WP(C) 578/2008 B E F O R E HON’BLE THE CHIEF JUSTICE MR. A.K.GOEL THE HON’BLE MR. JUSTICE N. KOTISWAR SINGH (A. K. Goel, CJ) This order will dispose of WP(C) Nos.578/2008, 809/2009, 822/2009, 811/2009, 816/2009, 819/2009, 325/2011, 1705/2009, 802/2009, 1960/2009, Writ Appeal Nos.286/2010, 279/2011, WP(C) Nos.5343/2011, 5344/2011, 5345/2011, 5346/201 1, 5347/2011, 5280/2011, 5348/2011, Writ Appeal No.147/2011, WP(C) Nos.2124 /2011, 5585/2011 and Writ Appeal No.383/2009 as it is stated by learned counsel for the parties that all the cases involve a common question of leviability of V AT under the Assam Value Added Tax Act, 2003 (’the Act’) on the transaction in q uestion on the ground that transfer of right to use the goods for consideration was involved therein. We have taken Writ Appeal No.286 of 2010 and Writ Appeal No. 279 of 2011 as the lead cases ---- the first being the appeal by the Revenue and the second being a ppeal by the assessee against orders of learned Single Judge in identical matter s. In Writ Appeal No.286 of 2010 one learned Single Judge has taken view in favour of the assessee while in Writ Appeal No.279 of 2011 another learned Single Judge following an earlier Division Bench judgment dated 25.11.2009 in Writ Appeal No .138 of 2007 (M/S Dipak Nath vs. Oil & Natural Gas Corp. Ltd.) has taken a view in favor of the Revenue. In Writ Appeal No.286 of 2010, the respondent-assessee challenged deduction of t ax at source under the Act in respect of the transaction covered under the contr act dated 22.06.2009 between the assessee-contractor and the Oil and Natural Gas Corporation Ltd. (ONGC), contractee on the ground that no transfer of right to use was involved, the transaction being in the nature of service. Case of the assessee was that it owned cranes and in pursuance of notice invitin g tenders issued by the ONGC for hiring cranes, the assessee had entered into th e contract. The cranes were placed at the disposal of the contractee ONGC on day to day basis, without transfer of possession and custody thereof. Operating cos ts including maintenance, repair, insurance, salary of employees were to be born e by the assessee and there was no transfer of ownership of the cranes, nor of t he right to use. The possession and custody of the cranes remained with the asse ssee. The assessee was paying service tax to the Central Government under the pr ovisions of the Service Tax contained in Finance Act, 1994. The Revenue informed the assessee that in view of judgment of this Court in Dipak Nath, the contract in question attracted VAT. The said judgment could not apply after the Finance Act, 1994 came to be amended with effect from 16.05.2008 whereby Clause (zzzz j ) was inserted in Section 65(105) of the Finance Act, 1994, making service in re lation to supply of tangible goods, including machinery, equipments and applianc es for use without transferring right or possession and effective control, to be taxable service. The contract of providing cranes for hire to the ONGC was a co ntract of service and not of transfer of right to use in view of terms of the co ntract in question. The work included deep drilling rigs/work over rigs besides loading/unloading works of heavy and all connected rig materials from or into tr ailers/trucks/railways wagons besides any other materials handling job as may be assigned from time to time by the authority. The employees for operating cranes remained employees of the assess and were not paid any extra charges by the con tractee ONGC. The assessee was required to make arrangement for shelter, food, stay and other requirements of the said staff. The assessee also continued to re main responsible for any claim arising out of accident by the cranes. Per day hi re charges for the cranes were inclusive of all expenses necessary for continuan ce of service of the cranes. Repair and maintenance of the cranes and establishm ent expenses were of the assessee. The contract could not be split up so as to t reat a part of contract to be of sale, in case the contract was considered to be composite contract of sale and service. The writ petition was contested by the State of Assam by submitting that the con tract was predominantly the transfer of right to use the cranes in favour of the ONGC. As per terms of the contract, right to use during subsistence of contrac t was with the ONGC and not with the assessee. Payment of service tax was not de terminative of chargeability of VAT. Providing of service for operating the cran es was incidental to the contract of transfer of right to use the cranes. Even i f the transaction involved two overlapping taxable events, distinctiveness of th e aspect of sale enabled levy of VAT on the transaction. Learned Single Judge, after considering the rival submissions, upheld the plea o f the assessee. The Division Bench judgment of this Court in Dipak Nath was held to be distinguishable on the ground that the transaction involved therein was n ot unequivocal that cranes were being made available for services of ONGC, thoug h substantially identical, the plea of indivisibility of composite contract was not decided therein and the transaction was prior to amendment of provisions of service tax by the Finance Act, 2008. It was further held that as per the recita l in the scope of work, dominion of the contractee ONGC, without cessation of du ty of the contractor assessee to maintain the cranes could not give rise to the interference of transfer of control of the cranes. The operative part of the ob servations in the said judgment are : 27. The various clauses referred to hereinabove if considered in con junction along with the unqualified recital in the Scope of Work, in the estimat e of this Court do not comprehend a lease or transfer of right of use of the cra ne(s) and propel the transaction out of the purview of lease/sale as contemplate d by Article 336(29A)(d) of the Constitution of India or Section 2(27)/2(43) of the Act. A dominion of the Corporation over the manned crane(s) though perceptib le for the operational needs