SHARMA HEAVY LIFTERversusSTATE OF MAHARASHTRA

                                                             JUDG- MVXA-01-2024 - CRANES.DOC


PALLAVI
MAHENDRA
WARGAONKAR
Digitally signed by
PALLAVI MAHENDRA                                                                       Pallavi
WARGAONKAR
Date: 2026.09.22
21:26:44 +0530                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                  ORDINARY ORIGINAL CIVIL JURISDICTION
                           MAHARASHTRA VALUE ADDED TAX APPEAL NO.1 OF 2024

                      M/s. Sharma Heavy Lifter
                      Proprietary Concern
                      Through Mrs. Kiran Brijmohan Sharma.
                      Wife of Late Proprietor, Having its office at,
                      Bungalow No.22, Vasant Vihar, C.G. Road                  …Appellant
                      Chembur (West), Mumbai-400074.
                            Versus
                      1. The State of Maharashtra
                      Having its office at, Govt Pleader PWD
                      Building,Ground floor, Bombay High Court,
                      Mumbai: 400020.

                      2. The Commissioner of State Tax Maharashtra
                      State, Having his office at GST Bhavan, 8 th
                      Floor, New Building Mazgaon,
                      Mumbai:400 010.                                       …Respondents


                      Ms. Nikita Badheka with Mr. Parth Badheka for the Appellant.
                      Ms. Jyoti Chavan, Addl. GP for the Respondent - State.

                                                CORAM : SUMAN SHYAM &
                                                        ADVAIT M. SETHNA, JJ.

                                       RESERVED ON :         11th AUGUST 2026.
                                    PRONOUNCED ON :          22nd SEPTEMBER 2026

                      Judgment (Per: Advait M. Sethna, J.) :-

                      1.     By way of this Appeal, the Appellant has mounted a
                      challenge to the order of the Maharashtra Sales Tax Tribunal,
                      Mumbai dated 11th July 2023 passed in VAT SA/391/2025
                      (“Impugned Order” for short).




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2.    Heard. By consent of the parties, the Appeal is taken up for
final hearing and disposal.

3.    The pivotal issue for determination before the Court is
whether the activity of providing cranes for hire by the Appellant
tantamount to transfer of right to use of cranes under the regime
of the Maharashtra Value Added Tax Act, 2002 (“MVAT Act” for
short) or would constitute service falling outside the scope of the
MVAT Act.

Factual Matrix:-

4.    The facts relevant for adjudication of this Appeal are
encapsulated below:-

5.    The Appellant entered into contractual terms for hire with
Hindustan Construction Company Ltd. and Era Constructions India
Ltd. (“Companies” for short) dated 18th January 2005 and 31st July
2004, respectively. By the said contracts, the Appellant agreed to
provide certain number of cranes, as stipulated in the contractual
terms, for hire, to the said Companies. The Companies were to pay
a fixed rate of Rs.3,10,000/- per month and Rs.2,50,000/- per
month, respectively, as hire charges.

6.    A dispute arose between the parties on the issue as to
whether the hire charges/rent paid by the Companies to the
Appellant should be treated as sale falling under the provisions
MVAT Act or such activity should be categorized as service.




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7.    The matter then fell for adjudication before the Maharashtra
Sales Tax Tribunal (“Tribunal” for short). The order of the
Appellate Authority dated 6th June 2015 i.e. Deputy Commissioner
of State Tax, was challenged by the Appellant before the Tribunal,
as the case of the Respondent (Revenue) was accepted by the said
Appellate Authority. The Tribunal held that the transaction/activity
in the instant case would clearly attract VAT on the ground of the
same being deemed sale on account of transfer of right to use the
goods. Accordingly, penalty and interest were levied by the
Tribunal on the Appellant vide the Impugned Order and the case of
the Respondent was, thus, partly upheld.

8.    Aggrieved by the order of the Tribunal, the Appellant has
assailed the same in the present Appeal.

Rival Contentions:
Submissions of the Appellant:-

9.    Ms. Badheka, learned counsel for the Appellant would
submit that the Impugned Order dated 11 th July 2023 passed by
the Tribunal is unsustainable in the eyes of law on several counts.

