TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 85
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.... 2. The questions arise in the following background. Respondent assessee is a proprietary concern and is engaged in the business of providing pest control service to various commercial establishments. The assessee is registered as a service provider for the purpose of service tax in the category of cleaning activity service. The assessee was awarded a work order by Reliance Industries for carrying out pest control measurements in the premises of the company. The State Government holds belief that the pesticides and other raw materials used by the assessee in execution of such contract would be exigible to value added tax, on the basis that in the process, there has been sale of such goods. The assessee however contends that the contract is one for providing service, it is a skilled service which also involves providing labour. Use of pesticides is incidental. In any case, such material is consumed during the course of the work. The title in the goods therefore, never passed from the assessee to the company who has awarded such contract. 3. The assessee in view of such debatable issue had approached the Joint Commissioner of Commercial Tax by filing an application under section 80 ....
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....in clause( b) contained a similar expression, under which, the sale of goods would include transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The Tribunal concluded as under: "57. In my view in the present case the appellant is engaged in the business of providing "Pest Control Services". In execution of pest control services Pesticides, Chemicals and Water is used by the appellant on the space specified by the contractee and charged consideration on square feet basis. 58. In light of the legal position set out by the Hon'ble Supreme Court, though the pesticides, chemicals and water are used by the appellant in execution of the pest control, but still it is not a composite works contract as per 46th Constitutional Amendment. Because clause (29A)(b) provides that "a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract". Basic condition for levying tax under this clause is that "there must be a transfer of property in goods", while in execution of pest control contract property in pesticides, chemicals or water is not transferred eithe....
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...."goods". The inclusive definition in the Constitution as well as in the Gujarat Value Added Tax Act refers to materials, commodities and articles or all kinds of movable property and live stocks, all materials, commodities and articles as such or in some other form. Before a tax can be levied on a works contract, it must be established that there is transfer of property in goods involved in the execution of a works contract. The goods may have undergone a change of form. But in whatever form, there must be transfer of property in goods. This presupposes that the goods existed and that either in its original form or in some other form, it is transferred to the principal by the contractor. Transaction involved in the question of the applicant does not involve transfer of any goods as understood in sub clause (b) of clause (29A) of article 366 of the Constitution of India or under the provisions of the Gujarat Value Added Tax Act, 2003. It is a service pure and simple and does not involve any sale of goods since there are no goods in which property can be transferred. 63. Thus the emphasis is on the transfer of property in goods (whether as goods or in some other form). The letter ....
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....of service tax would not be conclusive. The Tribunal committed a serious error in holding that since the goods were consumable, no title passed in favour of the purchaser. 6. On the other hand, learned counsel for the assessee opposed the appeal contending that the assessee had only provided skill based service. There was no transfer of goods in the process. At the end of execution of the contract, the pesticides and chemicals were fully consumed. There was thus, no sale of goods. In any case, it was a skill based service, which also included employment of substantial labour force and, use of consumables was wholly incidental. There was no intention to sale such products. Counsel relied on several decisions to which we would refer to at a later stage. 7. As noted earlier, by virtue of 46th amendment, the term 'sale' referred to in Article 366 came to be expanded. Matching provisions have been made in the State Sales Tax laws. Currently, the VAT Act, the section 2(23) of the Act defines term 'sale' as to mean on sale of goods made within the State for cash or differed payment or other valuable consideration and would include various transactions referred to in clau....
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....nt aspects would be a matter of considerable technical expertise. The use of the pesticides in the process was wholly incidental. The dominant purpose was to provide a composite pest control and rodent control service. The use of pesticides and chemicals was wholly incidental. There was no intention of sale of goods from the assessee to the company. 11. We may notice how this or somewhat similar issue has been considered by Courts in the past. In the Constitution Bench judgment in case of Gannon Dunkerley & Co. and others v. State of Rajasthan and others reported in 88 STC 204, it was observed that the value of goods to be involved in execution of works contract will have to be determined, taking into account the value of the entire works contract and deducting various charges such as labour charges and cost of consumable such as water, electricity, fuel, etc. used in the execution of the works contract, the properly in which is not transferred in the course of execution of a works contract. 12. In case of Rainbow Colour Lab and Another v. State of Madhya Pradesh and others, reported in 118 STC 9, the Supreme Court considered a case where the assessee was in the business of takin....