The main legal point established in the judgment is that under a BOOT basis agreement, the party in possession and control of the equipment is not liable to pay sales tax unless the equipment is transferred, as per the relevant clauses of the Agreement and legal principles.

Judgment

By means of this writ petition, the petitioners have challenged the action on the part of respondents No. 1 to 5 regarding deduction of tax at source under Meghalaya Value Added Tax Act, 2003. Heard learned counsel for the parties at length and perused papers and record.

2. Brief facts of the case are that petitioner No. 1 M/s. Tata Consultancy Services Ltd. is a pioneer consultancy company, engaged in providing consultancy services in the field of information and technology to its clients including the Government Departments and Public Sector undertakings. For rendering such service, the petitioner No. 1 is liable to pay Service Tax in the light of Section 65(105) of Chapter V of the Finance Act, 1994, for which it is registered with the Government of India (Registration No. AAACR4849RST011 under Section 69 of Finance Act, 1994 issued by the Superintendent (Registration), Service Tax, Division-II, Kolkata.

3. Respondent No. 4 Meghalaya Information Technology Society (MITS), Shillong through Commissioner & Secretary to the Govt. of Meghalaya entered into an Agreement dated 20.08.2010 with the petitioner No. 1 for providing network services throughout the State of Meghalaya. The said Agreement was entered after Govt. of Meghalaya proposed to set up Meghalaya State Wide Area Network (MSWAN) to modernize the communication setup of Government to implement e-Governance initiatives, improve administrative effectiveness and efficiency and accelerate the overall development of the State through improved Government interfaces. The implementation of MSWAN Project was awarded to the petitioner by respondent No. 4 vide aforesaid Agreement dated 20.08.2010 on Build, Own, Operate, Transfer (BOOT) basis. The implementation of MSWAN on BOOT Basis was required to be done in five years to provide Data connectivity and Voice Video services to various Offices of Government of Meghalaya for which the Government was required to pay minimum guaranteed amount on quarterly basis at the end of each quarter to the petitioner No. 1 who is shown as operator in the Agreement.

4. It is pleaded by the petitioners that the Agreement entered between the petitioner No. 1 and respondent No. 4 clearly provides that the petitioner No. 1 will have all control and possession of the equipments necessary for the operation of the network during the contractual period (five years) and the petitioner will transfer all equipments at a nominal value of Re. 1/- to the respondent No. 4. Apart from this, the petitioner No. 1 was required to provide training to the personnel of Government of Meghalaya and to deploy qualified manpower for implementation and operation of the network to keep the project operational all 365 days of the year and 24 hours a day except at the Block Headquarters level. Petitioner No. 1 is also responsible for the upkeep and maintenance of the premises at all levels like State Headquarters, District level HQs etc.

5. It is also stated in the writ petition that in terms of the Agreement since five years period has not expired as such petitioner No. 1 is still owner of all the equipments, cables etc. by which MSWAN is made operational under BOOT basis. As such neither there is any "works contract" nor any "transfer" of right to use "goods" for any of the purposes of Sub-Clause (b) and (d) of Clause (xxxii) of Section 2 of Meghalaya Value Added Tax, 2003 (MVAT Act). After importing necessary equipments and components, petitioners are rendering services to the State of Meghalaya in terms of the Agreement, after Final Acceptance Test Certificate for MSWAN was issued by respondent No. 4 on 29.06.2011. The period of five years under the Agreement for transfer of system would expire in June, 2016, whereafter, the system along with equipments will be transferred to respondent No. 4 for Re. 1/- only.

6. Since the petitioners are registered with the Service Tax Department of Government of India, they are filing the returns in Form ST-3 un