10.   Ms. Badheka would, in substance, urge that the Tribunal
failed to appreciate that the activity of providing the cranes for
hire by the Appellant to the Companies was at best a service and
the same could never be regarded as sale under the MVAT Act.
This, primarily for the reason that the ownership and effective
control of the cranes hired by the Companies from the Appellant
always and at all times remained with the Appellant. She would




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place emphasis on the contractual terms of hire executed with the
Companies, inter alia dealing with fixed period of hire, fixed rate
of hire, mobilization, de-mobilization, in support of her contention.
The Tribunal, she would submit, lost sight of this vital factual
position and treated the transaction as sale, thereby making the
Impugned Order legally vulnerable.

11.      Ms. Badheka would submit that the Tribunal erred in
misconstruing the service of providing the cranes on contractual
basis for hire, as transfer of right to use the cranes by referring to
Section 2(24)(b)(iv) of the MVAT Act. When the effective control
and ownership of the cranes, were both retained by the Appellant,
by no stretch of imagination, there can be any transfer of the right
to own and or use the cranes as contemplated under the MVAT Act.
Consequently, in the absence of any sale in the given facts, there
cannot be any MVAT leviable on the transaction, let alone penalty
and interest under the Act. That is where the Tribunal had grossly
erred.

12.      Ms. Badheka has, in the course of her arguments, placed due
reliance inter alia, on the following decisions in support of her
contentions:-

      I)    Commissioner of Sales Tax, Maharashtra vs. Ms.
            General Cranes1;
      II) State of Andhra Pradesh & Another vs. Rashtriya
          Ispat Nigam Ltd.2;


1        2015 SCC OnLine Bom 4867
2        114 STC 126




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      III) State of Maharashtra vs. Sanghavi Movers Ltd.3;
      IV) K.P. Mozika vs. Oil and Natural Gas Corporation Ltd.
          & Ors.4;
      V) Aurobindo Highway                 Services      v.    State   of
         Maharashtra.5;
       According to her, the reasoning and ratio in the above
decisions would clearly support the case of the Appellant. This,
more particularly, when the legal right in the cranes including its
ownership is retained by the Appellant, which, is duly supported
by the contractual terms, executed by the Appellant with the
Companies. She has also referred to the decision of the Supreme
Court in Bharat Sanchar Nigam Ltd. and Another vs. Union of
India and Others 6 to submit that none of the attributes, as set out
in the decision to constitute transfer of right to use the goods, are
present in the given facts, so as to attract MVAT under the Act.

13.    Ms. Badheka would state that only the fuel for the cranes
was not provided by the Appellant for the cranes on hire in view of
the fact that it was not feasible/viable to shift the cranes back to
the Appellant for re-fuelling, during the contractual period.
However, the act of fueling the cranes, cannot in any event, be
construed as transfer of ownership in the cranes by the Appellant.

14.    For all the above reasons, Ms. Badheka would urge that the
Appeal deserves to be allowed and the Impugned Order of the
Tribunal be set aside.

3      128 GSTR 335
4      Civil Appeal No.3548 of 2017 December on 9 th January 2024
5      MVXA No.8 of 2015 decided on 1st August 2023
6      (2006) 3 SCC 1




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Submissions of the Respondent:-

15.   Ms. Chavan, learned counsel for the Respondents at the
outset, would emphatically refute the case projected by the
Appellant. She would at first refer to Section 2(24)(b)(iv) of the
MVAT Act. This to contend that the right to use the cranes for a
specific period would confer the right to use the same exclusively
for that period. This would tantamount to transfer of possession in
the cranes in favour of the Companies so as to attract MVAT, under
the said provision.

