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TMI Blog2014 (9) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... 286 of 2010, 279 of 2011, W.P.(C) Nos. 5343 of 2011, 5344 of 2011, 5345 of 2011, 5346 of 2011, 5347 of 2011, 5280 of 2011, 5348 of 2011, Writ Appeal No. 147 of 2011, W.P.(C) Nos. 2124 of 2011, 5585 of 2011 and Writ Appeal No. 383 of 2009 as it is stated by learned counsel for the parties that all the cases involve a common question of leviability of VAT under the Assam Value Added Tax Act, 2003 ("the Act") on the transaction in question on the ground that transfer of right to use the goods for consideration was involved therein. We have taken Writ Appeal No. 286 of 2010 and Writ Appeal No. 279 of 2011 as the lead cases-the first being the appeal by the Revenue and the second being appeal by the assessee against orders of learned single judge in identical matters. In Writ Appeal No. 286 of 2010 one learned single judge1 has taken view in favour of the assessee while in Writ Appeal No. 279 of 2011 another learned single judge following an earlier Division Bench judgment dated November 25, 2009 in Writ Appeal No. 138 of 2007 (Dipak Nath v. Oil and Natural Gas Corporation Ltd. [2010] 31 VST 337 (Gauhati)) has taken a view in favour of the Revenue. In Writ Appeal No. 286 of 2010, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the cranes were inclusive of all expenses necessary for continuance of service of the cranes. Repair and maintenance of the cranes and establishment expenses were of the assessee. The contract could not be split up so as to treat a part of contract to be of sale, in case the contract was considered to be composite contract of sale and service. The writ petition was contested by the State of Assam by submitting that the contract was predominantly the transfer of right to use the cranes in favour of the ONGC. As per the terms of the contract, the right to use during subsistence of contract was with the ONGC and not with the assessee. Payment of service tax was not determinative of chargeability of VAT. Providing of service for operating the cranes was incidental to the contract of transfer of right to use the cranes. Even if the transaction involved two overlapping taxable events, distinctiveness of the aspect of sale enabled levy of VAT on the transaction. The learned single judge Reported as D.P. Agarwala v. Oil and Natural Gas Corporation Ltd. [2010] 32 VST 8 (Gauhati)., after considering the rival submissions, upheld the plea of the assessee. The Division Bench judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power retained by the Corporation in the matter of detailment of the works and the prohibition against the withdrawal of the crane (s) approved by it do not ipso facto militate against the otherwise all pervasive service aura discernible in the contract agreements. Though the working hours of the crane(s) have been specified, the contract agreements do not ordain continuance of the location thereof at the site(s) even thereafter. Payments on hourly pro rata basis are also contemplated. Not only the opening recital potraying the transaction to be neither a lease nor a transfer of right to use the crane (s) consciously incorporated in the contract agreements ought not to be readily trivialized, the comprehension of service tax only being payable is also redolent of the predominant service feature thereof. The parties, inspite of all the clauses bearing on the minutiae of the operations did not contemplate transfer of right of use of the cranes by the contractors in favour of the Corporation divesting themselves of their authority and control over the same. 34. The determination made by a Division Bench of this court in Writ Appeal No. 138/2007 (Dipak Nath v. Oil and Natural Gas Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work and are to be taken by the contractors on the termination of the contract. Under clause 5.1 the cranes offered by the contractor are to be inspected by the ONGC along with the documents pertaining to the cranes. Under clause 5.3 once a particular crane and its documents have been approved for service of the ONGC the same cannot be changed during the period of the contract except on being rendered defective. Under clause 8.1 of the contract agreement though the contractor is required to provide employees for operation of the crane such employees are to work as directed by the ONGC. Under clause 8.3 of the contract agreement a crane though hired for work in oil field conditions may also be required to work in other hazardous situations at the discretion of the ONGC. Refusal to work in such hazardous situations as directed by the authorized representative of the ONGC could lead to de-hiring of the crane. Under clause 8.7 of the contract agreement day-to-day operations are to be performed as per instructions given to the contractor's representatives by the authorized representatives of the ONGC. Under clause 8.11 normal working hours are to commence from seven hours for 10 hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sole discretion of the ONGC. Though the cranes are operated by the crew provided by the contractor such crew while operating a crane is under the effective control of the ONGC and its authorities. Therefore, under the contract though the normal operational time is 10 hours in a day, the ONGC is entitled to deploy the cranes, if required, for the entire period of 24 hours to perform duties, the kind of which and the locations whereof is to be decided by the ONGC. The mere fact that after the operation of the crane is over on any given day the crane may come back to the owner/contractor will hardly be material to decide as to who has dominion over the crane inasmuch as the crane can be recalled for duty by the ONGC at any time. Under the contract the crane is to be operated for 26 days in a month and the remaining four days are to be treated as maintenance off days. Though the crane is not operational on the maintenance off days, yet, 50 per cent of the operational charges is paid by the ONGC for the maintenance off days and the terms of the contract make it clear that even on the off days the crane can be called for operation by the ONGC as its sole discretion. 