TaxTMI 
TaxTMI 
2024 (1) TMI 443
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....Appeal No.3558 of 2017 Civil Appeal No.3559 of 2017 Civil Appeal Nos.35663569 of 2017 Civil Appeal No.3572 of 2017 Civil Appeal No.3561 of 2017 Civil Appeal No.3562 of 2017 Civil Appeal No.3564 of 2017 Civil Appeal No.3563 of 2017 Civil Appeal No.3570 of 2017 Civil Appeal No.3571 of 2017 Civil Appeal No.3560 of 2017 and Civil Appeal No.3550 of 2017 Abhay S. Oka And Rajesh Bindal , JJ. For the Appellant : Mr. Hrishikesh Baruah, AOR Mr. Kumar Kshitij, Adv. Mr. B.K.Mishra,Sr.Adv. Mr. Hitesh Kumar Sharma,Adv. Mr. Akhileshwar Jha,Adv. Mr. Amit Kumar Chawla,Adv. Mr. virendra Mohan,Adv. Ms. Niharika Dwivedi,Adv. Ms. Sandhya Mishra,Adv. Mr. Mohan Pandey, AOR Mr. Anil Shrivastav, AOR Mr. Ananga Bhattacharyya, AOR Ms. Devahuti Tamuli, Adv. Mr. Krishanu Barua, Adv. Mr. Manish Goswami, Adv. Mr. Rameshwar Prasad Goyal, AOR Mr. Raj Bahadur Yadav, AOR Mr. Sumeet Lall, AOR Mr. R. C. Kaushik, AOR Mr. Shibu Devasia Olickal, AOR Mr. Jagjit Singh Chhabra, AOR For the Respondent : Mrs. Aishwarya Bhati, A.S.G. Mr. Raj Bahadur Yadav Aor, Adv. Mrs. Nisha Bagchi, Adv. Mr. Shashank Bajpai, Adv. Mrs. Ruchi Kohli, Adv. Mr. Prashant Singh Ii, Adv. Mr. Sabarish Subramanium, Adv. Mr. Raj Bahadur Yadav, ....
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....th December 2009, 29th June 2010 and 25th August 2010. Civil Appeal no.3548 of 2017 arises from the impugned judgment dated 25th November 2009 passed by a Division Bench of the Gauhati High Court in a writ appeal. In this case, the agreement is of 13th April 2006, by which the appellant agreed to provide services of truckmounted hydraulic cranes with crew, etc., to ONGC for carrying out its various operations. The appellant had to approach the High Court on the threat given by ONGC to deduct tax at source under the VAT Act in respect of the services provided by the appellant. Similar petitions were filed before the learned Single Judge of the Gauhati High Court. The learned Single Judge dismissed the petitions by holding that the contract was for the transfer of the right to use the goods and, therefore, there is a liability under the VAT Act and the Sales Tax Act. The learned Single Judge also passed orders in similar writ petitions disposing of the same in terms of the order dated 19th December 2006. Therefore, the appellants filed writ appeals before the Division Bench. By the impugned judgment dated 25th November 2009, the Division Bench dismissed the writ appeals by holding th....
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.... of transactions were treated as deemed sale of goods. Therefore, 'deemed sale' must be read in every provision wherever the phrase 'tax on sale and purchase of goods' appears. He pointed out the decisions that cover the contingencies covered by sub-clauses (a) to (f) of Clause 29A of Article 366 of the Constitution of India. As far as sub-clause (d) is concerned, he relied upon the decision of the High Court of Madras in the case of A. V. Meiyappan v. Commissioner of Commercial Taxes, Board of Revenue, Madras & Anr. (1967) 20 STC 115 (Madras). 5. Coming to the Sales Tax Act, the learned counsel pointed out that the same was repealed by virtue of Section 107 of the VAT Act. He submitted that the VAT Act is in conformity with the 46th Amendment to the Constitution of India. He also pointed out the view taken by the High Court of Tripura in the judgments and orders dated 3rd November 2014 and 29th February 2016, wherein the said High Court, after analysing the similar contract, came to the conclusion that the said transaction did not involve any transfer of right to use. 6. He pointed out that the question will be whether the transactions subject matter of these appeals constit....
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....decision in the case of Great Eastern Shipping Company Limited v. State of Karnataka & Ors. (2020) 3 SCC 354, he submitted that in the facts of the case before this Court, the 'Tug' which was the subject matter of the contract was made available to the port twentyfour hours a day throughout the contract period. The contract provided that during the contract period, the tug will be available with the port for all purposes and under control in every respect. He also referred to this Court's decision in Commissioner of Service Tax, Delhi v. Quick Heal Technologies Limited 2022 SCC Online SC 976. In the said case, this Court observed that the transaction was of software sale, and once it is accepted that the software put in a compact disk is goods, there cannot be any service element in the transaction. He submitted that by accepting the contentions raised by him, consequential directions will have to be issued to settle the account of the contractors. Submissions in Civil Appeal No. 383 of 2013 9. The learned senior counsel appearing for the appellant in Civil Appeal No. 383 of 2013 has also made detailed submissions. He relied upon the standard contract executed between the....
