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TMI Blog2015 (6) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to Jubilant Oil and Gas Private Limited and there is any sale within the meaning of Section 2(25)(d) of the Tripura Value Added Tax Act, 2004 read with Rule 7(2) of the Tripura Value Added Tax Rules, 2005 and exigible to tax under Section 4(2) of the Tripura Value Added Tax Act, 2004. [2] At this stage it would be pertinent to refer Article 366(29A) of the Constitution of India which reads as follows: "366(29A) tax on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contact, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involed in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 29A of Article 366 of the Constitution bring within the ambit of sale, transactions where one or more of the essential ingredients of sale as traditionally understood were absent. By legal fiction such transactions, transfers and supply of goods were deemed to be sale and purchase of the goods. [6] After amendment of the Constitution the Apex Court in Gannon Dunkerley and Co. Vs. State of Rajasthan: 1993(1) SCC 364 dealing with works contracts held that only the value of the goods involved in the execution of works contract could be taxed and this would have to be determined by taking into account the value of the entire works contract after deducting therefrom the charges towards labour, services etc. The Apex Court in the Second Gannon Dunkerley Case concluded that only the value of the goods involved in the execution of a works contract were amenable to the provisions of the Sales Tax/VAT Act of the State. [7] In the cases before us the contracts are for hiring of goods and services. The stand of the State is that ONGC has exclusive use and right to use the goods involved in the contracts and therefore there is transfer of the right to use goods and as such tax is leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the right to use any goods other than the goods in exempted list of the Act for any purpose (whether or not for a specified period) for cash or in any manner, shall at the time of making such payment deduct an amount at the rate as notified by the Government from time to time of the payment on account of such transfer of right : provided that till the Government notify the rate, the prevailing rate shall continue : Provided no such deduction shall be made from the bill(s) or invoice(s) of the transferer where the amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made, ****" The main issue is whether there is a transfer of the right to use any goods or not? [8] A Constitution Bench of the Apex Court in 20th Century Finance Corpn. Ltd. and another Vrs. State of Maharashtra : (2000) 6 SCC 12 dealt with the issue with regard to the power of the State legislature to levy tax under Clause 29A(d) of Article 366 of the Constitution on the transfer of the right to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed." According to the Apex Court the taxable event on the transfer of right to use goods would be the place where the contract is executed. In the case of M/s. Oil field Instrumentation (India) Ltd., the contract was executed in Maharastra whereas in other cases the contracts were executed within Tripura. [9] The Apex Court in Rainbow Colour Lab Vrs. State of M.P; (2000) 2 SCC 385 was dealing with the issue as to whether the job rendered by a photographer in taking photographs, developing and printing films would amount to a works contract within the meaning of sub-clause (b) of Article 366 Clause 29A of the Constitution. It held as follows: "Prior to the amendment of Article 366, in view of the judgment of this Court in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. (1958) 9 STC 353: AIR 1958 SC 560 the States could not levy sales tax on sale of goods involved in a works contract because the contract was ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery for works other than the project work of the respondent or move out the machinery during the period of contract. The Court went on to hold that the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against the possession and control of the Ispat Nigam over the property. The Apex Court upheld the judgment of the High Court of Andhra Pradesh. [11] In Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others, (2006) 3 SCC 1 the Apex Court was dealing with the issue as to whether the transaction by which mobile phone connections are enjoyed is a sale or a service or both. The Apex Court held that if it was a sale only the State would be competent to levy sale tax on such a transaction under Entry 54 of List-II of the Seventh Schedule to the Constitution. If it was a service then the Central Government alone could levy service tax under Entry-97 of List-I or Entry-92-C of List-I after 2003. The Apex Court further held if the nature of the transaction has characteristics of both sale and service then the moot question would be whether legislative authorities could levy separate taxes together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les. Sub-clause (f) pertains to contracts which had been held not to amount to sale in State of Punjab vs. M/s. Associated Hotels of India Ltd. (supra). That decision has by this clause been effectively legislatively invalidated. 