20. The above fea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, particularly paragraphs 74, 75, 76, 77 and 97 (paras 73, 74, 75, 76 and 97 in 3 VST 95) as follows: "74. In determining the situs of the transfer of the right to use the goods, the court did not say that delivery of the goods was inessential for the purposes of completing the transfer of the right to use. The emphasised portions in the quoted passage evidences that the goods must be available when the transfer of the right to use the goods takes place. The court also recognised that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment). 75. In our opinion, the essence of the right under article 366(29A)(d) is that it relates to the user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred, the owner cannot again transfer the same rights to others." The learned counsel for the assessee supported the view taken by learned single judge Reported as D.P. Agarwala v. Oil and Natural Gas Corporation Ltd. [2010] 32 VST 8 (Gauhati)., particularly, the conclusion in para 33 (paras 39 and 40 in 32 VST 8) of the judgment as follows: "33. In the face of the overwhelming clauses of the contract agreements which predominantly project the transactions for rendition of services of manned cranes by the petitioners, the challenge laid to the competence of the Revenue to realize tax under the Act in connection therewith, appears to be formidable. To reiterate the Revenue has admitted the transactions to be otherwise indivisible. The contract agreements, however do not evidence even a little of the intention of the parties to mutilate the integrity of the transactions engrafted therein into two independent undertakings for transfer of the right to use the cranes and services, quantifying separate values therefor. The essence of the contract agreements is not the cranes, but the covenants to employ the same. As has been envisioned in paragraph 97 of Bharat Sanchar Nigam Ltd. [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Bhopal [1977] 40 STC 42 (SC). (5) W.P. (C) No. 127 of 2005 (Agartala Bench) HLS Asia Limited v. State of Tripura [2011] 41 VST 341 (Gauhati). We have given due consideration to the rival submissions and also perused the judgments relied upon and the record. Main question for consideration is whether the transaction covered by the contract in question involves transfer of right to use. Before we deal with the main question, we may deal with the objection raised on behalf of the State that the writ court may not deal with the nature of transaction so as to pre-empt the statutory assessing authorities determining the question whether the transaction was of transfer of right to use the goods. Undoubtedly, the writ court is not expected to decide a question of fact which is required to be gone into during the assessment. But no such objection having been raised before learned single judge and the parties having participated in adjudication of the issue on merits, it will be too late in the day to non-suit the assessee at this stage. Coming to the merits, it has to be analysed whether, under the transaction in question, right to use of the cranes remains vested with the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them. Any defect, deficiencies noticed in the contractor's service will be promptly remedied by the contractor within 10 days upon the receipt of written notice from ONGC to improve their performance failing which ONGC may terminate the contract by giving the contractor 30 (thirty) days written notice." "1. Scope of work The services of the manned (driver/operator slinger/khalasi, etc., as the case may be) crane (type of crane to be given) as per technical specifications given herein or a vehicle equipment of equivalent technical specifications and acceptable to ONGC along with the necessary accessories with valid permits/licences, insurance, etc., sufficient fuel in well maintained condition and fulfilling other pre-requisites should be available for performing the duties as advised by ONGC, at the appointed time and place, throughout the contract not by way of lease or transfer of rights for use of the vehicle/equipment, by the contract to ONGC. The work under contract shall include but not limited to dismantling/erection of deep drilling rigs/work over rigs besides loading/ unloading works of heavy drilling/production equipment's, like tubulars, bunk houses, store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent will be made as per the day rate. (iv) (a) In case, due to ONGC operational requirement contractor has not availed of maintenance day(s) in a particular month (max. up to four days), contractor can avail of the left over maintenance days in the subsequent months in addition to the available maintenance days of the respective month. However, contractor may accumulate maintenance days only up to eight days at any point of time. These maintenance days can be availed of by the contractor with prior approval of ONGC. The number of maintenance days shall not be carried forward for more than 8 accumulated days at any point of time and no LD will be imposed on such cases. (b) Depending on the urgency and requirement of work, if the crane is utilized by ONGC, beyond 10 hours (including half an hour lunch) in a day, for each hour of utilization payment will be made on pro rata basis, calculated as per clause 1.31 of section A of annexure II of the contract. This would include all expenses, including OT charges if any to the operating crew and operational charges. Occasionally the crane may be required to work round the clock during lowering and pulling of casting operations. (v) Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory manner and up to desired standard." 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. Liability to the third party is on account of the fact that in spite of hiring of the cranes by the ONGC, the employees operating the cranes are provided by the assessee. In Mersey Docks and Harbour Board Ltd. v. Coggins and Griffiths (Liverpool) Ltd. and Mcfarlane [1946] 2 All E.R. 345 (HL), and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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