TMI Blog2009 (9) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in the case pertains to the claim of the appellant to the applicability of the DVAT Act to the transaction in question which was of hiring of Maruti Omni cabs by the respondent to a company, M/s. New Delhi Power Limited (hereafter the NDPL ). Two issues arise for determination by this court: (a) Whether the transaction in question is sale within the meaning of the expression in article 366(29A)(d)? (b) Whether the contracts in question are contracts for services and hence not assessable to tax under the DVAT Act? Putting it differently, is the appellant entitled to impose tax on the transaction in question because it contains an aspect/element of sale of goods and it makes no difference if services also are included in the transaction? Both the parties have extensively relied upon the decision of the Supreme Court in the case of Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95; [2006] 145 STC 91; [2006] 3 SCC 1. They have also relied upon certain other judgments as discussed hereinafter. Before we proceed to answer the issues arising, it will be necessary to give a gist of the contract between the respondent and M/s. NDPL for hiring of Maruti Omni ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The provision of the vehicle is an important activity in the process of our company and the vehicle's uptime should always be 100 per cent. 15. The vehicles should be fitted with a carrier to carry an aluminium/fibre glass ladder. 16. Driver should look after the security of the ladder on the carrier and also ensure safe removal and loading. 17. Two vehicles will not be fitted with rear seat and the rear should be fitted at our cost of clamps for safe keeping of test equipment. 18. The colour of the Omnis should be white and should either be painted or stickers fixed as per corporate logo scheme enclosed. Period of contract: From May 1, 2003 to March 31, 2004 extendable up to March 31, 2005 by mutual consent. 1. Estimated total contract value: Rs. 56 lacs (Fifty six lacs) 2. Taxes, duties and delivery: Service tax extra as applicable. All taxes deductible at source (TDS) as per concerned authorities, and at the rates specified, shall be deducted by NDPL from your invoices and TDS certificate/s shall be issued. 3. Price-variation clause: The unit price contracted shall normally be firm during the period of the contract. However, variation for price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such workmen under any statute or rules or regulations or otherwise howsoever and indemnify the NDPL against such payments. 5.. You shall maintain the total employee data of all the work force deployed under this contract and shall produce the same for verification at any time as and when required. You will also issue photo ID cards to the personnel working under this contract, which shall be duly endorsed by our security officer at site. 6.. In the event of your not being in a position to provide services specified under this contract or any part thereof for any reason whatsoever, the NDPL will make alternative arrangements at market rates and the cost difference shall be adjusted against you pending/subsequent bills. A copy of the said agreement is enclosed and marked as annexure III. Mr. Parag Tripathi, the learned Additional Solicitor-General, who appeared for the appellant has raised basically the following contentions: (i) A reference to the clauses of the contract aforesaid shows that the terms thereof satisfy the requirement of sale as specified in article 366(29A)(d) inasmuch as according to him there is a transfer of the right to use the goods for valuabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he service tax in the Finance Act, 1994 of the Centre. Since both the parties have, and as stated above, relied extensively upon the judgment of the Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 with respect to the test of determination whether the transaction in question is a sale or not, we propose to straightway refer to the relevant paragraphs of the said judgment including those laying down the test for determining whether a transaction is a sale of goods or not. We may also state that though it has not been argued by the respondent on the basis of Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 that the transaction in question cannot be assessable to the tax under the DVAT Act because the contract in question is not severable, but we find that Bharat Sanchar Nigam Ltd.'s case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 directly and specifically determines this very issue and, therefore, this would be relevant to determine the second issue which has been urged by both the parties. We take up firstly the second contention of the parties, viz., whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) it became permissible by legal fiction to divide specific composite contract as a result of which sale element could be isolated and be subjected to tax. (see paras 35, 37, 39, 40 to 42 of the judgment in VST, SCC). (ii) Except the specific contracts so provided under article 366(29A) no other contracts can be artificially severed to tax the sale element with respect to goods as comprised in such composite contracts. Therefore, where the contracts are composite contracts, including therein both aspects of sale of goods and services, such contracts which are other than those specified in article 366(29A)(b) and (f), then such other contracts not falling within such sub-clauses of article 366(29A) cannot be split up taxing the sale element in the goods component thereof and which was only possible if the parties had in mind or intended that separate rights arising out of sale of goods and if there was no such intention then there is no sale of goods, even if such a contract could be disintegrated. (see paras 44, 45, 86, 91(c) in VST; paras 44, 45, 88, 92(C) in SCC). Where the sale is distinctly discernible in the transaction, i.e., the contracts are by intention of the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction value because that would amount to the State entrenching upon the Union List and tax services by including the cost of such services in the value of the goods. Thus, the contract in question being a composite contract is to be treated as a contract for services and no sales tax can be imposed on the contracts in question. It has also been held by the Constitution Bench of the Supreme Court in its judgment reported as Godfrey Phillips India Ltd. v. State of U.P. [2005] 139 STC 537 (SC); [2005] 2 SCC 515 that taxing entries must be construed with clarity and precision so as to maintain exclusivity and a construction of a taxation entry which may lead to overlapping must be eschewed. Reference in that case was also made to the judgment in State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC); [2004] 2 RC 298; [2004] 10 SCC 201 that in our Constitution a conflict of the taxing power of the Union and States cannot arise. Since the contract in question is taxed as services by the Central Government defining the same as services under the Finance Act, 1994, we would have to thus eschew an interpretation which will lead to overlapping in the taxation entries otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Sub-paras (b) and (c) of para 97 are important with reference to the facts of the case to determine as to whether or not there is a sale by virtue of transfer of right to use goods as envisaged in article 366(29A)(d). The admitted position which emerges is that the transferee, namely, NDPL, has not been made available the legal consequence of the legal right to use the goods, viz., the permissions and licences with respect to the goods. In the present case, the permissions and licences with respect to the cabs are not available to the transferee and remained in control and possession of the respondent. It is the driver of the vehicle who keeps in his custody and control the permissions and licences with respect to the Maruti Omni cabs or the said permissions and licences remained in possession of the respondent. These are never transferred to M/s. NDPL. It, therefore, cannot be said that there is a sale of goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner of Commercial Taxes [2001] 124 STC 426 (Karn) wherein R.V. Raveendran, J. (as he then was) held that when there is only hiring of audio visual and multi-media equipment, which equipment is at the risk of the owner and possession and effective control remain with the owners then, in such circumstances it cannot be said that the customer had got the right to use the equipment and there was, therefore, no deemed sale. We may note that there are other single Bench judgments of the Allahabad High Court which follow the view of the Division Bench in the Ahuja Goods Agency's case [1997] 106 STC 540 and we need refer to only one such judgments reported as Mohd. Wasim Khan v. Commissioner of Trade Tax, U.P., Lucknow [2009] 20 VST 196 (All); [2006] 30 NTN 233, in which the contracts were those of providing buses for transportation of the employees of the companies from one place to another and which transaction was held to be not a sale because the driver and other employees of the vehicles were employees of the owners, the road permit was in the names of the owners who had to take insurance for the vehicles and the workmen and consequently it was held that there was no ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
