(CAV) Amitava Roy, J. -

The proposed deduction of tax at source under the Assam Value Added Tax Act, 2003 (hereafter referred to as the Act) by the Oil and Natural Gas Corporation (for short hereafter referred to as the Corporation) from the petitioner's entitlements under the contract for hiring of Hydraulic cranes by it is under impeachment in the present series of proceedings at the instance of the contractors providing the machines. The quintessential features of the contract agreements and the legal issues centering the debate being inseverably identical permitting analogous adjudication, a common determination would suffice. The prolix rival pleas notwithstanding, the essential factual details for reference have been culled from the pleadings of WP(C) 54537 2009 and WP(C) 5456/2009.

2. I have heard Dr. A. K. Saraf, Sr. Advocate for the petitioners, Dr. B.P. Todi, Sr. Advocate for the Corporation, Mr. D. Saikia, learned Standing Counsel, Finance Department, Government of Assam, for the Revenue and Mr. B. Sharma, learned Central Government Standing Counsel, for the Union of India.

3. The pleaded accounts of the parties in the fray are indispensable to appropriately comprehend the contentious arguments based thereon. The petitioners represent to be proprietorship firms carrying on business in various locations of the State and own Hydraulic Cranes with necessary licence and other testimonials to be legally, possessed thereof. In response to the Notice Inviting Tenders (for short hereafter referred to as the NIT) issued by the Corporation for the hire of services of » Hydraulic Cranes for carrying out its operations on stipulations as mentioned therein, the petitioners' responded thereto and eventually individual contract agreements were executed between the parties 22/23.06.2009. Meanwhile the Act had been enforced on and from 1.5.2005 mandating imposition and collection of tax on sales and purchases of goods in the State of Assam and matters connected therewith and incidental thereto.

4. According to the petitioners, in terms of the clauses of the contracts, the transactions are evidently not of sale as envisaged under the Act or within the meaning of Clause (29A) (d) of Article 366 of the Constitution of India and, therefore, no tax is payable by them. Inspite thereof, the Corporation basing on the decision of this Court in WA138/2007 and other connected cases rendered on 25.11.2009 had informed them that tax under the Act for the instant contracts would be deducted at source construing the transactions to be those of lease. The petitioners have asserted that the contracts herein are distinctly different from those involved in the aforementioned proceedings decided by this Court, and service tax leviable under the Finance Act, 1994, was only contemplated by the parties.

5. Moreover the present contract agreements in categorical terms envisage that the transactions would not be by way of lease or transfer of the right to use the vehicle/equipments. As the express intention of the parties is for providing and availing the services of the Hydraulic Cranes which do not conceive of any transfer of right to use the same, the proposed deduction of tax under the Act is constitutionally as well as legally impermissible. The petitioners in the alternative have also averred that even if the contracts could be perceived to evidence an element of transfer of the right to use of the cranes, as those are of composite nature also inclusive of the service component, the same do not admit of splitting under Article 366 (29 A) and, therefore, the sale segment thereof cannot be made exigible to tax under the Act.

6. The Corporation in its affidavit while expressing nescience about the payment of service tax by the contractors to the Central Government for the contracts in question has maintained that the agreements involved and the transactions embodied therein are exactly the same as those analysed with by this Court in WA 138/2007 and matters co

Click Here to Read the rest of this document