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TMI Blog2024 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1930 are absent, within the ambit of the purchase and sale for the purpose of levy of sales tax. By the said amendment, it now specifically allows specific composite contracts, viz., works contract; hire-purchase contracts; catering contracts by legal fiction to be divisible contracts where the sale element could be isolated and be subject to sales tax. On the basis of the amendment so carried out to Article 366 (29A) of the Constitution, the State Sales Tax Legislation had also adopted substantially a similar definition as would be seen from a perusal of Section 2 (43) of the Act of 2003. The contracts relate to hiring of two numbers of launch vessels in connection with the construction of the Bogibeel Bridge across river Brahmaputra near Dibrugarh. The Schedule of Rates and their approximate quantities mentioned about the description of the items, i.e. hire charge per launch fitted with 10 KVA DG set for essential services which shall include the cost of operators/machines etc. deployed for running and operation of the launch as per the IWAI regulations complete in all respect. The second description of the items shows running charge of launch vessel including cost of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come within the ambit of transfer of right to use the launch vessels. They are purely service contracts. In the case of M/s K. P. Mozika [ 2024 (1) TMI 443 - SUPREME COURT] as quoted, applies to the facts of the instant case. Thus, that there is no transfer of right of use of the launch vessels in favour of the Railways, the contracts in question would come within the ambit of service contracts as stipulated in Section 65 (105) (zzzzj) of the Finance Act, 1994. The consequential effect of the said observation and declaration is that the impugned order dated 03.04.2017 stands set aside and quashed and the clarifications so given by the respondent No. 2 on 28.08.2015 and 06.06.2015 stands restored. The respondents therefore are further directed to act on the basis of the clarification orders dated 28.08.2015 and 06.06.2015 and take appropriate steps for processing the application for refund of the petitioners as sought for at the earliest. The writ petition was allowed. - HONOURABLE MR. JUSTICE DEVASHIS BARUAH For the Petitioners : Ms. N. Hawelia, Advocate For the respondents : Mr. B. Gogoi, SC, Finance Taxation Deptt. Mr. S. C. Keyal, SC Service Tax Department, Govt. of India Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarification to the petitioners vide an order dated 06.06.2015 stating inter-alia that the VAT was not applicable on the charges received in respect to the said contract agreement. Thereupon, the petitioner filed another application on 21.07.2015 seeking clarification in respect to the contract agreement dated 08.06.2009 and the respondent No. 2 gave a clarification to the petitioner vide order dated 28.0.8.2015 that the VAT was not applicable on the charges received in respect to the said contract as the same was purely a service contract. 5. The said two orders providing clarification was in terms with Section 105 of the Act of 2003. The petitioners thereupon applied for refund of an amount of Rs. 30,09,287/-. The respondent No. 3, i.e. the jurisdictional Superintendent of Taxes vide letter dated 09.09.2015 asked the petitioners or the legal representative to appear before him personally along with all relevant documents on 30.09.2015. The respondent No. 3 thereafter vide the letter dated 30.09.2015 asked the Officers of the Railway to furnish the TDS certified challans in respect to the petitioner s firm. The TDS challans were accordingly submitted before the respondent No. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 18.03.2017 by which the permission was granted by the respondent No. 4 to review the earlier clarificatory orders and the order dated 03.04.2017 by which the earlier clarificatory orders were reviewed thereby holding that the contracts in question were sale within the meaning of Section 2 (43) of the Act of 2003. The petitioners have also sought for other consequential reliefs on the basis thereof. 9. The instant writ petition was filed on 19.09.2017. This Court vide an order dated 22.09.2017 issued notice and further directed that no coercive measure should be taken against the petitioners pursuant to the impugned review order dated 03.04.2017 of the Commissioner of Taxes, Assam. 10. The record reveals that the respondent No. 2 filed an affidavit-in-opposition wherein the order dated 03.04.2017 was stated to be in accordance with law on the ground that the perusal of terms and conditions of both the contracts dated 08.06.2009 and 04.07.2012 would come within the ambit of sale within the meaning of Section 2 (43) of the Act of 2003. 