42. All the sub-clauses of Article 366 (29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act 1930 are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerly limited. The amendment especially allows specific composite contracts viz. works contracts (Sub-clause (b)), hire purchase contracts (Sub-clause (c)), catering contracts (Sub-clause (e)) by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax. 43. Gannon Dunkerley survived the 46th Constitutional Amendment in two respects. First with regard to the definition of 'sale' for the purposes of the Constitution in general and for the purposes of Entry 54 of List II in particular except to the extent that the clauses in Art.366(29A) operate. By introducing separate categories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Apex Court held as follows: "49. We agree. After the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying. Therefore when in 2005, C.K. Jidheesh vs. Union of India (2005) 13 SCC 37 held that the aforesaid observations in Associated Cement (2001) 4 SCC 593 were merely obiter and that Rainbow Colour Lab (2000) 2 SCC 385 was still good law, it was not correct. It is necessary to note that Associated Cement did not say that in all cases of composite transactions the 46th Amendment would apply. 50. What are the "goods" in a sales transaction, therefore, remains primarily a matter of contract and intention. The seller and such purchaser would have to be ad idem as to the subject matter of sale or purchase. The Court would have to arrive at the conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject matter of sale or purchase. In arriving at a conclusion the Court would have to approach the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the High Court and held as follows: "27. What, however, did not fall for consideration in any of the aforementioned decisions is the concept of works contract involving both service as also supply of goods constituting a sale. Both, in Tata Consultancy (2005) 1 SCC 308 as also in Associated Cement Company (2001) 4 SCC 593, what was in issue was the value of the goods and only for the said purpose, this Court went by the definition thereof both under the Customs Act as also the Sales Tax Act to hold that the same must have the attributes of its utility, capability of being bought and sold and capability of being transmitted, transferred, delivered, stored and possessed. As a software was found to be having the said attributes, they were held to be goods. 28. We have, however, a different problem at hand. The appellant admittedly is a service provider. When it provides for service, it is assessable to a tax known as service tax. Such tax is leviable by reason of a parliamentary statute. In the matter of interpretation of a taxing statute, as also other statutes where the applicability of Article 246 of the Constitution of India, read with the Seventh Schedule thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant nature test would not apply and the contract could be split up to determine the value of that part of the contract which amounted to services and that portion of the contract which amounted to a deemed sale. This aspect has been also explained in Imagic Creative(P) Ltd. case. The Apex Court has clearly taken a view that the service part of the contract cannot be taxed by the State. This view is in line with the view taken by the Apex Court in the Second Gannon Dunkerley Case. [18] The Delhi High Court in Commissioner, VAT, Trade and Taxes Department vrs. International Travel House Ltd. (Sale Tax Appeal No. 10 of 2009 decided on 8th September, 2009) reported in VAT and Service Tax Cases 77 STC 182 was dealing with a case wherein the International Travel House had entered into a contract with M/s. New Delhi Power Limited (NDPL) for hiring of Maruiti Omni Cabs by the former to the latter. The conditions laid down provided that all the chauffeurs should wear uniforms and should know both Hindi and English. They should all have mobiles. The cars should be kept clean and the rates would be inclusive of fuel, maintenance and driving charges etc. There were many other conditions. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprising of both goods and services. Not only the contracts cannot be artificially split up so as to enable the sale element to be taxed, further, the States cannot treat the contract as only a contract of sale of goods and tax the whole value of the transaction as a sale of goods. Since the parties have not intended the contract to be mutilated/severable inasmuch as no different values are specified in the subject contract towards goods value separately and the value of services separately, it is not permissible by the DVAT Act to impose sales tax on the whole transaction value because that would amount to the State to entrench upon the Union List and tax services by including the cost of such services in the value of the goods. Thus, the contract in question being a composite contract is to be treated as a contract for services and no sales tax can be imposed on the contracts in question.