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2016 (2) TMI 1152 - HC - VAT and Sales TaxService tax or VAT - contract with the ONGC for digging directional wells - 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 - The case of the petitioner is that this is not a contract for hiring of machinery but for hiring of services. Whether the transactions entered into by the petitioner amount to transfer of right to use any goods and, therefore, they are exigible to tax in terms of Section 4(2) of the Tripura Value Added Tax Act, 2004 read with Rule 7 of the Tripura Value Added Tax Rules, 2005? Held that: - A bare perusal of the provisions of the contract clearly show that the contract is basically for providing of services inasmuch as highly specialized machinery along with specialized staff is provided and the rates not only include the rates for hiring of machinery but also for the staff and the services provided by the staff. After carefully going through the contract we are of the view that the contract is mainly for hiring of services. There may be a very small element of transfer of right to use goods but according to us the predominant portion of the contract relates to hiring of services and not to transfer of right to use the goods. We are aware that the dominant nature test is not to be used in composite contract falling within the ambit of Article 366(29A) but from the reading of the contract it is more than apparent that the intention of the parties was to treat the contract as a contract for hiring of services. Moreover, it is impossible to divide the contract into two separate portions. Every element of the digging directional wells and Mobile Drilling Rig service contains a major element of provisions of services. In such an eventuality it is virtually impossible to divide the contract. The petitioner has also been paying service tax and if the State is allowed to tax any portion of the value of the contract then there has to be a proportionate refund of the service tax to that extent - The petitioner or the ONGC cannot be made liable to pay both the taxes for the same transaction. The transactions do not amount to sale within the meaning of the TVAT Act, 2004. Therefore, the petition has to be allowed - decided in favor of petitioner.
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