AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 2
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....eements dated 08.06.2009 and 04.07.2012 would come within the ambit of 'sale' as defined in Section 2 (43) of the Assam Value Added Tax Act, 2003 (for short, 'the Act of 2003') or it would be 'service' in terms with Section 65 (105) (zzzzj) of the Finance Act 1994. 3. Before dealing with the said question, this Court finds it relevant to take note of the brief facts which led to the filing of the instant writ petition. 4. The petitioner herein entered into an agreement on 08.06.2009 with Northeast Frontier Railway (Construction Organization) (hereinafter for short referred to as 'the Railway') whereby the petitioner agreed to supply two launch vehicles on hire charge basis in connection with the construction of the Bogibeel Bridge Project across the river Brahmaputra near Dibrugarh for two years. In terms with the said agreement, it was mentioned that the construction work has to be done on or before 29.12.2010. However, as the work was not completed, a fresh agreement was entered into containing similar terms and conditions on 04.07.2012. During the period of the said contracts, the respondent No. 5, i.e. the Service Tax Department of the Government of India demanded from the pe....
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....rmed the petitioner that the Form by which the said application was filed seeking refund was not in the proper manner and therefore the petitioner was asked to submit the application in the proper Format. The petitioner thereupon submitted again all available documents to the respondent No. 3 and made a fresh application for refund under Form-37. The respondent No. 3 thereupon referred the refund petition for suggestion to the Commissioner of Taxes vide the communication dated 20.11.2015 as to whether the refund could be granted to the petitioner. Thereupon, it is seen from the averments made in the writ petition that there were no effective steps taken by the respondent authorities for refund of the entitlement to the petitioner except issuing a letter on 21.04.2016 informing certain clarifications have been sought from the Commissioner of Taxes. 6. It is further seen from a perusal of the writ petition that the Commissioner of Taxes-Respondent No. 2 thereafter referred the matter to the Commissioner and Secretary to the Government of Assam, i.e. the Respondent No. 4 for permission to review the clarificatory orders dated 06.06.2015 and 28.08.2015 wherein it was categorically men....
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....urt also finds it relevant to take note of the additional affidavit filed on 15.02.2024 whereby the entire set of contract agreements dated 08.06.2009 and 04.07.2012 were brought on record. 12. In the backdrop of the above, let this Court to take note of the submissions made on behalf of the learned counsels for the parties. (A). Ms. N. Hawelia, the learned counsel for the petitioners submitted that the test to be applied as to whether there was any element of sale within the meaning of transfer of right to use goods or was it purely a service contract has to be discerned on the basis of stipulations in the contract. The learned counsel for the petitioners submitted that in the case of Bharat Sanchar Nigam Ltd. and Another vs. Union of India and Others, reported in (2006) 3 SCC 1, the Supreme Court categorically dealt with the issue as regards the essence of the right under Article 366 (29A) (d) of the Constitution and opined that the essence of the right under the said Article is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time o....
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....e and the perusal of the terms and conditions of the contracts between the petitioners and the Railway would show that it would be a deemed sale for which VAT is applicable as per the Schedule rate of tax. The review order dated 03.04.2017 was supported by the learned Standing Counsel stating that the said review was made as per the provisions of the Act of 2003. He further submitted that the contracts in question would be deemed sale in view of the fact that the launch vessels were hired by the Railway and therefore there is transfer of the right to use against the payment made by the Railway. The learned Standing Counsel relied upon the judgment of the Supreme Court in the case of Great Eastern Shipping Co. Ltd. (supra) and submitted that the instant case is squarely covered by the said judgment rendered. He submitted that this judgment of the Supreme Court in Great Eastern Shipping Co. Ltd. (supra) was a judgment rendered by a larger Bench than the Bench rendering the judgment in the case of M/s K. P. Mozika (supra) for which the judgment in the case of Great Eastern Shipping Co. Ltd. (supra) was binding upon this Court. (C). Mr. S. C. Keyal, the learned counsel appearing on ....
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....noted that these transactions resemble sales in substance and suggested three drafting devices for conferring the power of taxing these transactions on the States, viz.:- (i) amending the State List, Entry-54, or (ii) adding a fresh Entry in the State List, or (iii) inserting in Article 366 a wide definitation of "sale" so as to include work contract. The Law Commission in its recommendation preferred the last alternative. On the basis thereof, the Constitution (Forty Sixth Amendment) Act, 1982 was brought in force and Article 366 (29A) was amended. The said Article 366 (29A) read as under:- "(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 hire-purchase or any system of payment by installments; (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 paymen....
