By TIOL News Service

TRIPURA, JUNE 15, 2015 : THE issue before the High Court was whether while carrying out the activity of seismic survey work, which is carried out to investigate the Earth's subterranean structure, an assessee would be considered as engaged in work contract, even if there is no stipulation regarding transfer of goods, machinary or rights to use such property in the contract of service. NO is the answer.

Facts of the case

The assessee, Asian Oilfield Services is an Indian Company. It had entered into a contract with Jubilant Oil and Gas Private Limited whereby it agreed to provide 2D Seismic Data Acquisition & Basic Processing Services to Jubilant Oil and Gas Private Limited which was engaged in oil exploration in the State. Revenue had contended that since a tax on the sale or purchase of goods includes, in terms of sub-clause (d) of Article 366(29A), tax on the transfer of the right to use any goods for any purpose the assessees were liable to pay VAT on such transfer of right to use goods. Assessee contended that they had entered into a service contract and only the Union can levy tax on services and not the State. The assessees had also urged that they were paying service tax to the Central Government under the provisions of law and since they were paying service tax, if there was conflict between the Central Law and the State Act the Tripura VAT Act must necessarily give way to the provisions which provide for imposition of service tax in the Finance Act of 1994. In this case, the contracts were for hiring of goods and services. The stand of the State was that ONGC had exclusive use and right to use the goods involved in the contracts and therefore there was transfer of the right to use goods and as such tax was leviable u/s 4(3) of the TVAT Act read with Rule 7(2) of the Rules. It was further contended that in terms of Section 4(3) of the Act the person making payment on this account was bound to deduct tax as leviable under law.

The High Court held that,

++ Jubilant Oil and Gas Private Limited had entered into a joint venture with Gas Authority of India Limited and by the contract in question the petitioner was to carry out seismic surveys to assist the respondent No.4 and GAIL in carrying out the gas exploration. From the terms of the contract dated 28th April, 2010, we find that there was no transfer of any property. In fact none of the machinery of the petitioner was to remain with the respondent No. 4. The counsel for the respondents-State has failed to point out any stipulation in the contract which would indicate that there is any transfer of right to use property. It is also obvious that this was not a works contract because no work was to be done except carrying out a survey. The present contract does not fall within the ambit of a works contract. It however, appears that on 02.02.2010 on behalf of the petitioner a letter was addressed to the Superintendent of taxes where they prayed that they may be registered for the purpose of sales tax and agreed to pay all taxes of charges. While granting the certificate of registration the nature of business was described as works contract. Since it was treated to be a work contract deductions were made by respondent No.4 from the amounts payable to the petitioner in terms of the TVAT Act;

++ it is also true that the petitioner in the communication dated 07.12.2010 referred to their contract as a works contract. On 29th September, 2010 the company had sent a communication to the Superintendent of Taxes, Charge-VIII, Agartala, as per which assessee was asked to provide details of of Works Contract Tax for the Geophysical Survey and advise whether Geophysical Survey is coming under the Works Contract Tax or not. Therefore, right from the very beginning the petitioner had asked the Superintendent of Taxes to clarify as to whether the work of Geophysical Survey falls within the ambit of works contract or not. Later, the assessee company made demands that the tax had wrongly been deducted and the same be refunded. These demands were rejected. There were inherent fallacies in this rejection. The petitioner is not engaged in drilling work but was only engaged for carrying out seismic survey work. The said work does not fall within the ambit of Section 4(3) of the TVAT Act. The Seismic survey is carried out to investigate the Earth's subterranean structure. There was no transfer of the right to use goods. The equipment of the petitioner contractor remained the equipment and material owned and provided by the contractor. The equipment remained in the control of the petitioner. The petitioner remained in exclusive possession and control of the said equipment and all the resources were supplied by the contractor. A reference to various provisions of the contract clearly indicate that the contractor's equipment remained his equipment solely under his control and even the equipment of the company, if any, given to him did not become his equipment but remained the equipment of the company. Therefore, there was no transfer of right to use goods and the petitioner was only rendering services which are only amenable to tax by the Union of India and not by the State. The writ petition is accordingly allowed. The contract of the petitioner shall not be treated as a Works Contract. The order of deduction dated 5.1.2011 and the order dated 5.3.2011 are quashed. The tax, if any, deducted from the account of the petitioner be refunded along with statutory interest on or before 31st July, 2015, failing which the State shall be liable to pay interest @ 12% per annum from today. No order as to costs.

(See 2015-TIOL-1442-HC-TRIPURA-VAT)