2003 (3) TMI 676 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether services rendered in wire line logging and perforation activities constitute a "sale" under section 2(33) of the Assam General Sales Tax Act, 1993.
2. The legality of deducting sales tax at source by the Oil India Limited (OIL) from the petitioner-company's invoices.
3. The nature of the contract between the petitioner-company and OIL, specifically if it constitutes a lease under section 2(19) of the Act.
4. The applicability and interpretation of relevant legal precedents and statutory provisions.

Issue-wise Detailed Analysis:

1. Whether services rendered in wire line logging and perforation activities constitute a "sale" under section 2(33) of the Assam General Sales Tax Act, 1993:
The petitioner, a public limited company, argued that its services in wire line logging and perforation, involving high-tech equipment used exclusively by its professionals, do not constitute a "sale" as defined under section 2(33) of the Act. The petitioner contended that since there was no transfer of possession or control of the equipment to OIL, the services should not be taxable as a sale.

2. The legality of deducting sales tax at source by OIL from the petitioner-company's invoices:
OIL, in its affidavit, pointed out that clause 7.14 of the contract mandated a 5% deduction as sales tax from rental invoices. This clause was consistent with section 27 of the Act, which requires tax deduction at source for payments involving the transfer of property in goods or the right to use goods.

3. The nature of the contract between the petitioner-company and OIL, specifically if it constitutes a lease under section 2(19) of the Act:
The court examined the contract's terms and conditions, particularly clauses 1.1, 1.2, 2.0, 7.13, and 17.2. These clauses indicated that the equipment provided by the petitioner was exclusively for OIL's use, with OIL having implied possession and control over the equipment during the contract period. The court concluded that the agreement constituted a lease as defined under section 2(19) of the Act, thereby falling within the definition of "sale" under section 2(33)(iv).

4. The applicability and interpretation of relevant legal precedents and statutory provisions:
The petitioner relied on several Supreme Court judgments to argue that the contract was a license rather than a lease. However, the court distinguished these cases, noting that they pertained to immovable property under the Transfer of Property Act, whereas the current case involved the specific definitions under the Assam General Sales Tax Act, 1993. The court emphasized that the right to use goods, without transferring possession, sufficed to categorize the contract as a lease under section 2(19).

Conclusion:
The court held that the services rendered by the petitioner-company in wire line logging and perforation activities constituted a "sale" under section 2(33)(iv) read with section 2(19) of the Act. Consequently, clause 7.14 of the contract, which required OIL to deduct sales tax at source, was valid and enforceable. The petition was dismissed, and the court affirmed the legality of the tax deduction as per the contract terms and statutory provisions.