2013 (1) TMI 25 - HC - VAT and Sales Tax

Court rules service provider not a 'dealer' under TVAT Act, overturns registration mandate.

The court ruled in favor of the petitioner, a service provider, stating that they were not engaged in the transfer of the right to use goods and therefore ... Tripura Value Added Tax Act, 1976 - Tripura Value Added Tax Rules - Exigible under the Tripura Sales Tax Act or not - Dealer, under Section 2(8) the TVAT Act - Assessee engaged in the business of providing services including ‘Well Logging Perforating and other Wire Line Services’, on contract basis – Registered as Service provider with Service Tax department - Assessee entered into an agreement with the ONGC - To provide the services of Well Logging, Perforating and other Wire Line Services - For execution of works under the said contract agreement, the petitioner mobilized equipments and accessories into the State of Tripura from outside. Revenue contended that the contract between the petitioner and the ONGC was also for supplying of materials, such as, spares, explosives, logging cables, etc., and liable to Sales Tax. Held that:- The contents of the agreement make it abundantly clear that the petitioner merely worked as a service provider and, for the purpose of rendering services, under the contract agreement, the petitioner had mobilized equipments and accessories in order to execute the works contract and the respondents could not show any material to prove any element of transfer of right to use any of the equipments/accessories by the petitioner to the ONGC. It is, no doubt, that tax is chargeable in the event of transfer of the property in goods or if there is a deemed transfer, and, as it has already been decided by this Court, there was no element of transfer of right to use any goods and therefore, the petitioner was not chargeable to pay sales tax. In favour of assessee Issues Involved:1. Requirement for the petitioner to register as a 'dealer' under the Tripura Value Added Tax Act (TVAT Act).2. Determination of whether the petitioner is involved in the transfer of right to use goods.3. Applicability of previous court judgments on the current case.4. Examination of the contractual agreement between the petitioner and ONGC.Detailed Analysis:1. Requirement for the petitioner to register as a 'dealer' under the TVAT Act:The petitioner challenged the letter dated 20.07.2011, which required it to register as a 'dealer' under the TVAT Act and TVAT Rules. The petitioner argued that it does not fall under the definition of a 'dealer' as it neither sells nor transfers the right to use any goods in Tripura. The petitioner contended that it is a service provider and should not be compelled to register as a 'dealer' under the TVAT Act.2. Determination of whether the petitioner is involved in the transfer of right to use goods:The court examined the contract between the petitioner and ONGC, which included provisions for equipment rentals and service charges. The petitioner maintained that the equipment remained its exclusive property and was only used to provide services under the contract. The court noted that the petitioner was previously adjudicated not to be involved in any transfer of right to use goods, as determined in WP(C) 127 of 2005. The court reiterated that the contractual agreement did not involve any transfer of right to use equipment and that the petitioner was solely providing services.3. Applicability of previous court judgments on the current case:The court referred to its previous judgment in WP(C) 127 of 2005, where it was held that the petitioner was not liable to pay sales tax under the Tripura Sales Tax Act, 1976, as there was no transfer of right to use goods. The court emphasized that this judgment covered all relevant issues, including the exigibility of taxes, and thus, the petitioner should not be compelled to register as a 'dealer' under the TVAT Act.4. Examination of the contractual agreement between the petitioner and ONGC:The court analyzed the contractual agreement, which specified that the equipment used by the petitioner remained its exclusive property and was utilized solely for providing services to ONGC. The court highlighted several clauses from the agreement, which confirmed that the contract was for rendering services and not for the transfer of right to use equipment. The court concluded that there was no element of transfer of right to use any goods, and thus, the petitioner was not liable to pay sales tax or register as a 'dealer' under the TVAT Act.Conclusion:The court found that the petitioner, being a service provider, was not involved in the transfer of right to use any goods and was not liable to register as a 'dealer' under the TVAT Act. The impugned letter dated 20.07.2011 was set aside and quashed, and the respondents were restrained from acting further based on the said letter. The writ petition was allowed, and parties were directed to bear their own costs.