2006 (12) TMI 455 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Maintainability of W.P.(C) No. 2416 of 2005.
2. Whether the services rendered by the petitioners to OIL/ONGC fall within the category of "transfer of right to use any goods" under the Assam General Sales Tax Act, 1993, and the Assam Value Added Tax Act, 2003.

Summary:

1. Maintainability of W.P.(C) No. 2416 of 2005:

The learned Standing Counsel, Finance Department, raised an objection about the maintainability of W.P.(C) No. 2416 of 2005, submitting that all the petitioners impleaded in this writ petition have different causes of action as they entered into separate contract/agreement with ONGC and as such a single petition filed by them is not maintainable. The court agreed, noting that the averments made in these writ petitions disclose separate causes of action for each of the writ petitioners and as such they ought to have filed separate writ petitions challenging the impugned action of ONGC, independently and separately and as such the petition is not maintainable on this count.

2. Transfer of Right to Use Any Goods:

The primary issue for adjudication was whether the services rendered by the petitioners to OIL/ONGC fall within the category of "transfer of right to use any goods" within the meaning of clause 2(27) and/or 2(43) of the Assam Value Added Tax Act, 2003, and/or 2(33) of the Assam General Sales Tax Act, 1993, thereby attracting liability to pay necessary sales tax to the State Government, authorising deduction of tax at source from the bills of the petitioners.

Petitioners contended that the services rendered by them do not fall within the category of "sale" under the relevant Acts and that there was no transfer of the right to use the articles involved in the contract to ONGC. They argued that they continued to exercise effective control over the articles in question, making the imposition of sales tax and deduction of taxes at source unjustified and impermissible.

Contrary to this, the learned Standing Counsel for the Finance Department argued that the nature of the contracts and services rendered by the petitioners squarely attract the imposition of taxes under the relevant statutes. The ONGC also submitted that it is duty-bound to exercise its power in deducting tax at source as per the relevant statute.

The court referred to various clauses of the agreements and relevant statutory provisions, including Article 366(29A) of the Constitution, which extends the meaning of "tax on the sale or purchase of goods" to include the transfer of the right to use any goods. The court noted that the contracts in question clearly disclosed that after the placement of the materials of the contract, it is the absolute will and discretion of OIL/ONGC as to how or in what manner those are to be used, indicating a transfer of the right to use the goods.

Referring to the apex court's decisions in Bharat Sanchar Nigam Ltd. and other relevant cases, the court concluded that the transactions in question amounted to a transfer of the right to use equipment/machinery/vehicles to OIL/ONGC. Consequently, the definition of "dealer" is attracted in respect of the transactions/agreements arrived at by the petitioners, and the liability for payment of taxes under the relevant financial statutes of the State cannot be denied.

In view of the aforesaid discussions, the court found no merit in this batch of writ petitions and dismissed the same, vacating the earlier interim order.