11. The records further show that an additional affidavit-in-opposition was filed by the respondent No. 2 whereby the order dated 26.11.2010 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined with the petitioner. The learned counsel for the petitioners further drew the attention of this Court to the concurrent opinion of His Lordship, Dr. A. R. Lakshmanan, J. (as His Lordship then was). The learned counsel submitted that in the concurring opinion, various attributes to constitute a transaction for transfer of the right to use the goods were detailed out. The learned counsel for the petitioners further submitted that the said attributes which would constitute a transaction for transfer of the right to use goods have been applied and approved by the Supreme Court time and again in various judgments. In that regard, the learned counsel referred to Great Eastern Shipping Co. Ltd. vs. State of Karnataka, reported in (2020) 3 SCC 354; Commissioner of Service Tax vs. M/s Adani Gas Limited, reported in (2020) 81 GSTR 1 (SC); Commissioner of Service Tax, Delhi vs. Quick Heal Technologies Ltd., reported in (2023) 5 SCC 469 as well as also the recent judgment of the Supreme Court in the case of M/s K. P. Mozika vs. Oil and Nature Gas Corporation Ltd., reported in (2024) 122 GSTR 1 (SC). The learned counsel for the petitioners therefore submitted that if test which has been la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to the 46th Amendment to the Constitution of India, composite contracts such as work contracts, hire purchase contacts and catering contracts were not assessable as contract for sale of goods. The law which was holding the field at that point of time was the law declared by the Supreme Court in the case of State of Madras vs. Gannon Dunkerley Co. (Madras) Ltd., reported in (1958) 9 SCC 353 wherein the scope of Entry 48 in List II of Schedule VII to the Government of India Act, 1935 was dealt with. It was observed that the words sale of goods in the said Entry would not cover the sale sought to be taxed by the State Government under the Madras General Sales Tax Act, 1939. It was observed that the classical concept of sale was to apply to the Entry in the Legislative List wherein there has to be three essential components to constitute a transaction of sale, namely:- (i) an agreement to transfer title, (ii) supported by consideration, and (iii) an actual transfer of title in the goods. The Supreme Court further held in the said judgment that in absence of any one of these elements, there was no sale. The said proposition of law was followed by the Supreme Court as well as by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; 15. Let this Court briefly analyse what Article 366 (29A) deals with. Sub-clause (a) of the said Article covers a situation where the consensual element is lacking and therefore the said Clause normally takes place in the case of involuntary sale. Sub-clause (b) covers cases relating to works contract. This Clause was brought into the fold of the tax on sale of purchase of goods in order to take care of the situation which arose in view of the difficulties faced on account of the judgment in the case of Gannon Dunkerley (supra). The effect of Sub-clause (b) therefore is that the transfer of property in goods involved in execution of works contract was deemed to be a sale. Sub-clause (c) deals with the hire-purchase where the title to the goods is not transferred. However, by fiction of law, it is treated as sale. In terms with Sub-clause (d), which the most pertinent, for the purpose of the instant proceedings, stipulates that the title of the goods remains with the transferor who only transfer the right to use the goods to the purchaser. Sub-Clause (e) cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of the right to use those goods, would not arise. From, the above observations, not only it is clear that the goods are required to be delivered at some stage but another aspect is implicit as regards the identity goods or for that matter the goods are specifically required to be identified as per the consensus of the parties in order to come within the ambit of transfer of right to use the goods. 18. At this stage, this Court finds it very pertinent to take note of Article 366 (12) of the Constitution which defines the word goods for the purpose of the Constitution as including all materials, commodities, and articles . In Section 2 (7) of the Sales of Goods Act, 1930 the word goods is defined as every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. In the Act of 2003, the term goods has been defined in Section 2 (20) of the Act of 2003 to mean all materials, commodities and articles and all other kinds of movable property, whether tangible or intangible and includes as per sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to transfer of right to use the goods which being relevant are reproduced herein under:- 53. The following principles to the extent relevant may be summed up: 53.1. The Constitution (Forty-sixth Amendment) Act intends to rope in various economic activities by enlarging the scope of tax on sale or purchase of goods so that it may include within its scope, the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) of clause (29-A) of Article 366. The works contracts, hire purchase contracts, supply of food for human consumption, supply of goods by association and clubs, contract for transfer of the right to use any goods are some such economic activities. 53.2. The transfer of the right to use goods, as distinct from the transfer of goods, is yet another economic activity intended to be exigible to State tax. 53.3. There are clear distinguishing features between ordinary sales and deemed sales. 53.4. Article 366 (29-A) (d) of the Constitution implies tax not on the delivery of the goods for use, but implies tax on the transfer of the right to use goods. The transfer of the right to use the goods contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich may not amount to transfer of the right to use the goods. 