16.   Ms. Chavan has specifically referred to the contract dated
18th January 2005 entered into by the Appellant with Hindustan
Construction Co. Ltd. to submit that the cranes would be provided
at a charge of Rs.3,10,000/- per month, round the clock, for 28
working days and any working hours, beyond 280 hours per
month, shall be paid on a pro-rata basis. She would then refer to a
similar contract entered by and in between Era Constructions
(India) Ltd. and the Appellant, dated 31st July 2004 where the
cranes were hired at a charge of Rs.2,50,000/- per month for 10
working hours per day to contend that one of the conditions in the
contract would specifically stipulate that if at any time the
equipment or the operator provided were found to be not up to the
mark, the Company reserved the right to ask for replacement
forthwith without any additional costs to the Appellant providing
such cranes. Ms. Chavan has also referred to the clauses in the said
contract that provide for mobilization and de-mobilization to
submit that even contractually, the Company which hired the




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cranes from the Appellant became owner of the said cranes for that
period. For such reason, there is a clear transfer of right to use the
cranes attracting MVAT under the provisions of Section 2(24)(b)
(iv) of the Act.

17.   Ms. Chavan, would emphatically rely on the decision of the
Supreme Court in Bharat Sanchar Nigam Ltd. (Supra), more
particularly, on paragraph 97 thereof, to urge that the transaction
in the given case would partake all attributes of sale to the
Companies by the Appellant, which necessities transfer of right to
use the goods. In view thereof, the transaction in the given case
would clearly attract levy of MVAT, under the Act.

18.   Ms. Chavan in rejoinder would submit that all decisions
cited by Ms. Badheka are clearly distinguishable. This for the
reason that considering the terms of the contract, in the given case,
clearly establish the transfer of right in favour of the Companies, to
use the cranes. According to Ms. Chavan, here is a situation where
even under the contractual terms, evidently there is a transfer of
right to use the cranes, the possession and control of which
remains with the Companies. The provisions of the Act would,
therefore, clearly apply attracting levy of MVAT, in terms of
paragraph 97 of the Supreme Court decision in Bharat Sanchar
Nigham Ltd (Supra).

19.   For all the above reasons, Ms. Chavan would urge that the
Appeal of the Appellant against the Impugned Order of the
Tribunal be dismissed.




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Analysis :-

20.    We have heard the submissions of the learned counsel for
the parties and, with their assistance, have carefully perused the
record.

21.    To place the issue in perspective, it would be apposite to
reproduce the definition of "sale" under Section 2(24) of the MVAT
Act, which reads thus:—

      "(24) "sale" means a sale of goods made within the State for
           cash or deferred payment or other valuable
           consideration but does not include a mortgage,
           hypothecation, charge or pledge; and the words "sell",
           "buy" and "purchase", with all their grammatical
           variation and cognate expressions, shall be construed
           accordingly;
          Explanation- For the purposes of this clause, -
           (a) a sale within the State includes a sale
           determined to be inside the State in accordance
           with the principles formulated in section 4 of the
           Central Sales Tax Act, 1956 (74 of 1956);
           (b) (i) the transfer of property in any goods,
           otherwise than in pursuance of a contract, for
           cash, deferred payment or other valuable
           consideration;
              (ii) the transfer of property in goods (whether as
              goods or in some other form)involved in the
              execution of a works contract including an
              agreement for carrying out for cash, deferred
              payment or other valuable consideration, the
              building, construction, manufacture, processing,
              fabrication, erection, installation, fitting out,
              improvement,        modification,     repair    or
              commissioning of any movable or immoveable
              property;
              (iii) a delivery of goods on hire-purchase or any
              system of payment by instalments;
              (iv) the transfer of the right to use any goods for




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           any purpose whether or not for a specified period
           for cash, deferred payment or other valuable
           consideration;
           (v) the supply of goods by any association or body
           of persons incorporated or not, to a member
           thereof for cash, deferred payment or other
           valuable consideration ;
           (vi) the supply, by way of or as part of any service
           or in any other manner whatsoever, of alcoholic
           liquor for human consumption where such supply
           or service is made or given for cash, deferred
           payment or other valuable consideration ;
           shall be deemed to be a sale ;"

22.    Contextually, we have perused the contractual terms
stipulated in the contracts dated 18th January 2005 and 31st July
2004 respectively. These relate to the contractual terms entered
into by the Appellant with Hindustan Construction Company,
which are extracted as under:-

      (i) Subject/Re- Hiring of 3 numbers 75 MT Cranes;

      (ii) Rate – At Rs.3,10,000.00 per month, round the clock for 28
           days working. (Minimum 280 hours per month). Any
           working hours beyond 280 hours per month, shall be paid
           on prorata basis;