*****" The Delhi High Court thereafter went on to hold that there was no transfer of right to use goods because the control of the cabs remained with the owner. [19] Both sides have made reference to a number of decisions of the Gauhati High Court. In Dipak Nath Vrs. Oil and Natural Gas Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was for well logging, perforating and other wire line services and the question was whether such a transaction amounts to transfer of right to use any goods. The Division Bench held as follows: "47. Of all the different kinds of composite transactions, the drafters of the Forty-sixth Amendment chose three specific situations, a 'works contract', a 'hire-purchase' contract and a 'catering contract' to bring them within the fiction of a 'deemed sale'. Of these three, the first and third, namely, 'works contract' and 'catering contract' involve a kind of 'service' and 'sale' at the same time. Apart from these two cases, covered by sub-clauses (b) and (f) of clause (29A) of article 366, where splitting of the service and supply has been constitutionally permitted, there is no other service, which has been permitted to be so split. If there is an instrument of contract, which may be composite, in form, in any case other than the exceptions, which article 366(29A) makes, the State would have no power to separate the agreement to sell from the agreement to render service, and thereby impose tax on the component of 'sale' unless the transaction, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax and service tax on the same transaction. It was also held that if there are both elements of service and transfer of right to use goods are present in a contract and the contract is not divisible then if service tax has been paid to the Central Government, the State cannot be levy sales tax. [25] In Quippo Oil and Gas Infrastructure Limited Vrs. State of Tripura and others : (2015) 1 TLR 38 this Court after discussing the entire law on the subject held that no person can be directed to pay both sales tax and service tax on the same transaction. It also held that there must be transfer of right to use goods to make it exigible to tax and lastly, it was held that if a contract is composite in nature, the State Government can levy tax only if the contract is easily divisible. [26] As far as the facts of this case are concerned Jubilant Oil and Gas Private Limited had entered into a joint venture with Gas Authority of India Limited and by the contract in question the petitioner was to carry out seismic surveys to assist the respondent No.4 and GAIL in carrying out the gas exploration. From the terms of the contract dated 28th April, 2010, we find that there was no transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also true that the petitioner in the communication dated 07.12.2010 referred to their contract as a works contract. At the same time it may be mentioned that on 29th September, 2010 the company had sent a communication to the Superintendent of Taxes, Charge-VIII, Agartala, relevant portion of which reads as follows: "***** Herewith, we are requesting you to provide the details of Works Contract Tax for the Geophysical Survey and advise whether Geophysical Survey is coming under the Works Contract Tax or not? ****" Therefore, right from the very beginning the petitioner had asked the Superintendent of Taxes to clarify as to whether the work of Geophysical Survey falls within the ambit of works contract or not. Later, the petitioner-company made demands that the tax had wrongly been deducted and the same be refunded. These demands were rejected vide order dated 05.03.2011 which reads as follows: "No.F.5/Charge VIII/2007/1026-1029 GOVERNMENT OF TRIPURA OFFICE OF THE SUPERINTENDENT OF TAXES CHARGE-VIII, AGARTALA Date: 05.03.2011 The Party Chief M/s. Asian Oilfield Services Ltd. Amtali, Agartala, Tripura (W). Sub: Amendment of Registration Certificate. Ref.: Your let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all provide at its own cost the Contractor's Equipment described in the Contract in accordance with the terms set out therein. The Contractor shall be responsible for ensuring that the Contractor's Equipment includes all necessary equipment and materials and is of the quality required for the performance of the Work. ****** ****** ****** ****** 4.2 Personnel: 4.2.1 The Contractor undertakes to provide sufficient personnel at all times to ensure performance and completion of the Services in accordance with the provisions of the Contract. If the Company is of the opinion that the Contractor is operating with a deficiency in the number or quality of the Contractor's personnel or that part thereof, the Company in consultation with Contractor, may require the Contractor to provide additional personnel or remove and replace personnel to provide numbers and quality of Contractor's personnel as Company sees fit and Contractor shall comply and bear the cost thereof. 4.2.2 All personnel employed on the Services shall, for the work, which they are required to perform, be competent, properly qualified, skilled and experienced in accordance with good industry practice. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed hereunder, if earlier. 5.2 Obligation of the Company: Contractor shall be responsible for all formalities related to importation of equipment, consumables etc. under the Contract till the delivery at site. For all import of consumables, which are directly purchased by Jubilant, Consignee name shall be Jubilant. For all other materials, Equipments, Contractor shall be the consignee. All Essentiality Certificate applications will be signed and approved by Company. For any reason if Essentiality Certificate is not obtained, then Company shall pay the Customs duty. ***** ***** ****** 19.1 Obligations of the Contractor: The Contractor shall at its own expense, if required by the Company for operational reasons or by the Government, prepare for removal from the Location any equipment or materials belonging to any of the Contractor or its Affiliates, agents or subcontractors which may have been rendered unserviceable through any cause during the course of operations hereunder or otherwise deal with equipment or materials in accordance with the Company's instructions. Notwithstanding that the equipment or materials may be insured and whether or not declared a loss." [2 ..... 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