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TMI Blog2017 (4) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the petitioner? - Held that: - A dealer entrusted with the task of carrying out drilling operations in the west-coast on the Arabian Sea, when subjected to service tax liability by the concerned authorities, cannot be said to have wrongfully deprived the State of its revenue under the A.P. VAT Act, 2005. Therefore, all the reasons contained in the impugned order, assuming jurisdiction on the ground that the agreements should be presumed to have been entered into in the State of Andhra Pradesh, are wholly unsustainable in law and are completely perverse - issue of jurisdiction answered in favor of the writ petitioner. Whether in the facts and circumstances of the case, it could be deemed that there was a transfer of the right to use the rigs? - Held that: - the equipment and technical personnel provided by the petitioner to the main contractor are on charter hire, where the complete control was retained by the petitioner. All responsibilities were placed only upon the petitioner by the main contractor himself - transfer of the right to use not taking place. Appeal allowed - decided in favor of appellant. - Writ Petition No.44908 of 2016 - - - Dated:- 6-4-2017 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was a transfer of the right to use. 8. The show cause notice was challenged by the petitioner before this Court in W.P.No.1778 of 2015. But by an order dated 03-02-2015, this Court disposed of the writ petition with liberty to the petitioner to file objections and a direction to the 3rd respondent to pass orders after examining the objections with regard to jurisdiction and competence of the tax authority of the State of Andhra Pradesh. 9. Accordingly, the petitioner filed a detailed reply dated 17-3-2015, objecting to the very jurisdiction of the 3rd respondent to levy tax. The petitioner also requested the 3rd respondent to decide the question of jurisdiction in the light of the law laid down by the Supreme Court in 20th Century Finance Corporation Limited v. State of Maharashtra [2000] 119 STC 182 (SC). 10. Thereafter, the 3rd respondent issued a revised show cause notice dated 11-5-2015, enhancing the proposed tax liability. The petitioner again submitted a reply on 01-12-2015 and on 14-12-2015. The petitioner was then granted personal hearing. Thereafter, a show cause notice dated 10-02-2016 was issued proposing to levy tax at 14.5%. It was followed by an order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) that in any case, the finding that there was a transfer of the right to use the rigs in terms of Section 4(8) of the Act was completely perverse. 16. The 3rd respondent has filed a counter affidavit contending, inter alia, (i) that the petitioner has an effective statutory alternative remedy; (ii) that since the contracts in question do not disclose the place in which they were executed and also since the petitioner failed to prove that they were not entered into in the State of Andhra Pradesh, the 3rd respondent had jurisdiction; (iii) that merely because the non-judicial stamp papers on which the contracts were entered into, were purchased in Mumbai and merely because the witnesses to the agreement deposed in favour of the petitioner, it cannot be contended that the agreements were not executed within the State of Andhra Pradesh; (iv) that the mere payment of service tax on an erroneous understanding of the law by the writ petitioner, cannot be conclusive proof of the fact that the effective control of the drilling rigs were not transferred to the operators, and that therefore the writ petition deserved to be dismissed. 17. We have carefully considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rig, namely J T Angel (hereinafter referred to as Drilling Unit) and requisite personnel for operating the Drilling Unit and for carrying out offshore drilling operations, for a term of 3 years; AND WHEREAS, pursuant to the Firm Order, Contractor and Operator would further execute and enter into an agreement with detailed terms and conditions (the Contract) in terms of the Model Contract in the Tender; AND WHEREAS, Sub-contractor is the owner of the said Drilling Unit and also has adequate and necessary personnel for performing the offshore drilling operations, which would inter-alia include to deploy the Drilling Unit and to provide personnel as per Annexure-III on charter hire basis, on behalf of the Contractor (Drilling Services); 21. It is relevant to note that none of the contracting parties, namely, Transocean Drilling Services (India) Private Limited or the petitioner herein have been described in the agreement dated 16-4-2010 either to have a registered office or to have a principal office or to have a sub-office within the State of Andhra Pradesh. The non-judicial stamp paper on which the agreement was executed was admittedly purchased in the State of Maharashtra. 