the owner as a carrier to carry the goods which are put on board of the ship by the time charterer. The use of the phrase such as “let”, “hire”, “delivery” or “redelivery”, although at the first flush, makes one think that the charterer has possession, control and authority over the ship, yet, a reading of the various clauses, particularly clause 26, shows that there was no demise of the ship, meaning thereby, there was no transfer of possession.

59. We have no hesitation in accepting the plea of the assessee that the Tribunal committed a serious error in its understanding of what possession would mean, in the face of the time charter agreement. Going by the decision of the apex court reported in (1990) 3 SCC 481 (British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries) and the well laid down principles on the concept of time charterparty agreement, we hold that the essence of the agreement between the assessee and M/s. Poompuhar Shipping Corporation is one of services; hence, not amenable under the provisions of section 3A of the Act.

60. In the background of the decisions thus referred to above and the clauses, seen, we have no hesitation in agreeing with the assessee that there was no transfer of right to use to have an effective control of the vessel by the charterer under the time charter so as to attract the charge under the provisions of section 3A of the Act.

61. Quite apart from, this, “owner” is defined under section 3(23) of the Merchant Shipping Act, 1958 as follows:

“(23) owner’ means;—

(a) in relation to a ship, the person to whom the ship or a share in the ship belongs,;

(b) in relation to a sailing vessel, the person to whom the sailing vessel belongs.”

62. Section 344K, appearing in Part IXB of the Merchant Shipping Act, 1958 relating to security of ships and port facilities, defines “company” as follows:

“In this part, unless the context otherwise requires,—

(a) ‘company’ means the owner of the ship who, or any organisation which has assumed the responsibility of operation of the ship from the owner of such ship and who or which has agreed to take over all the duties and responsibilities imposed by the International Safety Management Code;”

63. Section 37 of the Merchant Shipping Act enjoins on an endorsement as to a certificate of change of master. Where there is a transfer of ownership on ships, sections 42, 43 arid 44 deal with the procedure on transfer of ships and shares. In the background of the special enactment provisions, we hold that the assessee is justified in its contention that the transactions do not attract the charging provisions of the Act.

64. It is no doubt true that the apex court, in the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra)’ and the subsequent decision reported in [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); (2006) 282 ITR 273 (SC) (Bharat Sahchar Nigam Ltd. v. Union of India), spoke about the delivery as art aspect to be taken note of in deciding the issue under section 3A of the Act. Yet a reading of the decisions of the apex court dearly shows that what is contemplated therein to attract the charge on transfer of right to use goods had also been well explained therein. Thus when possession given is unaccompanied by transfer of right to use in the sense of there being no effective control, the charge falls under section 3A of the Act.

65. The learned Advocate-General pointed out that the charterparty agree ment contemplates transport of coal from Tuticorin Port Trust to various other places; hence, the transaction is in the nature of inter-State sale. We fail to understand how the purpose for which the agreement had been entered into will speak on the character of transaction, or for that matter, to treat the transaction as an inter-State sale. For a transaction to be brought under the provisions of section 3A of the Act, it must fit in Within the definition of “transfer of the right to use goods”, a phrase which has been interpreted by courts as referred to in the preceding paragraphs.

66. The learned Advocate-General pointed out that when the agreement entered into in Tamil Nadu for chartering the vessels owned by the assessee had been used by the charterer and consideration paid to the assessee, then, going by the “simple words”—an expression used by/the learned’ Advocate-General in section 3A of the Act, there need hot’ be any undue weightage given on the effective control aspect, to attract the liability.

67. We do not agree with the said line of reasoning. The phrase “transfer of the right to use goods” is judicially interpreted as not covering a mere possession given in a contract to automatically attract the charge under section 3A of the Act. Refer [2002] 126 STC 114 (SC) (State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd.).

68. The mere fact that the agreement had been entered into and that the assessee had been paid the hire-charges, does not, perse, bring the transaction within the scope of section 3A of the Act. Except to call the reasoning propounded by the State as an over-simplification of the issue, we do not find any legal support to accept the same.

69. In the light of the above, we have no hesitation in accepting the asses-see's case that there is no transfer of possession accompanied by transfer of right to use. In the light of the various decisions on time charter and the provisions of law relating to tax on transfer of right to use goods in the sense as appearing in section 3A of the Act and similarly worded provisions in the tax enactments of other States, we reject the arguments of the State. On the above grounds, we also reject the reasoning of the Tribunal granting exemption under section 3A(2)(a) of the Act as inter-State sales on transfer of right to use.

