TaxTMI 
TaxTMI 
2016 (2) TMI 1152
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.... of directional drilling and, therefore, it is paying service tax to the Central Government. The petitioner contends that the contract does not amount to sale and no VAT can be levied on the same. [3] The stand of the State is that transactions entered into by the petitioner is for hiring of machineries which amounts to sale within the meaning of Section 2(25)(d) of the Tripura Value Added Tax Act, 2004 read with Rule 7(2) of the Tripura Value Added Tax Rules, 2005 and exigible to tax under Section 4(2) of the Tripura Value Added Tax Act, 2004. [4] At this stage it would be pertinent to refer Article 366(29A) of the Constitution of India which reads as follows: "366(29A) tax on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contact, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involed in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpos....
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....nstitution by the Constitution Forty-sixth Amendment Act, 1982. By means of this Constitutional amendment, tax on the sale or purchase of goods now covered six more categories which may otherwise not have fallen within the definition of sale. Sub-clauses (a) to (f) to Clause 29A of Article 366 of the Constitution bring within the ambit of sale, transactions where one or more of the essential ingredients of sale as traditionally understood were absent. By legal fiction such transactions, transfers and supply of goods were deemed to be sale and purchase of the goods. [8] After amendment of the Constitution the Apex Court in Gannon Dunkerley and Co. Vs. State of Rajasthan: 1993(1) SCC 364 dealing with works contracts held that only the value of the goods involved in the execution of works contract could be taxed and this would have to be determined by taking into account the value of the entire works contract after deducting therefrom the charges towards labour, services etc. The Apex Court in the Second Gannon Dunkerley Case concluded that only the value of the goods involved in the execution of a works contract were amenable to the provisions of the Sales Tax/VAT Act of the State....
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....ent thereof in cash or by issue of a cheque or draft or any other mode, deduct such amount towards sales tax (not being more than the total tax payable by the dealer) as may be prescribed." ***** ******* ******* ******* ****** ****** Rule 7(2) of the TVAT Rules reads thus: "7(2) Every person responsible for making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the right to use any goods other than the goods in exempted list of the Act for any purpose (whether or not for a specified period) for cash or in any manner, shall at the time of making such payment deduct an amount at the rate as notified by the Government from time to time of the payment on account of such transfer of right : provided that till the Government notify the rate, the prevailing rate shall continue : Provided no such deduction shall be made from the bill(s) or invoice(s) of the transferer where the amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made, ****" The main issue is whether there is a transfer o....
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....titute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed." According to the Apex Court the taxable event on the transfer of right to use goods would be the place where the contract is executed. In the case of M/s. Oil field Instrumentation (India) Ltd., the contract was executed in Maharastra whereas in other cases the contracts were executed within Tripura. [11] The Apex Court in Rainbow Colour Lab Vrs. State of M.P ; (2000) 2 SCC 385 was dealing with the issue as to whether the job rendered by a photographer in taking photographs, developing and printing films would amou....
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.... same. The tax was levied on this transaction on the ground that there was a transfer of the right to use goods. The Andhra Pradesh High Court in its judgment held that there was no transfer of the right to use this machinery in favour of the contractor. While coming to this conclusion the High Court of Andhra Pradesh analysed the various clauses of the agreement and held that the contractors were not free to make use of the machinery for works other than the project work of the respondent or move out the machinery during the period of contract. The Court went on to hold that the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against the possession and control of the Ispat Nigam over the property. The Apex Court upheld the judgment of the High Court of Andhra Pradesh. [13] In Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others, (2006) 3 SCC 1 the Apex Court was dealing with the issue as to whether the transaction by which mobile phone connections are enjoyed is a sale or a service or both. The Apex Court held that if it was a sale only the State would be competent to levy sale tax on s....
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....remains with the transferor who only transfers the right to use the goods to the purchaser. In other words, contrary to A.V. Meiyappan decision a lease of a negative print of a picture would be a sale. Sub-clause (e) covers cases which in law may not have amounted to sale because the member of an incorporated association would have in a sense begun as both the supplier and the recipient of the supply of goods. Now such transactions are deemed sales. Sub-clause (f) pertains to contracts which had been held not to amount to sale in State of Punjab vs. M/s. Associated Hotels of India Ltd. (supra). That decision has by this clause been effectively legislatively invalidated. 42. All the sub-clauses of Article 366 (29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act 1930 are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerly limited. The amendment especially allows specific composite contracts viz. works contracts (Sub-clause (b)), hire purchase contracts (Sub-clause (c)), catering contracts (Sub-clause (e....