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.... upon the decision of this Court in the case of Gannon Dunkerley & Co^2. He pointed out why the Law Commission suggested an amendment to the Constitution of India by incorporating clause 29A under Article 366. He submitted that under clause 29A of Article 366, it is provided that the transfer, delivery, or supply of goods shall be deemed to be a sale of those goods by the person making the transfer, delivery, or supply. He relied upon the decision in the case of BSNL^5. He submitted that whether the contract falls in one category or the other is to be decided by finding out the substance of the contract. He also pointed out the decision of this Court in the case of Rashtriya Ispat Nigam Ltd.^6 for dealing with the issue of effective control. He heavily relied upon the opinion of the Hon'ble Dr. Justice A.R. Laxmanan in the case of BSNL^5. 12. The learned senior counsel relied upon several clauses in the agreement executed by the appellant. He submitted that after 2003, the transaction was liable to service tax. 13. The learned counsel appearing for the appellants in Civil Appeal nos.8714, 8710, 8705, 8693, and 3573-3579 of 2017 submitted that the contract of providing SCB tra....
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....dominion over the cranes, trucks and trailers is given to the hirer. It is irrelevant that the cranes, trucks, etc., come back to the contractor after the contract period. He submitted that the concept of 'deemed sale' under sub-clause (d) of Clause 29A of Article 366 of the Constitution of India comes into operation even if there is no legal transfer of ownership of the vehicles followed by its delivery. He pointed out that deemed sale is not a sale of the goods, but it is of the right to use the goods. Even if there is actually no sale of cranes, tankers or trailers in terms of the Sale of Goods Act, there is a deemed sale as the terms of the contracts read as a whole show that there was an intention on the part of the parties to transfer the right to use the said goods. He pointed out that this Court, in the case of Aggarwal Brothers v. State of Haryana & Anr. (1999) 9 SCC 182 , reiterated that the provisions are for transferring the right to use the goods and not the transfer of goods. He submitted that the test of effective control is satisfied in this case. 16. Inviting our attention to Section 65(105)(zzzzj) of the Finance Act, the learned counsel submitted that the said ....
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....t I of the Seventh Schedule to the Constitution of India, even the Central legislature is empowered to levy tax on the sale and purchase of goods other than newspapers where such sale or purchase occurs during the course of interstate trade or commerce. 20. Thereafter, the 46th Amendment to the Constitution of India was made. By the said amendment, Clause 29A was added to Article 366 with effect from 2nd February 1983. Clause 29A reads thus: "(29A) "tax on the sale or purchase of goods" includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, 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) involved in the execution of a works contract; (c) a tax on the delivery of goods on hirepurchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons t....
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....hiring trailers; f. Agreements for hiring water tankers; and g. Agreements for hiring of scrapping winch chassis. 23. The impugned judgment and order subject matter of challenge in Civil Appeal no.3548 of 2017 decides a group of 20 cases wherein the agreements were for providing/hiring cranes to ONGC and agreements pertaining to water tankers and trailers. The said judgment was against the assessee. 24. Civil Appeal no.383 of 2013 arises from the contract between the transport agencies and the appellant-IOCL, for transporting petroleum products by vehicles. The impugned judgment and order is of 24th July 2012. Civil Appeal No. 3548 of 2017 has been preferred by the assessee. The same is the case with Civil Appeal No. 383 of 2013. Civil Appeal No. 3580 of 2017 has been preferred by the Union of India. Civil Appeal no.4657 of 2013 is preferred by the assessee for challenging the judgment and order dated 24th July 2012. By the said judgment, again, a group of cases were decided by the Gauhati High Court. Even the said cases were decided against the assessee on the basis of the decision, which is the subject matter of challenge in Civil Appeal No. 3548 of 2017. ....
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....or a specified period) for cash, deferred payment or other valuable consideration. Only because a person is allowed to use certain goods of the owner, per se, there is no transfer of the right to use any goods. The transaction can be either of transfer of right to use the goods or granting mere permission to use the goods without transfer of the right to use the goods. 29. This Court has interpreted sub-clause (d) of Clause 29A in various decisions. The first important decision on this aspect is a decision of the Constitution Bench in the case of 20th Century Finance Corporation Ltd.^11. This was a case where the appellant had entered into a master-lease agreement with the lessee. The lessee was a party that desired to take equipment for use on hire. Under the agreement, the appellant agreed to give diverse machinery/equipment listed in the schedule to the master-lease agreement. The master-lease agreement provided that the appellants would place the orders for individual equipment on the request made by the lessee, and the equipment to be leased would be dispatched by the manufacturer or supplier concerned to the location specified in the lease agreement. At the instance of the....
