Back
2017 Supreme(AP) 79
IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
V. Ramasubramanian and J. Uma Devi, JJ.
M/s. Transocean Offshore, International Ventures Limited - Petitioner
Vs.
Union of India, Rep. by its Secretary, Department of Revenue, Ministry of finance, New Delhi; and 3 others - Respondents
Writ Petition No. 44908 of 2016
Decided On : 06-04-2017
For the Petitioner: S. Ravi
For the Respondents: B. Narayana Reddy
Headnote:
Article 27.0, 28, 29.0, 27, 28 and 29 - Andhra Pradesh A.P VAT Act, 2005 - Section 4(8) - Petition challenging an order of assessment passed by the 3rd respondent herein under the Andhra Pradesh Value Added Tax Act for various tax periods in the years - Learned Senior Counsel for the petitioner learned Advocate General for the State of Andhra Pradesh appearing for the respondents Reddy learned Assistant Solicitor General of India for the respondents - Engaged in the business of carrying on offshore drilling operations for petroleum exploration and production company - Petitioner was awarded various contracts by the contractor of the Oil and Natural Gas Corporation Limited (ONGC), for carrying out offshore drilling activities - According to the petitioner these contracts were entered into at on various dates - Purpose of carrying out the due execution of the contracts - Petitioner imported various drilling rigs - These rigs were mobilised both at the east-coast and west-coast - It is claimed by the petitioner that these rigs were used exclusively in the western coast for drilling operations - Petitioner set up a temporary base at in Pradesh purportedly for logistical purposes in order to enable them to carry out maintenance of the rigs - This base at was also used for temporarily storing the equipment as well as spares - Movement of the rigs along the borders of the State of Andhra Pradesh, the petitioner also registered itself as a dealer under the A.P VAT Act and obtained a TIN number - Held, Contract have used the expression charter hire only because of the fact that they were dealing with offshore drilling rigs. Articles of the agreement make it clear that the agreement between the parties does not fall under the category of a charter similar to a demise or bare boat charter - Terms of the agreement makes it clear that the entire control with regard to manning, operating and navigating was retained by the petitioner herein - Once this is clear it follows as a corollary that there was no transfer of the right to use - Court in State of A.P v. hire charges are taxable only when full possession and control is given to the hirer - If the owner retains effective control over the equipment - Court in BSNL v. Union of India the following attributes should be satisfied before a transaction is construed to be one involving transfer of the right to use the goods - Equipment and technical personnel provided by the petitioner to the main contractor are on charter hire where the complete control was retained by the petitioner - All responsibilities were placed only upon the petitioner by the main contractor himself even the tests adopted by the High Court in two successive decisions, one in Commissioner International Travel House Ltd. and Durga Travels v. Commissioner of Trade, are satisfied in this case - petitioner is entitled to succeed on both counts, namely lack of jurisdiction on the part of the respondent and (ii) the absence of a transfer of the right to use - Petition is allowed.
V. RAMASUBRAMANIAN, J.
The petitioner has come up with the above writ petition challenging an order of assessment passed by the 3rd respondent herein under the Andhra Pradesh Value Added Tax Act, 2005 for various tax periods in the years 2012-13 and 2013-14.
2. Heard Mr. S. Ravi, learned Senior Counsel for the petitioner, learned Advocate General for the State of Andhra Pradesh appearing for the respondents 2 and 3, and Mr. B. Narayana Reddy, learned Assistant Solicitor General of India for the respondents 1 and 4.
3. The petitioner is engaged in the business of carrying on offshore drilling operations for petroleum exploration and production company. The petitioner was awarded various contracts by the contractor of the Oil and Natural Gas Corporation Limited (ONGC), for carrying out offshore drilling activities. According to the petitioner, these contracts were entered into at Mumbai on various dates.
4. For the purpose of carrying out the due execution of the contracts, the petitioner imported various drilling rigs. These rigs were mobilised both at the east-coast and west-coast. It is claimed by the petitioner that these rigs were used exclusively in the western coast for drilling operations.
5. However, the petitioner set up a temporary base at Kakinada in Andhra Pradesh, purportedly for logistical purposes, in order to enable them to carry out maintenance of the rigs. This base at Kakinada was also used for temporarily storing the equipment as well as spares.
6. To avoid any dispute with regard to the movement of the rigs along the borders of the State of Andhra Pradesh, the petitioner also registered itself as a dealer under the A.P VAT Act, 2005 and obtained a TIN number.
7. Pursuant to an authorisation issued on 07-01-2015 by the Joint Commissioner (Enforcement), the 3rd respondent conducted an audit of the books of accounts of the petitioner for the period 2012-13 to 2013-14. Thereafter, a show cause notice dated 09-01-2015 was issued in Form VAT 305A, proposing to levy tax on operator hire charges on the rigs of the petitioner at the rate of 14.5% under Section 4(8) of the A.P VAT Act, 2005, on the ground that there was a transfer of the right to use.
8. The show cause notice was challenged by the petitioner before this Court in W.P No. 1778 of 2015. But by an order dated 03-02-2015, this Court disposed of the writ petition with liberty to the petitioner to file objections and a direction to the 3rd respondent to pass orders after examining the objections with regard to jurisdiction and competence of the tax authority of the State of Andhra Pradesh.
9. Accordingly, the petitioner filed a detailed reply dated 17-3-2015, objecting to the very jurisdiction of the 3rd respondent to levy tax. The petitioner also requested the 3rd respondent to decide the question of jurisdiction in the light of the law laid down by the Supreme Court in 20th Century Finance Corporation Limited v. State of Maharashtra [2000] 119 STC 182 (SC).
10. Thereafter, the 3rd respondent issued a revised show cause notice dated 11-5-2015, enhancing the proposed tax liability. The petitioner again submitted a reply on 01-12-2015 and on 14-12-2015. The petitioner was then granted personal hearing. Thereafter, a show cause notice dated 10-02-2016 was issued proposing to levy tax at 14.5%. It was followed by an order dated 25-02-2016 confirming the proposals.
11. As against the said order dated 25-02-2016, the petitioner filed a writ petition in W.P No. 9058 of 2016. The main grievance of the petitioner in the writ petition was that the 3rd respondent failed to deal with the question of lack of jurisdiction.
12. Finding that the issue of jurisdiction was not dealt with by the 3rd respondent, this Court allowed the writ petition W.P No. 9058 of 2016 by an order dated 19-4-2016. By the said order, this Court set aside the order of assessment dated 25-02-2016 and remitted the matter back to the 3rd respondent to consider the question of jurisdiction and to pass f
