TMI Blog2014 (9) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... The agreement is for hiring of the cranes. The heading and the recital clearly show that nature of transaction is for the hiring. The hire charges are per day for all days except the off days, though the bill is to be raised monthly. The provisions for maintenance, providing staff for maintenance and operation and taking responsibility for claim of third parties do not affect the nature of the transaction. A perusal of the above terms shows that (a) the contract is for hiring of the cranes for carrying out the operations of the ONGC; (b) the scope of work is mentioned to specify the operation in connection with which the cranes are hired; (c) the work is not to be executed by the contractor but by the ONGC itself; (d) the contractor is to provide cranes on hire in connection with the said work. It appears to have been wrongly assumed that the contractor is to execute the work mentioned in the heading of "scope of work". It is clear from the recital that the scope of work is mentioned as the work for which the cranes were hired; (e) clause 2.1 shows that the cranes are at the disposal of the ONGC and per day hire charges are paid for all days, except maintenance days; (f) serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 286 of 2010, the respondent-assessee challenged deduction of tax at source under the Act in respect of the transaction covered under the contract dated June 22, 2009 between the assesseecontractor and the Oil and Natural Gas Corporation Ltd. (ONGC), contractee on the ground that no transfer of right to use was involved, the transaction being in the nature of service. Case of the assessee was that it owned cranes and in pursuance of notice inviting tenders issued by the ONGC for hiring cranes, the assessee had entered into the contract. The cranes were placed at the disposal of the contractee ONGC on day-to-day basis, without transfer of possession and custody thereof. Operating costs including maintenance, repair, insurance, salary of employees were to be borne by the assessee and there was no transfer of ownership of the cranes, nor of the right to use. The possession and custody of the cranes remained with the assessee. The assessee was paying service tax to the Central Government under the provisions of the service tax contained in the Finance Act, 1994. The Revenue informed the assessee that in view of judgment of this court in Dipak Nath [2010] 31 VST 337 (Gauhati), the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bench judgment of this court in Dipak Nath [2010] 31 VST 337 (Gauhati) was held to be distinguishable on the ground that the transaction involved therein was not unequivocal that cranes were being made available for services of ONGC, though substantially identical, the plea of indivisibility of composite contract was not decided therein and the transaction was prior to amendment of provisions of service tax by the Finance Act, 2008. It was further held that as per the recital in the scope of work, dominion of the contractee-ONGC, without cessation of duty of the contractor-assessee to maintain the cranes could not give rise to the interference of transfer of control of the cranes. The operative parts of the observations in the said judgment are (pages 38-40 in 32 VST): 33. The various clauses referred to hereinabove if considered in conjunction along with the unqualified recital in the scope of work, in the estimate of this court do not comprehend a lease or transfer of right of use of the crane(s) and propel the transaction out of the purview of lease/sale as contemplated by article 336(29A)(d) of the Constitution of India or section 2(27)/2(43) of the Act. A dominion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Oil and Natural Gas Corporation Ltd. [2010] 31 VST 337 (Gauhati)) and a batch of other writ appeals and writ petitions accompanying the same in view of the apparent distinguishable features in the contract agreements involved, in the present adjudication does not wrest the issue in favour of the Revenue. Not only the contract agreements scrutinized in the aforementioned appeals, though otherwise substantially identical with those in hand did not inscribe the striking and unequivocal recital that the services of the manned cranes to be made available for performing the duties of the Corporation would not be by way of lease or transfer of rights for use thereof by the contractors to it (Corporation), the parties thereto, in clear terms contemplated realization and payment of service tax at the rate of 10.3 per cent thereon under the Finance Act, 1994. Moreover, the plea of indivisibility of a composite contract of the type involved in the perspective of article 366 (29A) of the Constitution was not raised to be analysed and adjudged in those appeals. The contract agreements therein also related to a point of time prior to the incorporation of sub-clause (zzzzj) in the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from seven hours for 10 hours everyday with half an hour as lunch break. However, the said clause has specifically mentioned that the timings indicated therein are subject to change and cranes may be asked for services beyond the normal working hours at the sole discretion of the ONGC. Under clause 8.12, a contractor is required to provide the crane on all days in the calendar month except 4 (four) days which are to be treated as maintenance off days. Even on such maintenance off days the ONGC can demand operation of the cranes by the contractor. Under clause 8.14 the employees provided by the contractor are to be provided with suitable residence at a convenient place near the site of operations so as they can be available for duty for 10 hours starting from seven hours to 17.00 hours or as directed by the authorized representative of the ONGC. Under clause 9.10 of the contract agreement the contractor is to arrange the fuel lubricants and other consumable at all times. Under clause 8.15 the contractor is to additionally ensure that each crane while reporting for duty is provided with adequate fuel for at least 24 hours of work. Under clause 9.14 the staff of the contractor engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretion. 20. The above features of the contract, in our considered view, makes it abundantly clear that it is the ONGC and not the contractor who has exclusive control and dominion over the crane during the subsistence of the contract, though, during the aforesaid period, at times, physical possession of the crane may come back to the contractor. Such temporary physical possession of the contractor, according to us, would hardly be relevant as under the contract the ONGC is vested with the authority to requisition the crane for operational purposes at any time. Besides, such temporary possession of the crane by the contractor does not mitigate against the transfer of the right to use the crane which event, as already indicated on the authority of the decision of the apex court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC), constitutes the taxable event under article 366(29A)(d) of the Constitution. We have heard learned counsel for the parties. The learned counsel for the Revenue submits that this court may not go into the question as to whether the transaction covered by contract dated June 22, 2009 amounted to transfer of right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise. 76. In State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC); [2002] 3 SCC 314, it was claimed by the sales tax authorities that the transaction by which the owner of certain machinery had made them available to the contractors was a sale. The court rejected the submission saying that (SCC, page 315, para 4) (page 116 in 126 STC): '. . . the transaction did not involve transfer of right to use the machinery in favour of contractors. . . . the effective control of the machinery even while the machinery was in use of the contractor was that of the respondent-company; the contractor was not free to make use of the machinery for the works other than the project work of the respondent or. . .' 