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TMI Blog2006 (11) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in contract business with OIL and provides highly professional and technical services in connection with extraction of oil and is also engaged in wire-line logging activities. It entered into a contract registered as above with OIL on September 10, 1999 for carrying out wire-line logging and perforation activities consisting of electronic/seismic scanning of subterranean strata and rock formation in the oil fields by utilising its own high tech equipment. In the process such equipment are to be released deep down into the subterranean region through drilled holes into the oil fields, which generate electronic/seismic impulses to be processed through special software and recorded through magnetic tapes. These equipment are owned and used by the company to be engaged for providing such services to OIL. In terms of the contract, the equipment remained in absolute possession of the company and used by it to provide the required data and other professional services. The equipment were operated by utilising the services of highly technically qualified and experienced personnel of the company. It has been categorically pleaded that the appellant-company used its own equipment, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monthly rental charges on equipment also indicated that the wire-line logging and perforation activities were exclusively meant for OIL and that the appellant-company had no right to use those in any manner other than the terms of the contract. It was held that the stipulations of the contract clearly indicated that the appellant-company had entered into an agreement/arrangement where under the right to use of the equipment was transferred to OIL on payment of rental charges. 6. Referring to Section 2(19) of the Act defining "lease" it was observed that the same did not envisage any arrangement requiring transfer of possession of the goods involved to constitute the transfer of right thereof. It was recorded that once the right to use any goods is transferred by one person to another for exclusive use it amounted to "lease" within the meaning of the Act. On facts it was noticed that the equipment supplied by the appellant-company were required to be used for OIL only and not for any other purpose denoting thereby that the same were exclusively meant for the use by OIL on payment of charges. The appellant-company having placed the equipment at the work site was not entitled to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means could be construed to be a lease under Section 2(19) of the Act. Dr. Todi, to buttress his arguments, placed reliance on the decisions of the apex court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 AP and of the Andhra Pradesh High Court in Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam [1990] 77 STC 182. 8. The learned Senior Counsel for OIL while reiterating its pleaded stand has argued that the appellant not having approached this Court with clean hands, the appeal is liable to be dismissed in limine. The appellant-company having charged sales tax over and above their bills in terms of clause 7.14 of the contract and the said amount having been paid by OIL to the Government, the turn around after the period of the contract lacks bona fide and, therefore, it is not entitled to any equitable consideration of this Court. The omission to pray for refund of the amount charged by it and paid by OIL to the Government clearly demonstrates that the purpose of the belated challenge is extraneous and collateral. Referring to the clauses of the contract agreement, the learned Senior Counsel urged that OIL having pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l provisions may first be analysed, the same being of determinative relevance. Having heard the parties at length we would prefer to dispose of the appeal on merits rather than dilating on the preliminary objections of maintainability raised on behalf of OIL. 11. The agreement pertaining to the services involved was executed by and between the parties on September 10, 1999 whereunder the appellant-company was required to render wire-line logging, perforation, data processing and interpretation services for the OIL's fields in the States of Assam and Arunachal Pradesh. The contract was effective from July 16, 1999 and was to remain in force for a period of two years from the date of commencement thereof as contemplated therein with an option to OIL to extend the same for a further period of one year at its discretion on the same rates, terms and conditions. Provision for further extension of the contract was also envisaged if called for, on rates, terms and conditions to be mutually agreed upon by the parties. Under clause 8.8 of Section I containing the general conditions of contract, levies and duties, sales tax, octroi, etc., on purchases and sales made by the contractor exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices every month-one for minimum charges equivalent to monthly fixed charges for the equipment/tools/computer center plus monthly personnel charges under the contract and the second for all balance amount(s) payable under the contract for the month. The fixed charges under clause 18.1. for equipment, etc., mobilised for the services were to be applicable from the date as certified by OIL's engineer to be in readiness to undertake the operation/services up to the effective date of demobilisation/termination. Clauses 7.13 and 7.14 having a vital bearing on the issues under the scrutiny deserve to be extracted. 7.13 ... The equipment/tools to be furnished by the contractor under this contract is the contractor's property and shall always remain in the possession of the contractor with the exclusive right to use of such equipment/tools by the contractor for providing services under this contract. 7.14 ... Company shall deduct five per cent AGST or as applicable from rental invoice of the contractor and accordingly the contractor should include five per cent AGST or as applicable on rental component separately in their rental invoice which will be deducted by the company whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) US$ 3.50 m for the first two years contract duration and (b) US$ 0.50 m for each 6 months extension or part thereof. In course of the arguments, this amount was claimed to have been invested by OIL to facilitate import of the appellant's equipment for the services under the contract. 