70. It must also be noted herein that the amendment to the Central Sales Tax Act in including the transfer of right to use any goods as deemed sale was brought in under the definition of “sale” in section 2(g) under the Finance Act (No. 20 of 2002), effective from May 11, 2002. In any event, even otherwise, the enlarged definition of “sale”, available on and from May 11, 2002, can have no relevance to the transaction of time charter for considering the same even by way of a deduction under section 3A(2)(a) of the Tamil Nadu General Sales Tax Act. In the decision reported in [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra), the apex court pointed out in paragraph 58 that with the definition of “sale” in, the Central Sales Tax Act remaining unamended so as to include the deemed sale on the transaction of transfer of right to use any goods; the provisions of section 4 of the Central Sales Tax Act could not be applied to such transactions of deemed sale. It further pointed out in paragraph 83 that after the insertion of clause (29A) in article 366 of the Constitution, the definition of “sale” in section 2(g) of the Central Sales Tax Act was not amended to conform to the definition of the expression “tax. on sale or purchase of the goods”. The apex court further referred to the decision of the Constitution Bench in Gannon Dunkerley & Co. v. State of Rajasthan reported in [1993] 88 STC 204 (SC), dealing with a case of works contract falling under sub-clause (b) of clause (29A), holding that the absence of, an amendment in the definition of “sale” contained in section 2(g) of the Central Sales Tax Act so as to include transfer of property in goods involved in execution of works contract, does not, in any way, affect the applicability of sections 3, 4 and 5 and sections 14 and 15 of the Central Sales Tax Act to such sales. Thus the Supreme Court observed (pages 222 and 223 in 119 STC):

“We have no valid reason to think that the same position will not obtain in a case falling under sub-clause (d). Therefore, the contention that for determining the question as to whether a ‘sale’ is inside one State and outside all other States or whether it is in the course of inter-State trade or commerce, recourse cannot be had to the provisions of sections 3 and 4 of the Central Sales Tax Act, is untenable.”

71. Thus we hold that the question of considering a deduction under section 3A(2)(a) of the Act does not arise and it would be in excess of what is contemplated under section 3A of the Act, or for that matter, beyond the legislative power of a State.

72. As far as the Tribunal's order is concerned, the reasoning of the Tribunal rests on the contention of the assessee as regards the object of the agreement being transportation of coal and movement of the vessel from outside the State to Tuticorin Port Trust under the time charter. Accepting the said contention of the assessee, the Tribunal thought it fit to grant deduction under section 3A(2) of the Act. As already pointed out, the case of deduction under section 3A(2) of the Act would arise only if and when there is an inter-State sale. After considering the issue that the transaction attracted charge under section 3A of the Act, it went ahead to hold that the transaction fell for consideration by way of deduction under section 3A(2)(a) of the Act. There is hardly any discussion as to how the transaction had been brought under section 3A(2) of the Act. As already pointed out, we do not agree with the stand of the Revenue that it is a local sale. In that event, the question of considering the claim for deduction as such, does arise for consideration. So too the question of a deduction as a deemed sale under the Central Sales Tax Act. This is quite apart from the fact that there is no provision to consider the same under the Central Sales Tax Act at all for want of authority to deal with a deemed sale under the definition of “sale” in the Central Sales Tax Act. As already pointed out, going by the terms of the time charter and the nature of the agreement, particularly with reference to possession, we have no hesitation in setting aside the order of the Tribunal in toto, thereby holding that the transaction would not attract the provisions of section 3A of the Tamil Nadu General Sales-Tax Act.

73. As far as the question raised on the taxability bf the turnover relating to sale of ships is concerned, section 2(h) of the ‘Tamil Nadu General Sales Tax Act defines when a sale takes place inside the State. Explanation 3(a) to section 2(n) of the Tamil Nadu General Sales Tax Act, reads as follows:

“Explanation 3. (a) The sale or-purchase of goods shall be deemed, for the purposes of this Act, to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State—

(i) in the case of specific or ascertained goods, at the time the contract of sale or purchase is made; and

(ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale; or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation;

(b) Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of clause (a) shall apply as if there were separate contracts in respect of the goods at each of such places.”