      (iii) Period of Hire / Duration of Rental Period – Period
            commencing from 01/02/2005 up to 30/04/2005 which may
            be extendable for further period;

      (iv) Insurance – Equipment shall be insured by the Appellant and
           the company shall not be liable for any damage to the
           equipment and/or property, personnel, etc;

      (v) Replacement – If the company finds that equipment or operator
           provided are not up to the mark, the       company reserves
           the right to ask the replacement forthwith without any cost to
           Appellant;




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      (vi) Mobilization and De Mobilization – Mobilization and
           Demobilization charges to be paid by the company to the
           Appellant, at the end of hire period.

          Similar contractual terms are reflected in the Contract
          dated 31st July 2004, between the Appellant and the Era
          Construction (India) Ltd.

23.    On a plain reading of such terms it becomes clear that the
ownership and effective control of the cranes has been retained by
the Appellant, at all times. The Appellant under such contractual
terms never intended to part with the ownership but it was merely
a license to use the cranes on hire. In such context, we may refer to
the findings recorded by the Tribunal inter alia in paragraphs 28
and 29 of the Impugned Order. This to the effect that the contract
duration is ascribed as rental period and that insurance is taken by
the Appellant would not bring the subject transaction within the
realm of sale and/or transfer of rights/ownership of the cranes
being retained by the Appellant. The same in fact supports the case
of the Appellant in as much these observations would demonstrate
that the ownership in the cranes was never parted with by the
Appellant. Accordingly, in absence of transfer of ownership, there
can be no sale, so as to attract MVAT under the Act.

24.    The Tribunal appears to have proceeded on an erroneous
premise that in the instant case, MVAT Act is attracted on the
footing of there being a deemed sale on account of transfer of the
right to use the goods, under the MVAT Act. In our view, as is
evident from the contractual terms (Supra), the transaction in the




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given case does not have any ingredient of sale and or deemed sale
to justify imposition of MVAT. Consequently, the finding on levy of
interest and penalty in the Impugned Order is found to be not
tenable in law. We, therefore, do not find ourselves in agreement
with Ms. Chavan who has urged that the Impugned Order of the
Tribunal, would warrant no interference by this Court.

25.    We may now advert to the various decisions relied on by the
Tribunal as well as by the learned counsel for the parties in the
paragraphs that follow:-

26.    The Supreme Court in paragraph 97 of its decision in Bharat
Sanchar Nigam Ltd. (supra) has categorically laid down the
attributes so as to constitute transfer of right to use the goods. We
find it apposite to reproduce the said para which reads thus:-

      "97. 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 goods;
      (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 license 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."




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27.      Upon perusal of the above, it is apparent that none of
the attributes, characteristics constituting right to transfer
ownership / use of the goods are present, qua the transaction
in the present case. This in as much as the legal right to use
was never to the exclusion of the Appellant’s ownership right
over the cranes even during the period of hire. In fact, the
contractual terms for hire in the given facts, would be
indicative of license to use the cranes during the hire period,
the ownership of which, at all material times, remained with
the Appellant. For such reasons, we are not persuaded to
accept that merely because temporary possession of the cranes
for the period of hire under the contractual terms was with
the Companies, the attributes of sale or transfer of rights/
ownership, so as to attract Section 2(24) (b) (iv) of the Act
would come into play. A co-ordinate Bench of this Court in
M/s. General Cranes (supra) following the principles set out in
Bharat Sanchar Nigam Ltd. (supra) has taken a similar view to
hold that the transaction would not entail transfer of right in
the goods, which in our view, would clearly apply to the given
facts.

28.      We also find force in the submission of Ms. Badheka placing
reliance on a decision of this Court in Aurobindo Highway Services
(supra) where a coordinate Bench of this Court had dealt with an
appeal under Section 27 of the MVAT Act. The issue before the
Court revolved around the interpretation of Section 2(24)(b)(iv) of




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the MVAT Act, which provides for transfer of the right to use the
goods. This Court gainfully referred to the Supreme Court decision
in Bharat Sanchar Nigam Ltd. (supra) coupled with other
decisions, including that of M/s. General Cranes (supra). Upon
analyzing the agreement executed between the owner and the
hiring company, this Court observed that, under the said
agreement, the effective control of the tanker in question, always
remained with the owner and was never transferred to the hiring
company. This Court had observed that when the custody and
effective control of the vehicle remain with the owner, it would be
incorrect to contend that there was a transfer of any right in the
vehicle.

