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TMI Blog2018 (4) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... al Nos. 560 to 563 of 2017. The four appeals were filed against the order dated 31st March, 2017 passed by the Joint Commissioner of Sales Tax (Appeals) (hereinafter referred to as the "first appellate authority"). 3. The petitioner states before us that it is one of the leading contractors and project developers engaged in the activities such as offshore oil and gas exploration, commercial and industrial construction etc. The respondents before us are exercising powers and discharging duties under the MVAT Act. A works contract was awarded to the petitioner by the Oil and natural Gas Corporation Limited (hereinafter referred to as the "ONGC"). That was awarded by the ONGC's Engineering Services for pipeline replacement project-2. The said contract, inter alia, includes laying and completion of 39 pipeline segments (208.8 kms.), which entails conducting project management surveys, design engineering, procurement, fabrication, anti-corrosion and weight coating etc. This was a contract with a consortium. The terms and conditions of the contract are referred to and it is urged that the contract work is carried out at the offshore platforms located beyond territorial waters. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the works for the ONGC. The works have to be performed beyond 12 nautical miles. It is stated that we must look at some of the terms and conditions of the contract. Though a works contract involving transfer of property in goods, whether as goods or in some other form, involved in execution of the works contract have been brought within the definition of the term "sale" as defined in clause (24) of section 2 of the MVAT Act, still, the execution of the works contract in this case would have a material bearing on the issue at hand. Our attention has been invited to the terms and conditions, on which the contract has been awarded. 7. A copy of the contract is at Exhibit 'B' to the paper book. That is dated 14th April, 2008. It is clearly stated, according to Mr. Shah in this contract that the ONGC is desirous of having the works mentioned in the contract carried out, but on the terms and conditions. The terms and conditions begin with the scope of work. Mr. Shah would submit that the scope of the work shall include in general but not limited to laying and completion of 39 pipeline segments (208.8 kms.), which includes project management, surveys and that is set out in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Maharashtra. Yet, the Deputy Commissioner/the first appellate authority has erroneously held that since the goods supplied to the ONGC are consigned for ONGS supply at Nhava and handed over to ONGC, the property in such goods is transferred within the State of Maharashtra. Such sale is complete within the State of Maharashtra and hence liable to VAT in the State. This is a completely erroneous finding, according to Mr. Shah and no part of the transaction has taken place, much less a transfer within the State. There is no concluded sale in the State of Maharashtra. 9. Mr. Shah has brought to our notice, which, according to him, is patent inconsistency in the tribunal's findings. The tribunal was aware of the primary argument, yet, while recording it, it has relied upon only one statement of the counsel. It is that statement, which resulted in the conclusion that this is a sale taxable in Maharashtra. However, the other contentions, which are summarised in para 4 of the order under challenge have not been considered at all. Even the alternate argument was not based on any concession, but pointing towards the inconsistency in the approach of the tribunal. In almost identical ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the transfer of property in any goods involved in execution of a works contract is deemed to be a sale. The Act defines the "State" to mean the State of Maharashtra. The "tax" is defined to mean a tax, namely, sales tax or purchase tax leviable or as the case may be, payable, under this Act and includes any amount payable by way of composition. The term "place of business" is defined in clause (18) and what is then material for our purpose is the definition of the term "goods" appearing in section 2(12) and the definition of the term "dealer" appearing in section 2(8). Therefore, the law postulates that there is an incidence or levy of tax when the transaction concerned is not falling within section 8. Section 8 says that certain sales and purchases are not liable to tax. The issue is whether the present transaction is covered by this exception carved out in section 8. 13. The tribunal found that the petitioner before us and appellant before it has been awarded a works contract by the ONGC. The scope of the work is referred by the tribunal and it is stated that the assessment orders denied the claim of the petitioner before us that the contract has not resulted in a sale in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sale or purchase shall be deemed to have taken place outside all other States. Sub-section (2) of section 4 says that a sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State in the case of specific or ascertained goods, at the time of contract for sale is made and in the case of un-ascertained or future goods at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the party is prior or subsequent to such appropriation. Then, the Explanation deals with a single contract. 15. The tribunal holds that in the present case, though such an argument is canvassed, but in the case of Raj Shipping (supra), this precise argument was considered by this court and negatived. 16. The tribunal holds that both parties in the present case are situate and registered in the State of Maharashtra. The goods have moved from the State of Maharashtra as per the contract executed between them. Therefore, there is a sufficient nexus to hold that the impugned sales are liable to tax under the provisions of the MVAT Act. In any event, only those goods have been considered for the purpose of levy of tax, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the oil marketing company, the barges sail to the anchorage point of the nominated vessel. After reaching the anchorage point of the nominated vessel, the high speed diesel is pumped out of the barge into the fuel tank or bunker of the nominated vessel. Such a transaction, according to M/s. Raj Shipping takes place beyond 1.5 nautical miles from the base line to deliver the high speed diesel to the vessels anchored therein and therefore, cannot be subjected to the MVAT. It is such a transaction and the argument based on it, which came to be rejected by applying the nexus theory. There, the nexus theory was applied because the oil marketing companies are in Mumbai. Their tanks are in Mumbai. From the tanks, the high speed diesel is collected and then that is loaded on the tanks styled as cargo tanks of the barges owned by the petitioner. That barge thereafter sails to the anchorage point of the nominated vessel. It is in these circumstances that the nexus theory was invoked and applied and the argument of the Revenue based on that came to be upheld. Whether that could have been applied to the facts and circumstances of the case is the real issue. 19. Here, the contract is for pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were held to be supplied to the ONGC because they are assigned for ONGC supply base at Nhava Sheva and handed over to ONGC. The argument is that the property in such goods has not been transferred within the State of Maharashtra. That is how the judgment and having a nexus theory is inapplicable. It is only because the goods are despatched to the supply base, but subject to acceptance by the ONGC that this matter is distinct from the other cases and dealt with by the tribunal. 21. To our mind, therefore, this was a highly debatable issue. If the tribunal was required to refer to not only the legal principles, but whether they are applicable will have to be eventually determined on the basis of the terms and conditions of the contract, then, in the given facts and circumstances of the case, there was no reason to impose any condition of part payment. The legal issues and raised either way ought to be answered on the basis of the nexus theory involved in the judgment of the Hon'ble Supreme Court and this court, whether that can be applied to the given facts and circumstances and to a works contract, unmindful of its peculiarity, demands an unconditional stay of recovery. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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