Transfer of right to use goods rejected for hired cranes; the arrangement was held to be an indivisible service contract.

Hiring of manned hydraulic cranes was treated as an indivisible service contract, not a transfer of the right to use goods. The contract kept maintenance, crew, insurance, transport, performance, safety, and control with the contractors, while the corporation's power to specify sites did not amount to exclusive possession or effective control. The agreement also described the arrangement as not a lease or transfer of rights for use, and the pricing structure included service tax, supporting the service character of the transaction. Applying Article 366(29A)(d), the Court held that the transaction was not a deemed sale and that tax deduction at source under the Assam Value Added Tax Act, 2003 was without jurisdiction.

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Issues: Whether the contract for hiring of manned hydraulic cranes amounted to a transfer of the right to use goods, so as to be exigible to tax under the Assam Value Added Tax Act, 2003, or whether it was a contract for service outside the charging provision.

Analysis: The contract terms showed that the contractors were to provide manned and equipped cranes, retain responsibility for maintenance, crew, insurance, transport, performance, and safety, and remain in control of the equipment and personnel. The corporation's right to direct operations and require the cranes at specified sites did not amount to exclusive possession, custody, or effective control over the cranes. The agreement itself stated that the arrangement was not by way of lease or transfer of rights for use, and the rate structure included service tax, reinforcing the service character of the bargain. In light of Article 366(29A)(d) of the Constitution of India, and the distinction between transfer of the right to use goods and mere provision of service, the Court held that the transaction was an indivisible service contract and not a deemed sale. The earlier decision relied upon by the respondents was distinguished on facts.

Conclusion: The proposed deduction of tax at source under the Assam Value Added Tax Act, 2003 was illegal and without jurisdiction, and the petitioners succeeded.

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