29.   We find that the reasoning and ratio in Aurobindo Highway
Services (supra) would clearly apply to the given factual matrix, as
in the present case also, the effective control and ownership of the
cranes always remained with the owner i.e. the Appellant. The
Company hiring the cranes would hire them for a fixed period as
per the contractual conditions, including payment of hiring
charges, by the Companies to the Appellant, which cannot be
construed as transfer of right of use/ownership in the cranes, as
such right, always remained with the Appellant.

30.   We have also carefully perused the decision of a coordinate
Bench of this Court in Sanghavi Movers Limited (Supra). This was
also a case of an appeal under Section 27 of the MVAT Act, where
this Court was considering the issue of transfer of the right to use
the goods under Section 2(24)(b)(iv) of the MVAT Act. We find




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that this Court has relied on several decisions in this regard, which
have been duly noted in the said judgment, including that of
General Cranes and Aurobindo Highway Services (supra). Upon
analyzing the contract in that case, the Court held that the work
order/contract would clearly indicate that the effective control of
the cranes was never parted with. In view thereof, the question of
law formulated in that case, was answered in the affirmative by
holding that the transaction would not amount to a sale under
Section 2(24) of the MVAT Act. Confronted with a similar situation
in the given case, we have no hesitation to follow the said decision
and the view taken therein.

31.   We have duly considered the recent decision of the Supreme
Court in K.P. Mozika (supra). The Supreme Court therein as noted
in paragraph 22, inter alia was confronted with a similar issue of
hiring of cranes. Relying upon the decision in Bharat Sanchar
Nigam Ltd. (supra), it was observed that there exists a distinction
between transferring the right to use and merely a license to use
the goods. Reference was made to Section 65(105)(zzzzj) of the
Finance Act effective from 16th May 2008, providing for taxable
service.

32.   In the facts that are before us, we find that the substantive/
effective control of the cranes always remained with the Appellant.
Accordingly, as held by the Supreme Court in K.P. Mozika (supra)
whenever there is effective/substantive control, which remains
with the person who supplies/provides the goods, the transaction
will be that of rendering service within the ambit of Section




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65(105)(zzzzj) of the Finance Act, after its coming into force. The
law as settled in K.P Mozika (Supra) would, in our view, clearly
apply in the given facts and circumstances. In view thereof, the
subject transaction, can at best be regarded as service rendered by
the Appellant but not a transfer of the goods attracting MVAT
under Section 2(24)(b)(iv) of the MVAT Act.

33.   We appreciate the effective assistance rendered by Ms.
Chavan in espousing the case of the Respondents. However,
considering the clear legal position, as aforementioned, we are
unable to agree with her contentions that the transaction would
attract MVAT under Section 2(24)(b)(iv) of the MVAT Act.
Adopting such a course, in our view, would tantamount to straying
away from the principles laid down in the judicial pronouncements
noted above, more particularly that of the Supreme Court, which
decision would be binding on this Court.

34.   Considering the submission of Ms. Badheka with regard to
fueling of the cranes by the Companies, we have noted the
circumstances in which the same had been done, which factually
remains uncontroverted. In view thereof, even on this count the
transaction cannot assume the character of sale and or deemed
sale by way of transfer of right to use/own the cranes. Such right
is, at all times, retained by the Appellant. Therefore, such
distinction as sought to be drawn by Ms. Chavan would not take
the case of the Respondent (Revenue) any further.




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35.      For all the above reasons, the Appeal is allowed.
Consequently, the Impugned Order of the Tribunal dated 11 th July
2023 is quashed and set aside.

36.      The Appeal is Disposed Of in the above terms. No order as to
costs.

37.      All concerned to act on an authenticated copy of this
Judgment.



(ADVAIT M. SETHNA, J.)                           (SUMAN SHYAM, J.)
                                                                       {




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