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TMI Blog2009 (9) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... (29A)(d)? (b) Whether the contracts in question are contracts for services and hence not assessable to tax under the DVAT Act? Putting it differently, is the appellant entitled to impose tax on the transaction in question because it contains an aspect/element of sale of goods and it makes no difference if services also are included in the transaction? Both the parties have extensively relied upon the decision of the Supreme Court in the case of Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95; [2006] 145 STC 91; [2006] 3 SCC 1. They have also relied upon certain other judgments as discussed hereinafter. Before we proceed to answer the issues arising, it will be necessary to give a gist of the contract between the respondent and M/s. NDPL for hiring of Maruti Omni cabs by the former to the latter. The appellant has referred to the said contract and its terms in para 11 of the appeal and which para reads as under: "11. That the respondent had enclosed a copy of the agreement with NDPL for hiring of Omni vans. As per the copy of the said agreement the respondent was to provide to NDPL 9 (nine) non-AC Maruti Omni vans on 24 hours/2500 km per month per vehicle on a monthly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t our cost of clamps for safe keeping of test equipment. 18. The colour of the Omnis should be white and should either be painted or stickers fixed as per corporate logo scheme enclosed. Period of contract: From May 1, 2003 to March 31, 2004 extendable up to March 31, 2005 by mutual consent. 1. Estimated total contract value: Rs. 56 lacs (Fifty six lacs) 2. Taxes, duties and delivery: Service tax extra as applicable. All taxes deductible at source (TDS) as per concerned authorities, and at the rates specified, shall be deducted by NDPL from your invoices and TDS certificate/s shall be issued. 3. Price-variation clause: The unit price contracted shall normally be firm during the period of the contract. However, variation for price may be permitted for fuel price variation as per the following formula: Difference to be paid/deducted based on (difference (increase/ decrease) price at the beginning of three monthly period commencing May 1 and that on July 31, 2003/14) x kms run during the period. 4. Terms of payment: Payment will be made within 15 days of submission of monthly bills and summary of log sheets duly certified by DGM (Admn)'s office. 5. Billing: Bills in dupli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of your not being in a position to provide services specified under this contract or any part thereof for any reason whatsoever, the NDPL will make alternative arrangements at market rates and the cost difference shall be adjusted against you pending/subsequent bills. A copy of the said agreement is enclosed and marked as annexure III." Mr. Parag Tripathi, the learned Additional Solicitor-General, who appeared for the appellant has raised basically the following contentions: (i) A reference to the clauses of the contract aforesaid shows that the terms thereof satisfy the requirement of sale as specified in article 366(29A)(d) inasmuch as according to him there is a transfer of the right to use the goods for valuable consideration. In furtherance of his submission, the learned ASG has further elaborated that since the effective control and possession of the cabs which have been given on hire are with NDPL, it can be said that there is a transfer of the right to use goods and it is not required that there should be a transfer of the right to use specific goods. (ii) The second proposition which has been urged is that since the transaction in question comprises both the element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether a transaction is a sale of goods or not. We may also state that though it has not been argued by the respondent on the basis of Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 that the transaction in question cannot be assessable to the tax under the DVAT Act because the contract in question is not severable, but we find that Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 directly and specifically determines this very issue and, therefore, this would be relevant to determine the second issue which has been urged by both the parties. We take up firstly the second contention of the parties, viz., whether the transaction in question is one of services or of sale of goods. Further, if the transaction in question contains both the components of a sale of goods and services also, whether such a transaction can only be taxed as a service or can also be taxed as a sale of goods. The related aspect which will also come in, is, if the contract is not severable as per the intention of the parties because separate values have not been fixed for the purposes of sale of goods and for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding therein both aspects of sale of goods and services, such contracts which are other than those specified in article 366(29A)(b) and (f), then such other contracts not falling within such sub-clauses of article 366(29A) cannot be split up taxing the sale element in the goods component thereof and which was only possible if the parties had in mind or intended that separate rights arising out of sale of goods and if there was no such intention then there is no sale of goods, even if such a contract could be disintegrated. (see paras 44, 45, 86, 91(c) in VST; paras 44, 45, 88, 92(C) in SCC). Where the sale is distinctly discernible in the transaction, i.e., the contracts are by intention of the parties severable so that there are separate values with respect to goods and services, only then can one not deny the legislative competence of the State to levy sales tax on the value of the goods. This, however, does not allow the State to entrench upon the Union List and tax services by including the cost of such services in the value of goods. Even in the composite contracts, which are by legal fiction deemed to be divisible under article 366(29A), the value of the goods involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 537 (SC); [2005] 2 SCC 515 that taxing entries must be construed with clarity and precision so as to maintain exclusivity and a construction of a taxation entry which may lead to overlapping must be eschewed. Reference in that case was also made to the judgment in State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC); [2004] 2 RC 298; [2004] 10 SCC 201 that in our Constitution a conflict of the taxing power of the Union and States cannot arise. Since the contract in question is taxed as services by the Central Government defining the same as services under the Finance Act, 1994, we would have to thus eschew an interpretation which will lead to overlapping in the taxation entries otherwise the same transaction will be taxed both as services as also goods. To avoid that overlapping, and more particularly in view of the legislative history behind the provision of article 366(29A) it becomes clear that a composite contract of both services and goods should be treated as a contract of services assessable to tax under the Finance Act, 1994 as the same has been defined and included therein. Our aforesaid discussion negates therefore the two pleas of the senior counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted position which emerges is that the transferee, namely, NDPL, has not been made available the legal consequence of the legal right to use the goods, viz., the permissions and licences with respect to the goods. In the present case, the permissions and licences with respect to the cabs are not available to the transferee and remained in control and possession of the respondent. It is the driver of the vehicle who keeps in his custody and control the permissions and licences with respect to the Maruti Omni cabs or the said permissions and licences remained in possession of the respondent. These are never transferred to M/s. NDPL. It, therefore, cannot be said that there is a sale of goods by transfer of right to use goods inasmuch as a necessary ingredient of the sale, the transfer of right to use the goods, is absent, namely, the ingredient as stated in para 97(c) of the Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1. The judgments which were cited during the course of arguments, namely, State of Andhra Pradesh v. Rastriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC); [2002] 3 SCC 314 and Aggarwal Brothers v. State of Haryana [1999] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad High Court which follow the view of the Division Bench in the Ahuja Goods Agency's case [1997] 106 STC 540 and we need refer to only one such judgments reported as Mohd. Wasim Khan v. Commissioner of Trade Tax, U.P., Lucknow [2009] 20 VST 196 (All); [2006] 30 NTN 233, in which the contracts were those of providing buses for transportation of the employees of the companies from one place to another and which transaction was held to be not a sale because the driver and other employees of the vehicles were employees of the owners, the road permit was in the names of the owners who had to take insurance for the vehicles and the workmen and consequently it was held that there was no case of transfer of the right to use the goods because the effective control of the vehicle remained with the owners of the buses. We do not agree with the view of the Division Bench of the Punjab and Haryana High Court in the case of Harbans Lal v. State of Haryana [1993] 88 STC 357 in view of the tests laid down in Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 and also because that such a composite contract cannot be artificially split up. Also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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