2015 (6) TMI 583 - HC - VAT and Sales Tax

Nature of Contract - transfer of property for providing services is involved in the contract or not - whether the services being rendered by the petitioner company are in the nature of works contract or are pure and simple services - joint venture - use of machinery for doing Seismic surveys activity - Held that - The petitioner is not engaged in drilling work but was only engaged for carrying out seismic survey work. The said work does not fall within the ambit of Section 4(3) of the TVAT Act. The Seismic survey is carried out to investigate the Earth s subterranean structure. There was no transfer of the right to use goods. The equipment of the petitioner contractor remained the equipment and material owned and provided by the contractor. The equipment remained in the control of the petitioner. The petitioner remained in exclusive possession and control of the said equipment and all the resources were supplied by the contractor. - These provisions of the contract clearly indicate that the contractor s equipment remained his equipment solely under his control and even the equipment of the company, if any, given to him did not become his equipment but remained the equipment of the company. Therefore, there was no transfer of right to use goods and the petitioner was only rendering services which are only amenable to tax by the Union of India and not by the State. - Decided in favour of assessee.

Summary

Issues Involved:
1. Nature of the contract: Works contract or pure services.
2. Transfer of equipment and applicability of sales tax under the Tripura Value Added Tax Act, 2004.
3. Legislative competence of State vs. Union regarding taxation on services and goods.

Detailed Analysis:

1. Nature of the Contract: Works Contract or Pure Services
The primary issue was whether the services rendered by the petitioner, Asian Oilfield Services, were in the nature of a works contract or pure and simple services. The petitioner entered into a contract with Jubilant Oil and Gas Private Limited for providing 2D Seismic Data Acquisition & Basic Processing Services. The court examined the contract and found that there was no transfer of any property or equipment to Jubilant Oil and Gas Private Limited. The seismic survey involved the use of the petitioner's equipment, which remained under their control. Therefore, the court concluded that the contract did not fall within the ambit of a works contract as defined under Section 2(36) of the TVAT Act.

2. Transfer of Equipment and Applicability of Sales Tax
The court analyzed whether the equipment used by the petitioner was transferred to Jubilant Oil and Gas Private Limited, making it a sale within the meaning of Section 2(25)(d) of the TVAT Act. The court referred to Article 366(29A) of the Constitution, which includes various forms of deemed sales, such as the transfer of the right to use any goods. The court cited several precedents, including the cases of State of Madras v. Gannon Dunkerley & Co. and Bharat Sanchar Nigam Ltd. v. Union of India, to elucidate the principles governing the transfer of the right to use goods. The court found that there was no transfer of the right to use the equipment as the equipment remained under the control of the petitioner. Therefore, the services provided by the petitioner were not exigible to sales tax under the TVAT Act.

3. Legislative Competence of State vs. Union
The petitioner contended that only the Union could levy tax on services, and since they were already paying service tax to the Central Government, the State could not levy VAT on the same transaction. The court referred to the principle of mutual exclusivity of taxation powers between the State and Union as established in various judgments, including Imagic Creative (P) Ltd. v. Commissioner of Commercial Taxes. The court held that the State could levy tax only on the sale part of a composite contract, and the service part could only be taxed by the Union. Since the contract in question was purely for services, the State could not levy VAT on it.

Conclusion:
The court allowed the writ petition, holding that the contract between the petitioner and Jubilant Oil and Gas Private Limited should not be treated as a works contract. The orders of deduction dated 5.1.2011 and 5.3.2011 were quashed. The court directed that any tax deducted from the petitioner be refunded along with statutory interest by 31st July 2015. If the refund was not made by this date, the State would be liable to pay interest at 12% per annum from the date of the judgment.