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2012 (8) TMI 407 - HC - VAT and Sales TaxContract for performance of work of laying HDPE pipe for transportation of natural gas determination of nature of the contract namely whether the said contract was an indivisible interstate works contract or a contract to supply pipes and a contract to lay down the pipes - Revenue considered the transaction as a divisible transaction Held that - The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants in as much as the applicants were required to lay down the tranches and lay down the pipes which would be reaching at site. The payment terms also clearly indicates that the applicants were entitled to get money from Assam Gas depending upon the performance of various acts required to be done for the successful fulfillment of terms of the contract. Further, Clause 9 and clause 21 refers to the term contract value and turnkey basis respectively which clearly indicates that the consideration payable was to be calculated as a whole and not in parts. If at all the contract was intended to be divided into two parts, the said payment terms would have indicated that the applicants would be entitled to get cost of the pipes on delivery of required quantity of pipes to be used for the purposes of laying the pipes In view of aforesaid it is held transaction to supply and laying down the pipe being inseparable, it would constitute works contract and to such a works contract, the liability to pay Central Sales Tax would arise only after 11.05.2002 and since the transaction in the present case pertains to the period prior to 11.05.2002, the applicant would not be liable for Central Sales Tax.
Issues Involved:
1. Whether the transactions with M/s. Assam Gas Company Limited were divisible and hence interstate sales of goods liable to tax under the Central Sales Tax Act, 1956. 2. Whether the transactions were indivisible and hence constituted a works contract. Issue-Wise Detailed Analysis: 1. Divisibility of Transactions: - The primary issue was whether the transactions between the applicants and Assam Gas were divisible into two parts: supply of HDPE pipes and installation of the same. - The Assessing Officer, Deputy Commissioner of Sales Tax (Appeals), and the Maharashtra Sales Tax Tribunal all considered the transactions as divisible, leading to the imposition of Central Sales Tax. - The applicants argued that the contract was an indivisible interstate works contract, and thus, no separate liability under the Central Sales Tax Act should be imposed. 2. Indivisibility and Works Contract: - The applicants contended that the entire contract was for laying HDPE pipes for transportation of natural gas, which included various activities such as supply, installation, and commissioning of the pipeline system. - The terms of the agreement, including clauses on 'scope of work,' 'payment terms,' and 'responsibilities of contractors,' were cited to support the argument that the contract was indivisible. - The applicants also provided evidence that invoices raised were for compliance with excise duty provisions and not indicative of a sale of goods. Analysis of Judgment: - The court examined the terms of the contract, particularly Clause 3 (Scope of Work), which detailed the comprehensive nature of the work involved, including supply and installation of HDPE pipes. - Clause 9 (Payment Terms) indicated that payments were to be made based on the completion of various stages of work, not separately for supply and installation. - Clause 21 specified that the work was awarded on a turnkey basis, suggesting an indivisible contract. - The court found that the terms of the contract and the manner of payment supported the applicants' claim that the contract was an indivisible works contract. - The invoices raised for excise duty compliance were not considered indicative of a sale of goods, as they included endorsements such as "no tax being works contract." Conclusion: - The court concluded that the contract between the applicants and Assam Gas was an indivisible interstate works contract. - As the liability to pay Central Sales Tax on works contracts arose only after the amendment on 11th May 2002, the applicants were not liable for Central Sales Tax for the period in question. - The assessment order dated 7th December 1997, the order dated 28th April 2000 by the Deputy Commissioner of Sales Tax (Appeals), and the order dated 29th November 2001 by the Tribunal were set aside. - Both questions were answered in favor of the applicants, confirming that the transactions were indivisible and constituted a works contract, with no Central Sales Tax liability for the period prior to the amendment. Final Judgment: - The court held that the transactions were indivisible works contracts, and the liability to pay Central Sales Tax would arise only after 11th May 2002. Since the transactions pertained to a period before this date, the applicants were not liable for Central Sales Tax.
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