77. But in the case of Aggarwal Brothers v. State of Haryana [1999] 113 STC 317 (SC); [1999] 9 SCC 182 when the assessee had hired shuttering in favour of contractors to use it in the course of construction of buildings it was found that possession of the shutterin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been envisioned in paragraph 97 of Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 the essential feature of sale amongst others are (1) the legal right of the transferee to use the goods to the exclusion of the transferor during the period of the contract and not merely a licence therefor, (2) the legal right of the transferee to use the goods with all legal consequences thereof including permissions or licence to be available to permit the exercise thereof. The transfer of right would thus imply relinquishment of both possession and control of the goods by the transferor in favour of the transferee whereafter during the transaction the former would have absolute dominion thereupon to the alienation of the latter. The enjoinments proclaimed by the various clauses of the contract agreements albeit are to secure the maximum utilization of the manned cranes and the quality services to be rendered thereby, (i) all permeable supervision of the contractors over the works to be executed on the instructions of the representatives of the Corporation, (ii) their singular responsibilities and liabilities to guarantee the avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the transaction in question, right to use of the cranes remains vested with the contractor-assessee or gets transferred to the contractor ONGC. To determine the nature of transaction, regard has to be had to the substance of the transaction than to its form. The substance has to be gathered from the totality of the terms of the contract. As held in BSNL, for determining whether transfer of right to use the goods was involved, there must be goods available for delivery; there should be consensus as to identity of goods; the transferee should have legal right to use the goods, to the exclusion of the transferor. Applying these tests, the Division Bench of this court in Dipak Nath [2010] 31 VST 337 (Gauhati) held that transfer of right to use the goods was involved in the transaction. We are in respectful agreement with the view taken therein. The distinguishing features pointed out by the learned single judge are of no consequence to the core issue. Question whether it was transfer of right to use did not depend on the provisions of the service tax law and thus amendment by the Finance Act, 2008 had no relevance to determine the said question. Plea of indivisibility o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides loading/ unloading works of heavy drilling/production equipment's, like tubulars, bunk houses, store houses of odd size and all connected rig materials from or into trailers/trucks/railways wagons besides any other materials handling job as may be assigned from time to time by the authorized representative of ONGC at various points/sites (slushy)/installations, etc. The area of operation shall normally be in connection with the activities of Assam asset of ONGC or anywhere as per requirement of ONGC in and around Sivasagar, Jorhat, Dibrugarh Districts, Assam. 2. Cranes and its operation: 2.1 Cranes placed at the disposal of ONGC should be available throughout the contract duration with the required efficiency/fitness to handle loads up to the designed capacity. 9. Rates and mode of payment: 9.1. The contractors shall raise cranewise monthly bills in TRIPLICATE in the prescribed pro forma in the name of FINANCE and ACCOUNTS OFFICER, ONGC and submits the same to inchargelogistic-operations, ONGC, or any other authority advised from time to time for arranging payment. These bills will be duly supported by the completed logbook sheets to him duly signed by the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges. Occasionally the crane may be required to work round the clock during lowering and pulling of casting operations. (v) During the period if the crane(s) remained in stuck up conditions in the ONGC's operational site as per the ONGC's record during normal working hours a day, the payment will be restricted to the rate of 10 per cent of the day rate/pro rata hourly rate as mentioned in clause 1.31 of section A of annexure II of the contract, as the case may be. No other payment for this period will be made. The decision of ONGC with regard to stuck up condition will be final and binding and the contractor will abide by the decision of ONGC. (vi) The payment of hired charges of crane(s) will be made on the basis of crane utilization record (date/time/period, etc.) entered in the log book of crane(s) provided to the contractor by ONGC, the contractor should maintain logbook and see that proper crane utilization/operations are recorded in the log book of the crane and log book is completed in all respect duly signed by ONGC's user/representative without any erasing, overwriting, cutting whatsoever. Whenever necessary and if any entry is cut/rewritten it should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In Mersey Docks and Harbour Board Ltd. v. Coggins and Griffiths (Liverpool) Ltd. and Mcfarlane [1946] 2 All E.R. 345 (HL), and in Karuppan Bhoomidas v. Port of Singapore Authority [1978] 1 All ER 956, it has been held that even if a ship is hired, responsibility for damage to a third party is not of the hirer but of the owner as it is the owner who controlled the manner and working of the employees; (g) it is the ONGC alone which is entitled to exclusively use the cranes and not the assessee. On totality of above factors, we, conclude that the transaction clearly involved transaction of right to use. Coming now to the judgments relied upon on behalf of the assessee, the judgment of the honourable Supreme Court in Bhopal Sugar Industries [1977] 40 STC 42 (SC) relates to interpretation of words in a transaction and holds that the court has to see the substance than the form. There is no dispute with this proposition. Judgments in (1) Commissioner, Trade Tax, U.P., Lucknow v. Jamuna Prosad Jaiswal [2008] 13 VST 403 (All), (2) Rungta Projects Limited v. State of Bihar [1998] 108 STC 234 (Patna) and (3) Commissioner, VAT, Trade and Taxes Department v. International Trav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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