TMI Blog2012 (7) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... This order will dispose of WP(C) Nos.578/2008, 809/2009, 822/2009, 811/2009, 816/2009, 819/2009, 325/2011, 1705/2009, 802/2009, 1960/2009, Writ Appeal Nos.286/2010, 279/2011, WP(C) Nos.5343/2011, 5344/2011, 5345/2011, 5346/2011, 5347/2011, 5280/2011, 5348/2011, Writ Appeal No.147/2011, WP(C) Nos.2124/2011, 5585/2011 and Writ Appeal No.383/2009 as it is stated by learned counsel for the parties that all the cases involve a common question of leviability of VAT under the Assam Value Added Tax Act, 2003 ('the Act') on the transaction in question on the ground that transfer of right to use the goods for consideration was involved therein. We have taken Writ Appeal No.286 of 2010 and Writ Appeal No. 279 of 2011 as the lead cases ---- the first being the appeal by the Revenue and the second being appeal by the assessee against orders of learned Single Judge in identical matters. In Writ Appeal No.286 of 2010 one learned Single Judge has taken view in favour of the assessee while in Writ Appeal No.279 of 2011 another learned Single Judge following an earlier Division Bench judgment dated 25.11.2009 in Writ Appeal No.138 of 2007 (M/S Dipak Nath vs. Oil Natural Gas Corp. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accident by the cranes. Per day hire charges for the cranes were inclusive of all expenses necessary for continuance of service of the cranes. Repair and maintenance of the cranes and establishment expenses were of the assessee. The contract could not be split up so as to treat a part of contract to be of sale, in case the contract was considered to be composite contract of sale and service. The writ petition was contested by the State of Assam by submitting that the contract was predominantly the transfer of right to use the cranes in favour of the ONGC. As per terms of the contract, right to use during subsistence of contract was with the ONGC and not with the assessee. Payment of service tax was not determinative of chargeability of VAT. Providing of service for operating the cranes was incidental to the contract of transfer of right to use the cranes. Even if the transaction involved two overlapping taxable events, distinctiveness of the aspect of sale enabled levy of VAT on the transaction. Learned Single Judge, after considering the rival submissions, upheld the plea of the assessee. The Division Bench judgment of this Court in Dipak Nath was held to be distinguishabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the withdrawal of the crane(s) approved by it do not ipso facto militate against the otherwise all pervasive service aura discernible in the contract agreements. Though the working hours of the crane(s) have been specified, the contract agreements do not ordain continuance of the location thereof at the site(s) even thereafter. Payments on hourly pro rata basis are also contemplated. Not only the opening recital potraying the transaction to be neither a lease nor a transfer of right to use the crane(s) consciously incorporated in the contract agreements ought not to be readily trivialized, the comprehension of service tax only being payable is also redolent of the predominant service feature thereof. The parties, inspite of all the clauses bearing on the minutiae of the operations did not contemplate transfer of right of use of the cranes by the contractors in favour of the Corporation divesting themselves of their authority and control over the same. 28. The determination made by a Division Bench of this Court in Writ Appeal No.138/2007 Dipak Nath v. Oil Natural Co. Ltd. and Ors. and a batch of other writ appeals and writ petitions accompanying the same in view of the apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to the cranes. Under clause 5.3 once a particular crane and its documents have been approved for service of the ONGC the same cannot be changed during the period of the contract except on being rendered defective. Under clause 8.1 of the contract agreement though the contractor is required to provide employees for operation of the crane such, employees are to work as directed by the ONGC, Under clause 8.3 of the contract agreement a crane through hired for work in oil field conditions may also be required to work in other hazardous situations at the discretion of the ONGC. Refusal to work in such hazardous situations as directed by the authorized representative of the ONGC could lead to de-hiring of the crane, under clause 8.7 of the contract agreement day-to-day operations are to be performed as per instructions given to the contractor's representatives by the authorized representatives of the ONGC. Under clause 8.11 normal working hours is to commence from 7.00 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, under the contract though the normal operational time is 10 hours in a day, the ONGC is entitled to deploy the cranes, if required, to the entire period of 24 hours to perform duties the kind of which and the locations whereof is to be decided by the ONGC. The mere fact that after the operation of the crane is over on any given day the crane may come back to the owner/contractor will hardly be material to decide as to who has dominion over the crane inasmuch as the crane can be recalled for duty by the ONGC at any time. Under the contract the crane is to be operated for 26 days in a month and the remaining four days are to be treated as maintenance off days. Though the crane is not operational on the maintenance off days, yet, 50% of the operational charges is paid by the ONGC for the maintenance off days and the terms of the contract make it clear that even on the off days the crane can be called for operation by the ONGC at its sole 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of completing the transfer of the right to use. The emphasised portions in the quoted passage evidences that the goods must be available when the transfer of the right to use the goods takes place. The Court also recognised that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment). 75. In our opinion, the essence of the right under Article 366(29-A)(d) 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 of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the 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 A.P. v. Rashtriya Ispat Nigam Ltd. (2002)3 SCC 314 it was claimed by the Sales Tax Authorities that the transaction by which the owner of certain machinery ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the competence of the Revenue to realize tax under the Act in connection therewith, appears to be formidable. To reiterate the Revenue has admitted the transactions to be otherwise indivisible. The contract agreements, however do not evidence even a little of the intention of the parties to mutilate the integrity of the transactions engrafted therein into two independent undertakings for transfer of the right to use the Cranes and services, quantifying separate values therefor. The essence of the contract agreements is not the Cranes, but the covenants to employ the same. As has been envisioned in paragraph 97 of Bharat Sanchar Nigam Limited (Supra) 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 transferrer in favour of the transferee whereafter dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction was of transfer of right to use the goods. Undoubtedly, the writ Court is not expected to decide a question of fact which is required to be gone into during the assessment. But no such objection having been raised before learned Single Judge and the parties having participated in adjudication of the issue on merits, it will be too late in the day to non-suit the assessee at this stage. Coming to the merits, it has to be analysed whether, under 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 held that transfer of right to use t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in well maintained condition and fulfilling other pre-requisites should be available for performing the duties as advised by ONGC, at the appointed time and place, throughout the contract not by way of lease or transfer of rights for use of the vehicle/equipment, by the contract to ONGC. The work under contract shall include but not limited to dismantling/erection of Deep drilling rigs/work over rigs besides 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 through out the contract duration with the required efficiency/fitness to handle loads upto the designed capacit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding on the urgency and requirement of work, if the crane is utilized by ONGC, beyond 10 hours (including half an hour lunch) in a day, for each hour of utilization payment will be made on prorata basis, calculated as per clause 1.31 of Section A of Annexure II of the contract. This would include all expenses, including OT charges if any to the operating crew operational charges. 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 50% of the day rate/prorata 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) provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the cranes are at the disposal of the ONGC and per day hire charges are paid for all days, except maintenance days; (f) services of staff and maintenance are incidental to the hiring of the cranes. Liability to the third party is on account of the fact that in spite of hiring of the cranes by the ONGC, the employees operating the cranes are provided by the assessee. In MERSEY DOCKS AND HARBOUR BOARD v. COGGINS GRIFFITHS (LIVERPOOL) LTD. AND McFARLANE, [1946] 2 All E.R. 345 and in 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 Hon'ble Supreme Court in Bhopal Sugar Industries relates to interpretation of words in a transaction and holds that the Court has to see thesubsta ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