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....nt or other valuable consideration. The said sub-clause (f) was inserted in order to overcome the decision of the Supreme Court in the case of State of Punjab vs. Associated Hotels of India Ltd., reported in (1972) 29 STC 474. 16. Therefore, from the above Sub-clauses of Article 366 (29A) of the Constitution, it would be seen that they serve to bring transactions where one or more of the essential ingredients of 'sale' as defined in the Sale of Goods Act, 1930 are absent, within the ambit of the purchase and sale for the purpose of levy of sales tax. By the said amendment, it now specifically allows specific composite contracts, viz., works contract; hire-purchase contracts; catering contracts by legal fiction to be divisible contracts where the sale element could be isolated and be subject to sales tax. On the basis of the amendment so carried out to Article 366 (29A) of the Constitution, the State Sales Tax Legislation had also adopted substantially a similar definition as would be seen from a perusal of Section 2 (43) of the Act of 2003. 17. In the backdrop of the above, let this Court deal with Article 366 (29A) (d) of the Constitution which deals with the transfer of right t....
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....t was observed at paragraph No.97 of the said judgment that for constituting a transaction for transfer of the right to use of goods, the transactions must have the following five attributes, namely:- (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 the legal right to use the goods-consequently all legal consequences of such use including any commission or licenses required therefore should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be to the exclusion of the transferor. It was observed that this was a concomitant the necessary commitment of the plain language of the statute, viz. a "transfer of right to use" and not merely a license 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 right to others. 20. It was further observed in the concurring opinion that all these attributes are required for constituting a transaction for transfer of right to use the goods. The said five attributes test ....
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..... The levy of tax under Article 366 (29-A )(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." 22. In the case of M/s K. P. Mozika (supra) which is the latest judgment on the point of transfer of the right to use goods, it was observed at paragraph No. 33 that the contract between the par....
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.... person to whom the supply is made, the transaction would be of rendering service coming within the meaning of Section 65 (105) (zzzzj) of the Finance Act, 1994 after the said provision came into force. Paragraph No. 42 of the said judgment is quoted herein under:- "42. Essentially, the transfer of the right to use will involve not only possession, which may be granted at some stage (after execution of the contract), but also the control of the goods by the user. When the substantial control remains with the contractor and is not handed over to the user, there is no transfer of the right to use the vehicles, cranes, tankers, etc. Whenever there is no such control on the goods vested in the person to whom the supply is made, the transaction will be of rendering service within the meaning of Section 65 (105) (zzzzj) of the Finance Act after the said provision came into force." 24. In the backdrop of the above law, let this Court therefore take note of the respective clauses of the two contracts agreements dated 08.06.2009 and 04.07.2012 which are similar in content. The contracts relate to hiring of two numbers of launch vessels in connection with the construction of the Bogibeel....
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....bers of Khalasi and one cook (who knows cooking well) for survey/inspection party and touring officers in the launch | shall be provided. 3. The launches shall be provided with adequate number of qualified crew having relevant statutory certificates, which shall be produced for verification as and when demanded by Engineer-in-charge (EIC). In addition, adequate and suitable helping hands for proper operation of the various activities connected with dredging shall be provided. 4. The tenderer shall clearly indicate about number of launches/tug owned by him or under valid lease agreement with other owner an. shall furnish supporting documents for the same. 13. Routine repairs and maintenance works shall be adjusted with mutual discussion with Engineer in charge such that the overall works schedule is not affected. In total maximum 48 hours may be allowed per month for maintenance of engines and other machineries, and payments for this period is allowable. 14. The contractor shall bear the cost for running of engine for charging battery of the launch/tug to keep the launch/tug in tip-top condition with full voltage electricity. Engine RPM meter shall be provided in the lau....
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.... 28. From the above terms of the contract, it would be seen that the petitioners have an option of replacing the launch vessel in case one of the launch vessels was not working properly (clause 17). The petitioners are liable to take care of legal consequence of using the launch vessels (clauses 38 & 39). The petitioners must maintain the vessels and it is for the petitioners to pay for consumable like fuel, oil etc. (clauses 13, 14 & 18). Even the launch vessels must be moved and operated by the crew members appointed by the Petitioners (clauses 2 & 3). Moreover, in case of mishap or an accident in connection with the launch vessels or in connection with the use of the launch vessels or as a consequence thereof, the entire liability would be on the petitioners and not on the Railway (clauses 38 & 39). Thus, in short, the contracts in question are for providing the service of the launch vessels to the Railways. The reason is that the Railways are not required to face legal consequences for using the launch vessels supplied by the Petitioners. Therefore, the test laid down in Clause (c) & (d) of paragraph No. 97 of the concurring opinion in Bharat Sanchar Nigam Ltd. (supra) are not....
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....NL observed: "97. To constitute a transaction for the 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 therefore 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." 37. The charter party agreement qualifies the test laid down by this Court. Applying the substance of the contract and the nominal nature test, the vessel was available when the agreement for the right to use the goods has taken place. The vessel was available at the time of tr....