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within 30 days. If the other party fails to appoint its arbitrator within stipulated period or the two arbitrators fail to appoint the third arbitrator, Chief Justice of High Court of competent jurisdiction or Chief Justice of India as the case may be or any person or institution designated by them shall appoint the Second Arbitrator and/or the Presiding arbitrator as the case may be. If the arbitrator or arbitrators to whom the matter is/are originally referred dies or refuse to act or resign/withdraws from the position of arbitrators for any reasons, a new arbitrator(s) shall be appointed by the respective parties/ arbitrators in the manner aforesaid. The new arbitral tribunal shall be entitled to proceed with the reference from the stage at which it was left by his predecessor if both the parties consent to this effect, failing which they will be entitled to proceed de-novo. It is a term of the Agreement that the cost of arbitration will be borne by the parties in equal shares. It is also a term of the Agreement that neither party to this Agreement shall be entitled for any ante-lite, (pre-reference) or pendent-lite interest on the amount of award. The venue of the arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined before the Assessing Officer were interested parties, is fatal to the contention of the petitioner. 28. It is true that by purchasing non-judicial stamp papers at a particular place, the parties to an agreement cannot create jurisdiction at that place. But when the purchase of non-judicial stamp papers at Mumbai is seen in the context of the location of the registered office of the Contractor at Mumbai as well as Article 27 of the agreement, indicating the addresses for correspondence of both parties to the agreement at Mumbai, the first reasoning given by the Assessing Officer can be seen to be hollow and perverse. The case on hand is not like that of two parties having their registered offices at Karnataka or Kerala, purchasing a non-judicial stamp paper at Maharashtra for the execution of an agreement. This is a case where one of the parties to the contract has its registered office at Mumbai. Both parties have indicated in Article 27 of the agreement, their addresses for correspondence only at Mumbai. Both parties have agreed under Article 28 of the agreement to have Mumbai as the venue of arbitration to resolve any disputes and both parties have agreed to submit to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered as a dealer in the State of Andhra Pradesh, the 3rd respondent cannot assume jurisdiction to tax all events that happen beyond the territorial limits of the State. Hence, the 2nd reasoning given by the 3rd respondent is also untenable. 32. The 3rd reasoning mentioned by the Assessing Officer is that there was a conscious omission on the part of the contracting parties to mention the place where the agreement was entered into. But we do not know how the mere absence of the words executed at Mumbai, will deprive the petitioner of their right to point out how the contract was executed at Mumbai. As we have pointed out earlier, (i) the non-judicial stamp paper was purchased at Mumbai, (ii) the address of the registered office of one of the parties to the contract is at Mumbai, while that of the other was outside India, (iii) the addresses for correspondence of both parties are indicated in Article 27 of the contract to be at Mumbai, (iv) Article 28 of the agreement indicates Mumbai to be the venue of arbitration and (v) Article 29 of the agreement indicates the courts in Mumbai to have exclusive jurisdiction to decide disputes arising out of the agreement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract was for deploying on charter hire basis, a jack up drilling rig and the requisite personnel for operating the drilling unit and for carrying out offshore drilling operations. The preamble which we have extracted earlier shows that the petitioner was the owner of the drilling unit and that they also had adequate and necessary personnel for performing the offshore drilling operations that would include the deployment of drilling unit and personnel as per Annexure-III. 38. The agreement contained 5 Annexures. Annexure-I gave the Schedule of responsibilities for drilling equipment, materials, supplies and services. Annexure-II contained the scope of the work. Annexure-III contained the list of technical crew and catering crew. It appears from Annexure-III that for the purpose of operating the rigs, the petitioner has to provide the services of about 46 technical personnel including Barge Engineer, Crane Operator, Radio Operator, Chief Mechanic etc. 39. Article 3.0 of the agreement provides the roles and responsibilities of the contractor. A careful look at the same would show that the responsibility of Transocean Drilling Services (India) Private Limited, which was the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mance of the work in accordance with this Agreement and the Contract. 42. From the above, it is clear that the petitioner was obliged to provide on charter hire basis (i) drilling rig and (ii) operating personnel and also take up the responsibility of carrying out the operations. Therefore, there was never any transfer of the right to use, either in favour of the contractor (Transocean Drilling Services (India) Private Limited) or in favour of the operator (ONGC). 43. It must be pointed out at this juncture that the expression charter hire has significance in Maritime or Admiralty Law. A charter is defined as a specific contract by which the owner of a ship lets the whole or part of the ship to another person for the conveyance of goods or passengers on a particular voyage or until the expiration of a specified time. In simple terms, charter party is the mere hiring of a ship. 44. Under the Maritime Law, charter parties are standardised and grouped into 3 main classifications, namely, (i) voyage charters, (ii) time charters and (iii) demise or bare boat charters. 45. In a voyage charter, the ship is hired to carry a full cargo on a single voyage. In a time charter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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