2014 (9) TMI 371 - HC - VAT and Sales Tax

Leviability of VAT - Assam Value Added Tax Act, 2003 - transfer of right to use the goods for consideration - whether the transaction covered by the contract in question involves transfer of right to use - Held that - For determining whether transfer of right to use the goods was involved, there must be goods available for delivery; there should be consensus as to identity of goods; the transferee should have legal right to use the goods, to the exclusion of the transferor - Question whether it was transfer of right to use did not depend on the provisions of the service tax law and thus amendment by the Finance Act, 2008 had no relevance to determine the said question. Plea of indivisibility of the contract also did not make any difference, if the transaction clearly involved transfer of right to use. The terms of the contract have already been analyzed in the Division Bench judgment in Dipak Nath 2009 (11) TMI 834 - GAUHATI HIGH COURT and present contract is substantially identical. The agreement is for hiring of the cranes. The heading and the recital clearly show that nature of transaction is for the hiring. The hire charges are per day for all days except the off days, though the bill is to be raised monthly. The provisions for maintenance, providing staff for maintenance and operation and taking responsibility for claim of third parties do not affect the nature of the transaction. A perusal of the above terms shows that (a) the contract is for hiring of the cranes for carrying out the operations of the ONGC; (b) the scope of work is mentioned to specify the operation in connection with which the cranes are hired; (c) the work is not to be executed by the contractor but by the ONGC itself; (d) the contractor is to provide cranes on hire in connection with the said work. It appears to have been wrongly assumed that the contractor is to execute the work mentioned in the heading of scope of work . It is clear from the recital that the scope of work is mentioned as the work for which the cranes were hired; (e) clause 2.1 shows that the cranes are at the disposal of the ONGC and per day hire charges are paid for all days, except maintenance days; (f) services of staff and maintenance are incidental to the hiring of the cranes. (g) it is the ONGC alone which is entitled to exclusively use the cranes and not the assessee. The transaction clearly involved transaction of right to use. - Decided in favor of revenue.

Summary

Issues Involved:
1. Leviability of VAT under the Assam Value Added Tax Act, 2003 on the transaction in question.
2. Whether the transaction involved transfer of right to use the goods for consideration.
3. Applicability of service tax provisions post-amendment by the Finance Act, 2008.

Issue-Wise Detailed Analysis:

1. Leviability of VAT under the Assam Value Added Tax Act, 2003:
The court examined whether the transaction in question attracted VAT under the Assam Value Added Tax Act, 2003. The Revenue argued that the contract was predominantly for the transfer of the right to use the cranes, which should attract VAT. The assessee contended that the transaction was a service, not a transfer of right to use, and thus not subject to VAT. The court concluded that the transaction involved the transfer of the right to use the cranes, thereby attracting VAT.

2. Transfer of Right to Use the Goods for Consideration:
The core issue was whether the transaction amounted to a transfer of the right to use the cranes. The court analyzed the terms of the contract, noting that the cranes were placed at the disposal of ONGC, and ONGC had control and dominion over the cranes during the contract period. The court referred to the judgment in Dipak Nath [2010] 31 VST 337 (Gauhati), which held that a similar contract involved the transfer of the right to use the cranes. The court agreed with this precedent, emphasizing that the contractor's obligations to provide maintenance and staff did not alter the nature of the transaction as a transfer of the right to use.

3. Applicability of Service Tax Provisions Post-Amendment by the Finance Act, 2008:
The assessee argued that the service tax provisions, specifically clause (zzzzj) inserted in section 65(105) of the Finance Act, 1994, post-amendment in 2008, made the transaction a taxable service rather than a transfer of the right to use. The court held that the service tax amendment did not affect the determination of whether the transaction involved a transfer of the right to use. The court maintained that the nature of the transaction, as analyzed under VAT law, remained a transfer of the right to use, irrespective of the service tax provisions.

Conclusion:
The court allowed the appeals filed by the Revenue and dismissed those filed by the assessee, concluding that the transaction in question involved the transfer of the right to use the cranes and was thus liable to VAT under the Assam Value Added Tax Act, 2003. The court emphasized that the substance of the transaction, rather than its form or the provisions of the service tax law, determined its taxability under VAT law.