23. It may be very appropriate at this stage to take into consideration that the question before the Supreme Court in the case of M/s K. P. Mozika (supra), pertained to agreements for hiring of various cranes, trucks, buses, transportation of petroleum products by vehicles, hiring trailers, hiring water tankers and for hiring of scrapping winch chassis. The Supreme Court after taking into account the various clauses of the contracts in those cases came to an opinion that the contracts do not reflect the intention on the part of the contractor to transfer the right to use the goods. It was observed that the contracts in relation to hiring of tankers for transportation of goods stipulated that once the tankers provided by the contractors are loaded with goods, the entire responsibility of their safe transit, including avoiding contamination, delivery and unloading at the destination is of the contractor. It was therefore observed that the test was not satisfied, and therefore, it was impossible to conclude that there is a transfer of right to use tankers in favour of the Indian Oil Corporation Limited. In paragraph No. 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices in launch vessel. 25. The said agreement contains a Chapter stipulating the Special Specifications. In terms with Clause-A which is the Objective and the Area of Work , it would transpire that the launch vessels shall be operated from Bogibeel Ghat to Kareng Chapori Ghat on North Bank in connection with construction of Bogibeel Bridge across river Brahmaputra near Dibrugarh and any other project related locations as directed by the Engineer. It was stipulated that the launch cannot be used by the contractor for any other purposes during the contract period without the specific permission of the Railway Authorities. The said stipulation therefore also implies that the launch vessels can be used for any other purpose but with the specific permission of the Railway Authorities. 26. Clause B of the Special Specifications stipulates the technical and special specifications of the launch vessels. A perusal of these technical and the special specifications shows that the petitioners were required to provide launch vessels satisfying those technical and special specifications. Therefore, there was no specific identity to a particular launch vessel. What was required was placing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording all movements of the launch/tug. The log-book so maintained must be got countersigned every day by the Engineer-in-Charge or his authorized representative. One copy of the logbook shall be enclosed with the running bill. 37. The running charges including cost of POL shall be paid to the contractor strictly on the basis of actual movement of the launches, which is entered and countersigned in the logbook. 38. The contractor shall at all times undertake reasonable precautions for safety of Railway officials Staff in the performance of their duties and other crew of launches and shall comply with all applicable provisions of the safety laws drawn up by the State/Central District Authorities, Municipalities and other Government Authorities/Departments of Government of India etc. The contractor shall comply with all provisions of safety handbook approved by the Ministry of Irrigation and Power (Govt. of India) and Safety Manual . 39. In case of loss or damage to Railway equipment or materials due to carelessness/negligence of any crew of the launch/tug, the contractor shall be liable to pay the amount to recover such loss or to rectify the damage so caused. The amount to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any loss to any third party, staff as well as the properties of the Railways. 30. This Court, at this stage finds it relevant to take note of the submission made by the learned counsel for the respondent-Finance and Taxation Department to the effect that the issue involved herein is squarely covered by the judgment of the Supreme Court in the case of Great Eastern Shipping Co. Ltd. (supra). In the opinion of this Court, the said submission is fallacious. The reason being that the law laid down in the case of Bharat Sanchar Nigam Ltd. (supra) till M/s K. P. Mozika (supra) continues to be the same. In fact, in the judgment of the Supreme Court in the case of M/s K. P. Mozika (supra), it was duly observed at paragraph No. 32 that in the case of Great Eastern Shipping Co. Ltd. (supra), the three Judges Bench had also approved the test as laid down by Dr. A. R. Lakshmanan, J. (as His Lordship then was) in the case of Bharat Sanchar Nigam Ltd. (supra). It is however relevant to take note of that the facts in the case of Great Eastern Shipping Co. Ltd. (supra) was different from the facts involved in the instant proceedings in as much as a perusal of the judgment in the case of Great Ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g properly. Only the contractor is liable to take care of the legal consequences of using the cranes. The contractor must maintain the cranes, and it is for the contractor to pay for consumables like fuel, oil, etc. Even the cranes must be moved and operated by the crew members appointed by the contractor. Moreover, in case of any mishap or accident in connection with the cranes or connection with the use of the cranes or as a consequence thereof, the entire liability will be of the contractor and not of the ONGC. Thus, in short, the contract is for providing the service of cranes to ONGC. The reason is that the transferee (ONGC) is not required to face legal consequences for using the cranes supplied by the contractor. Therefore, the tests laid down in clauses (c) and (d) of paragraph 97 of the decision of Dr AR Laxmanan, J are not fulfilled in this case. Moreover, on a conjoint reading of the aforesaid clauses, it appears that the use of the cranes provided by the contractor to ONGC will be by way of only a permissive use. Though the cranes are used for carrying out the work as suggested by ONGC, the entire control over the cranes is retained by the contractor, inasmuch as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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