13. A cumulative reading of the above clauses, in our considered opinion, unequivocally proclaims an all-pervasive control of OIL over the appellant's equipment deployed for the execution of the contract during its subsistence. Evidently, the equipment, tools and machinery detailed by the contractor were owned by it, physical possession whereof was also permitted to be retained by it. Those were to be operated by its technically qualified personnel. The contractor was to realise rental charges therefor. OIL thus had hired the contractor's equipment for charges to be borne by it. This was in addition to the personnel services for operating the same and providing the data required. As against this, the contractor was required to provide 24 hours service as demanded by OIL. The contractor was permitted to use the equipment/tools exclusively therefore under clause 7.13 referred to hereinabov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislation to amalgamate, consolidate and amend the laws relating to levy of tax concerning sale and purchase of goods in the State of Assam. Section 2(33) defines "sale" to mean any transfer of property in goods for cash, deferred payment or other valuable consideration and includes any transfer of the use of any goods under an operating lease. It being the focal point of the debate before us, it is considered expedient to extract the relevant excerpt of the said definition. 2. (33) 'sale' with all the grammatical variations and cognate expressions means any transfer of property in goods by any person for cash, deferred payment or other valuable consideration, and includes- (i) to (iii) ... (iv) Any transfer of the use of any goods under an operating lease; (v) to (vi) ... 16. The provisions defining of "lease" and "operating lease" are also set out hereunder for ready reference: 2. (19) 'lease' means any agreement or arrangement whereby the right to use any goods for any purpose is transferred by one person to another whether or not for a specified purpose for cash, deferred payment or other valuable consideration without the transfer of ownership and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has to be in conformity with the object of the legislation to effectuate the purposes thereof. A constricted and literal approach having the potential of frustrating the legislative intendment logically has to be eschewed. The concept of sale under the Act, the root whereof lies in the constitutional amendment referred to above must be permitted a full play, the underlying purpose of the extended connotation thereof being to make it all comprehensive to include all conceivable transactions involving transfer, delivery and supply of goods as well as the transfer of right to use of any goods under an operating lease. We are thus of the view that no exact analogy of a deemed sale conceptualised in the Act with a sale in common parlance is permissible. The provisions of the Act, therefore, call for an interpretation to further the notion of deemed or expanded sale visualised thereby. A brief survey of the authorities cited at the Bar would be essential at this stage. 20. In Rashtriya Ispat Nigam Ltd. [1990] 77 STC 182 (AP), the petitioner for the purpose of its steel project allotted different works to contractors. To facilitate the execution of the works, the petitioner undertook t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved had been transferred for valuable consideration in favour of OIL within the meaning of Section 2(33) of the Act. 22. In Aggarwal Brothers AIR 1999 SC 2868 the appellants used to supply shuttering to builders and contractors on hire to be used in the construction of buildings. The hire charges were assessed to tax under the Haryana General Sales Tax Act, 1973. The challenge thereto failed. Referring to the definition of "sale" provided in the Act envisioning transfer of the right to use of goods for any purpose for cash, deferred payment or for other valuable consideration, the apex court repelled the contention that for a deemed sale under the said statute, there ought to be a legal transfer of goods or that the transaction must be akin to a lease. It held, the transfer of the shuttering on hire charges to the builders and building contractors on hire charges in the facts of the case constitutes a sale of goods for consideration. Nothing much turns on this decision as the definition of "sale" in the legislation involved therein is not in pari materia with the one we are seized of. 23. A Constitution Bench of the apex court in 20th Century Finance Corporation Ltd. [2000] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period for which it is to be transferred, the owner cannot again transfer the same right to others. 25. In State of Tripura v. Tripura Bus Syndicate [2001] 122 STC 175 (Gau) the respondent was a registered trade union of vehicle operators in the State of Tripura. During the Parliamentary elections in 1989, a large number of vehicles belonging to the members of the respondent were requisitioned by the concerned District Magistrate. A division Bench of this Court while noticing the contextual facts held that as during the period of requisition, the vehicles had been under the control of the election authorities and were plied in accordance with their directions and instructions, there was a transfer of the right of use of the vehicles by the owners/operators to the said authorities and hire charges having been realised therefor, the transaction was a sale under Section 2(g)(ii) of the Tripura Sales Tax Act, 1976. 26. The judicially evolved principles to identify a transaction involving the transfer of right to use goods to be a sale under the Act clearly exclude the indispensability of delivery of physical possession thereof as an essential pre-condition. The other ordained featur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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