74. This is the reproduction of section 4 of the Central Sales Tax Act. Thus the location of goods at the time of sale determines the jurisdiction of that State to levy sales tax under the State Sales Tax Act. Thus in the case of ascertained goods, the place where the goods are at the time of contract, is the State which has the jurisdiction to assess the transaction. In the case of unascertained or future goods, the State where appropriation takes place, would be the competent State to impose’ tax.

75. The issue is relevant for the assessment years 1993-94 to 1997-98. Admittedly, as on the date of sale relating to the assessment years 1993-94 to 1997-98, the agreement was for named ships which were nowhere near the jurisdiction of the State of Tamil Nadu, to levy sales tax on the transactions under the provisions of the Tamil Nadu General Sales Tax Act, treating them as local sales. The mere fact that the contract is entered into in Tamil Nadu, or for that matter the assessee has sought for registration under the State Act; by itself, would not confer jurisdiction on the State to impose tax on the sale of the assets located outside the territorial application of the Tamil Nadu General Sales Tax Act.

76. The Appellate Tribunal and the appellate authority found as a matter of fact that as on the date of sale, all the named ships under the sale agreement were: positioned outside Tamil Nadu. The log book document called “protocol Of delivery and acceptance” evidencing sale and delivery, clearly gives the details as to the sale of the named ships outside Tamil Nadu arid their location. Thus, going by the facts found by the Tribunal based on materials, we have no hesitation in rejecting the Revenue's case in respect of T.C Nos. 1590 and 1563 of 2006. Even in respect of T.C No. 184 of 2006, it is seen from the documents filed before this court that at the time of entering into the sale of the named ships, it was found that the ships were not within the State of Tamil Nadu.

77. Except for contending that the sale of ships is assessable under the Tamil Nadu General Sales Tax Act, no material is placed before us to challenge the findings of the Tribunal on the sale of specifically named ships. In the circumstances, we agree with the assessee that having regard to the fact that the agreement is with reference to the sale of specific vessel by name, we have no hesitation in holding that all these being specific goods located outside the State of Tamil Nadu, the transactions are not chargeable to tax. In the result, we reject the tax case revisions. In the light of the above, cancelling the assessment, the question of levy of penalty does not arise.

78. We are constrained to note herein that except on the above two issues, namely, the transfer of right to use in relation to the time charter and the sale of ships, no arguments are made on other turnover in dispute and considered by the Tribunal in favour of the assessee. In the circumstances, we have considered the above two aspects only and confirm the order of the Tribunal on other aspects. In the result, we dismiss the tax case revisions.

79. As far as Writ Appeal in W.A No. 1140 of 2010 is concerned, the same is as against the order of this court in W.P Nos. 11159, 19375 of 2004 and 6261 of 20051.. The assessee has preferred the writ appeal as against the order in W.P No. 11159 of 2004 relating to the assessment year 1997-98 to quash the order dated March 26, 2004. While, disposing, of the writ petitions, this court directed the respondent not to proceed, with the preassessment notice till the tax cases filed by the State were disposed of. This court directed that after disposal of the tax case (revisions), it was open to the Revenue to proceed in accordance with law on the order passed in the tax case (revisions). The assessee has preferred this writ appeal, contending that even if the tax case (revisions) are dismissed on the merits, the, assessment challenged in the writ petition would remain, without being quashed or withdrawn, that in the end of all the proceedings, the assessee would be left without a remedy. Thus the disposal of the writ petition without quashing the assessment would leave the assessee without a remedy. In the circumstances, the assessee challenges the order of the learned single judge in not setting aside the order of assessment.

80. In the light of the order passed by this court as above, the writ appeal, in W.A No. 1140 of 2010 stands allowed and the assessment order passed in respect of assessment year 1997-98 stands set aside with a direction to re-do the issue in the light of the observations made by us. In respect of T.C No. 416 of 2006, filed against the order in S.T.A No. 1705 of 2001 by the Revenue, relating to the assessment year 1996-97, it is seen from the records of the court that the said tax case was dismissed for default on November 27, 2009 on account, of non-payment of batta and till this date, the said tax case had not been restored for consideration, on merits.

81. In the result, the tax case revisions stand dismissed and W.A No. 1140 of 2010 stands allowed. No costs. Connected miscellaneous petitions are closed.