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....n there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is to as what is 'the substance of the contract'. We will, for the want of a better phrase, call this the dominant nature test." [15] Thereafter the Court dealt with the question as to whether the dominant nature test would continue to apply even in respect of contracts falling within the ambit of Clause 29A of the Constitution. The Apex Court held as follows: "49. We agree. After the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying. Therefore when in 2005, C.K. Jidheesh vs. Union of India (2005) 13 SCC 37 held that the aforesaid observations in Associated Cement (2001) 4 SCC 593 were merely obiter and that Rainbow Colour Lab (2000) 2 SCC 385 was still good law, it was not correct. It is necessary to note that Associated Cement did not say that in all cases of composite transactions the 46th Amendment woul....
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.... company treated the said transaction as sale and paid sales tax on the same. When the matter came up before High Court it rejected the plea of the assessee holding that the contract was a comprehensive contract for supply of printed material developed by the company. The High Court held that the indivisible contract was divided by the company under different heads. The Apex Court after discussing all the relevant law on the point including the judgments which we have referred to hereinabove set aside the judgment of the High Court and held as follows: "27. What, however, did not fall for consideration in any of the aforementioned decisions is the concept of works contract involving both service as also supply of goods constituting a sale. Both, in Tata Consultancy (2005) 1 SCC 308 as also in Associated Cement Company (2001)4 SCC 593, what was in issue was the value of the goods and only for the said purpose, this Court went by the definition thereof both under the Customs Act as also the Sales Tax Act to hold that the same must have the attributes of its utility, capability of being bought and sold and capability of being transmitted, transferred, delivered, stored and po....
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....posite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract, irrespective of the element of service provided. The approach of the assessing authority, to us, thus, appears to be correct." [19] The Apex Court in BSNL's case clearly held that in a contract falling under Clause 29A of Article 366 of the Constitution the dominant nature test would not apply and the contract could be split up to determine the value of that part of the contract which amounted to services and that portion of the contract which amounted to a deemed sale. This aspect has been also explained in Imagic Creative(P) Ltd. case. The Apex Court has clearly taken a view that the service part of the contract cannot be taxed by the State. This view is in line with the view taken by the Apex Court in the Second Gannon Dunkerley Case. [20] The contract between the parties is for providing directional well. The opening portion of the contract provides that the contract has been entered into ....
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....ents, drawing or other particulars in relation to the Contract. ***** ****** ***** 5.0 Duties and Power/Authority: 5.1 The duties and authorities of the of the ONGC's site representative are to act on behalf of the ONGC for: (i) Overall supervision, co-ordination and Project Management at site. (ii) Proper utilization of equipment and services. (iii) Monitoring of performance and progress. (iv) Commenting/countersigning on reports made by the CONTRACTOR's representative at site in respect of works, receipts, consumption etc. after satisfying himself with the facts of the respective cases. (v) He shall have the authority, but not obligation at all times and any time to inspect/test/examine/verify any equipment machinery, instruments, tools materials, personnel, procedures and reports etc. directly or indirectly pertaining to the execution of the work. However, this shall not construe to imply an acceptance by the inspector. Hence, the overall responsibility of quality of work shall rest solely with the CONTRACTOR. Each and every document emerging from site in support of any claim by the contractor has to have th....
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....ned from that area where the person(s) has/have stayed earlier. The schedule of rates is as follows: SCHEDDULE OF RATES Group Group Group-II Location Tripura Asset Total No. of set 1(One) Area of operation PEL/ML Hole Size 171/2" to 6" Currency United Sates Dollar (USD) (i) Operating charges per day (for the equipments): Basic Unit Rates Service Tax @ 12.36% Unit Rate with Service Tax (a) MWD + Gamma Ray Tool A 2300 284.28 2584.28 (b) SDMM B 2180 269.45 2449.45 (c) Jar C 390 48.2 438.2 (ii) Standby Charges-per Day (for the equipments) :- (a) MWD + Gamma Ray Tool D 1320 163.15 1483.15 (b) SDMM E 1280 158.21 1438.21 (c) Jar F 180 22.25 202.25 (iii) Day Rate Charges: &n....
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.... in the range of 8000 NIL 8000 7 ¾" to 12. 8.3 / 8" 7. Drilling Jar 6 ½"/ 6 ¼" 38000 NIL 38000 Total for 8 ½" Hole (1 to 8 above) L2 157900 157900 c) For 6" Hole : 1. MWD tool 1000 NIL 1000 2. Gamma ray tool 1000 NIL 1000 3. NMDC 4 ¾" OD 500 NIL 500 4. Float Sub 4 ¾" 100 NIL 100 5. SDMM 4 ¾" OD 1500 NIL 1500 6. String Stabilizer 5 ½" 100 NIL 100 7. String Stabilizer 5 ¾" 100 NIL 100 8. Drilling Jar 4 ¾" OD 1500 NIL 1500 Total for 6" Hole (1 to 9 above) L3 5800 ....