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.... lessee, and the situs of sale of such a deemed sale would be where the agreement in respect thereof is executed. 30. There is another decision of this Court in the case of BSNL^5. This case was decided by a bench of three Hon'ble Judges of this Court. The question decided in this case was about the nature of the transaction by which mobile phone connections were provided. The question was whether it was a sale of goods that would attract sales tax or a service that would attract service tax under Entry 97 of List I of the Seventh Schedule to the Constitution of India. There were several issues, including an issue of whether there is any transfer of the right to use any goods by providing access to telephone connection by the telephone service provider to the subscriber. Another issue was whether a transaction of providing a telephone connection was a sale, which is an interstate sale. There were separate but concurring judgments delivered. Justice Ruma Pal authored the leading judgment for herself and Justice Dalveer Bhandari. In this decision, reference was made to the decision in the case of Gannon Dunkerley & Co.^2. It was held that even after Clause 29A of Article 366 was i....
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.... transfer of the right to use the goods, the transaction must have the following attributes: ( a ) there must be goods available for delivery; ( b ) there must be a consensus ad idem as to the identity of the goods; ( c ) the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee; ( d ) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor-this is the necessary concomitant of the plain language of the statute viz. a "transfer of the right to use" and not merely a licence to use the goods; ( e ) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." (underline supplied) 32. The view taken by Dr AR Laxmanan, J has been consistently followed thereafter by this Court in various decisions. In the case of Great Eastern Shipping Company Limited^7, paragraph 97 of the view expressed by Dr. AR Laxmanan, J was quoted with approval. A Bench ....
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.... 53.6. The levy of tax under Article 366(29A)( d) is not on the use of goods. It is on the transfer of the right to use goods which accrues only on account of the transfer of the right. In other words, the right to use goods arises only on the transfer of such right to use goods. 53.7. The transfer of right is the sine qua non for the right to use any goods, and such transfer takes place when the contract is executed under which the right is vested in the lessee. 53.8. The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to the identity of the good is shown the transaction is exigible to tax. 53.9. The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use the goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant." Thus, to decide the controversy involved in this group of appeals, the contract between the parties will have to be tested on the touchstone of the five tests laid....
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....equipment; b. The other salient features are : i. The specifications of cranes and other equipment are provided in clause 3.1. Clause 3.3 provides that apart from the cranes, the contract shall provide a necessary number of slings, hooks, dunnage material and other material for loading and unloading. The specific material is mentioned in the said clause; ii. Though in clause 6.2, the registration number of two cranes has been mentioned, what is important here is clause 5.2. It provides that even if a particular crane or its documents have been approved by ONGC, when a crane is defective, another crane of similar specifications must be offered as a replacement by the contractor. Therefore, the contract does not remain confined only to the two cranes described in clause 6.2, but the contractor has an obligation to replace the cranes; iii. The operational staff, such as driver, crane operator, rigorslinger, khalasi, cleaner, etc. as specifically mentioned in clause 8.17 and 8.18 shall be provided by the contractor. The crew must operate the cranes with requisite safety accessories, such as safety shoes, gloves, safety helmets, etc. The contractor sh....
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.... case one of the cranes was not working 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....
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....of any accident or damage while the trailer is on ONGC duty, there shall be no liability of any nature incurred by the ONGC; h. The contractor must take insurance of trailers covering all the risks and liabilities, which will cover unlimited third-party claims and the claims under the Workmen's Compensation Act, 1923, made by the workmen. 38. Looking at these clauses, it is obvious that the contractor fully controls the trailers during the contract period, and therefore, again, this is a case of a license granted to ONGC to use the trailer, and the right to use the trailer is not transferred to ONGC. Hence, test (c) out of the five tests is not fulfilled in this case. 39. Now, we come to Civil Appeal no.383 of 2013. In this case, the contract was for operating tank trucks to deliver petroleum products at specified rates. The salient features of the contract are as under: a. The contractors shall operate the tank trucks; b. IOCL will have the right to requisition a further number of tank trucks in addition to what is provided in the contract; c. IOCL did not guarantee any minimum turnover, whether daily, monthly or annually, during the contr....
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....zzzzj) of the Finance Act, which was brought into force with effect from 16th May 2008. Section 65(105)(zzzzj) reads thus: "Section 65. Definitions - .. .. .. .. .. .. .. .. .. .. (1) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. (105) "Taxable service" means any service provided or to be provided - (a) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. (zzzzj) to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances." It provides that "taxable service" means any service provided to any person by any other person in relation to the supply of tangible goods, including machinery, equipment and appliances for use without transferring the right of possession and effective control of such machinery, equipment and appliances. 42. Essentially, the transfer of the right to use will involve not only possession, which may be granted at some stage ....