TMI Blog2016 (10) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... e company. Similar issue decided in the case of Pest Control India Ltd. v. Union of India and others [1989 (9) TMI 356 - PATNA HIGH COURT]. NO transfer of property in goods involved - No VAT liability - appeal dismissed - decided against Revenue. - Tax Appeal No. 706 of 2013 - - - Dated:- 22-9-2016 - Akil Kureshi And A. J. Shastri, JJ. Government Pleader for the Appellant Mr. Apurva N Mehta, Advocate for the Opponent JUDGMENT ( Per Honourable Mr. Justice Akil Kureshi ) 1. This appeal is filed by the State Government challenging judgment of the Value Added Tax Tribunal. While admitting the appeal, following substantial questions of law were framed: 1. Whether in facts and circumstances of the case, the works contract for pest control would involve sale and supply of goods as per Section 2(13) and 2(23) of the Value Added Tax Act, 2003? 2. Whether a works contract for pest control would lead to transfer of property in goods making the transaction exigible to value added tax? 3. Whether the learned tribunal has erred by holding that in execution of a works contract for pest control, there is no transfer of property in goods because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f service and no sale of goods was involved. The pesticides and chemicals used by the assessee were for the purpose of treatment against pests and rodents and were consumed in the process of rendering service. The titles of the goods never passed to Reliance Petroleum since the goods ceased to exist. The Tribunal also referred to the amended definition of sale under Article 366(29A) of the Constitution by virtue of 46th Amendment, but was convinced that even with the aid of this expanded definition of term 'sale', the transaction in question could not be taxed as a sale of goods. We may recall the relevant expansion made by virtue of the said amendment was to allow the State to levy tax in the nature of sales tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract. The Tribunal noted that term 'dealer' defined under section 2(10) of the VAT Act contained a similar expression where it provides that a dealer would mean besides other any person who transferred property in goods where as goods (or in some other form) involved in the execution of Works Contract. The Tribunal also referred to definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60.1 (para 78 on page 125) But if there are no deliverable goods in existence as in this case, there is no transfer of user at all. Providing access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate. Of course the toll payer will use the road or bridge in one sense. But the distinction with a sale of goods is that the user would be of the thing or goods delivered. The delivery may not be simultaneous with the transfer of the right to use. But the goods must be in existence and deliverable when the right is sought to be transferred. 61. In view of the 46th Amendment, amendment in the VAT Act and the Judgement in the case of Builders Association (Supra), 20th Century (Supra) and BSNL Ltd. (Supra) following legal position of law emerged. 62. From the plain reading of sub clause (b) of clause (29A) of article 366 of the Constitution of India it appears that there must be a transfer of property in good whether as goods or in some other form involved in the execution of a works contract. Clause 12 of article 366 and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is charged service tax in its invoices and paying it. In view of the above facts, the activity of pest control service carried out by the appellant is not liable to tax under clause (29A)(b) of Article 366 of Constitution of India and under provisions of VAT Act because it ceases to exist and it amounts to only simple service contract. 4. It is this judgment that the State has challenged in the present appeal. As noted, revolving around the same controversy, three separate questions have been framed. First is, whether the contract of pest control would involve sale of goods? Second is, whether such contract would lead to transfer of property in goods which transfer would be exigible to VAT. The last is whether the Tribunal was wrong in holding that there was no transfer of property in goods because chemicals are consumed? In essence, the issue revolves around the question of taxing pesticides and chemicals used in the cleaning and pest control activity under the VAT Act. 5. Learned AGP submitted that the title in goods passed from the assessee to the Reliance Petroleum. The term 'sale' contained in section 2(23) of the VAT Act would cover such a situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the assessee under the supervision of the engineer of the company. The scope of work was further elaborated in this document as to include carrying out pest control activities in various facilities in office and factory building as per the instructions of the company. It would involve control of adult mosquito, control of rodent and crawling pests like bugs, ticks, crickets, cockroaches, silver fish, red ants, black ants spider and poisoned reptiles etc. It also required the assessee to use approved brands of pesticides, insecticides and chemicals of reputed company only. The contract envisaged the assessee to pay the service tax or the sale tax as may be applicable. 10. From the terms of contract, it can thus, be seen that the assessee was awarded the contract for pest control measures at the office of factory premises of the company situated within the SEZ area. The contract would include complete treatment of pest control and rodent control, for which, the assessee would use the pesticides and chemicals of reputed companies. In essence therefore, this was a contract for carrying out the pest control service which would require special knowhow and use of pesticides in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant was running a photocopying business, during which, the appellant would sale the photocopies or xeroxed documents to the customers. The question was whether the making of photocopies with the use of xerox or other machines and delivering the copies so taken to the customers amounts to sale of goods exigible to tax under the Tamilnadu General Sales Tax Act. In this background, it was held that when the main object of the work undertaken by a person is not the transfer of chattel as chattel, the contract is one of work and labour. The main object of the work undertaken by the operator of photocopier or xerox machine upon transfer of paper upon which, the copy is produced; is to duplicate or make a xerox copy of the document which the payer of the price wants duplicated. 14. In case of The Assistant Sales Tax Officer and Others v B C Kame, reported in [1977] 039 STC 0237, the Supreme Court held that when a photographer undertakes to take a photograph, develops the negative or to do other photographic work and to supply the prints to the clients, he cannot be said to have entered into a contract for sale of goods. The contract is for use of skill and labour. Sales tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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