Can machines be purchased with c-form and give on rent?

This query is : Resolved

Indudhar (Querist)
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28 May 2013 Hello friends,

My client has purchased machinerys against C-form (for use in manufacture/processing) with the intention to use them for quarrying in his own mines.

Since his license is pending hence the same machines are given on rent & filed the NIL vat returns.

Is machines purchased against C-form cannot be used fo rent?

the officer issued notice u/s 10-A of CST Act levying penalty at 1& 1/2 times of 14.5% of VAT?

Is his contention correct?

Please help me with suitable case laws..

Thanks a lot in anitciaption.

VASANTH D JAGANATH

VASANTH D JAGANATH (Expert)
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28 May 2013 machinery given on rent attract tax either under local or interstate, sale definition include right to use which is deemed sale, purchase of goods against form c for sale purpose is valid under cst act

further the levy of penalty under section 10-A should be judged whether the purchase of goods was with the intend to use for the purpose or not if the intention is different then only penalty is leviable

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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28 May 2013 Mr Indudhar,
Here the penalty proposal is not for giving the machine on hire but for not using the machine for the purpose it is purchased at cocessional rate. Your client has bought quarrying machines against 'C' form.The quarrying licence is pending.In the absince of a valid licence 'C' form should not have been issued for purchasing such machinery and secondly,even registration should not have been given.However, the quarrying machines can be hired out also, along with own use,and it does not amount to their misusing.It is better for your client to get the licence fast and start quarrying. By proving commencing of production you can show proper use of machines and avoid penalty under Sec 10A of CST Act.If not, penalty has to be met with....mjk