the overwhelmingly emphatic covenants consciously i ncorporated by the contracting parties emphasise as well the singular responsibi lity and accountability of the contractors to unfailingly guarantee the timely p lacement, and availability of the manned crane(s) as well as the smooth and qu ality execution of the works. A few clauses of the contract though are suggestiv e of the Corporation’s prerogative to use the crane(s) as per its requirements, the same per se do not constitute cessation of the contractors’ duties as enumer ated on various fronts for due discharge of the services expected of them. The t erms and conditions of the contract agreements taken as a whole, do not proclaim Corporation’s possession, custody and control of the crane(s) to the total excl usion and estrangement of the contractors wholly alienating them from the assign ment agreed to be undertaken. The parties seem to be ad-idem to accentuate upon continuous supervision and surveillance of the contractors not only to affirm un hindered execution of the Corporation’s works but also to ensure quality service . The residuary discretion and the power retained by the Corporation in the matt er of detailment of the works and the prohibition against the withdrawal of the crane(s) approved by it do not ipso facto militate against the otherwise all per vasive service aura discernible in the contract agreements. Though the working hours of the crane(s) have been specified, the contract agreements do not ordain continuance of the location thereof at the site(s) even thereafter. Payments on hourly pro rata basis are also contemplated. Not only the opening recital potra ying the transaction to be neither a lease nor a transfer of right to use the cr ane(s) consciously incorporated in the contract agreements ought not to be readi ly trivialized, the comprehension of service tax only being payable is also redo lent of the predominant service feature thereof. The parties, inspite of all th e clauses bearing on the minutiae of the operations did not contemplate transfer of right of use of the cranes by the contractors in favour of the Corporation d ivesting themselves of their authority and control over the same. 28. The determination made by a Division Bench of this Court in Writ Appeal No.138/2007 Dipak Nath v. Oil & Natural Co. Ltd. and Ors. and a batch of other writ appeals and writ petitions accompanying the same in view of the app arent distinguishable features in the contract agreements involved, in the prese nt adjudication does not wrest the issue in favour of the Revenue. Not only the contract agreements scrutinized in the aforementioned appeals, though otherwise substantially identical with those in hand did not inscribe the striking and un equivocal recital that the services of the manned Cranes to be made available fo r performing the duties of the Corporation would not be by way of lease or trans fer of rights for use thereof by the contractors to it (Corporation), the partie s thereto, in clear terms contemplated realization and payment of service tax at the rate of 10.3 % thereon under the Finance Act, 1994. Moreover, the plea of indivisibility of a composite contract of the type involved in the perspective o f Article 366 (29-A) of the Constitution was not raised to be analysed and adjud ged in those appeals. The contract agreements therein also related to a point o f time prior to the incorporation of Sub-clause (zzzz j) in the definition of ta xable service provided in Section 65(105) thereof vide the Finance Act, 2008 wit h effect from 16.05.2008. Contrary to above, in Dipak Nath construing almost identical contract with the O NGC, it was held that transfer of right to use was involved as the cranes were p laced at the disposal of the ONGC for its operation on all days except maintenan ce days. Mere fact that the contractor was required to provide employees or othe r facilities made no difference to issue of transfer of right to use, even if th e physical possession may be with the contractor. It was held that : 18. A reading of the core provisions of the terms of the contract, details of w hich have been extracted above, would indicate that insofar as the cranes are co ncerned, the same are required for dismantling or erection of deep drilling rigs /work over rigs and similar other works in different locations where the ONGC is engaged in its operations. Under clause 3.1 such cranes are to be placed at the disposal of the ONGC and should be available throughout the duration of the con tract. Under clause 4 the cranes are to be brought to the places nominated by th e ONGC on date of commencement of the work and are to be taken by the contractor s on the termination of the contract. Under clause 5.1 cranes offered by the con tractor are to be inspected by the ONGC along with the documents pertaining to t he cranes. Under clause 5.3 once a particular crane and its documents have been approved for service of the ONGC the same cannot be changed during the period of the contract except on being rendered defective. Under clause 8.1 of the contra ct agreement though the contractor is required to provide employees for operatio n of the crane such, employees are to work as directed by the ONGC, Under clause 8.3 of the contract agreement a crane through hired for work in oil field condi tions may also be required to work in other hazardous situations at the discreti on of the ONGC. Refusal to work in such hazardous situations as directed by the authorized representative of the ONGC could lead to de-hiring of the crane, unde r clause 8.7 of the contract agreement day-to-day operations are to be performed as per instructions given to the contractor’s representatives by the authorized representatives of the ONGC. Under clause 8.11 normal working hours is to comme nce from 7.00 hours for 10 hours everyday with half an hour as lunch break. Howe ver, the said clause has specifically mentioned that the timings indicated there in are subject to change and cranes may be asked for services beyond the normal working hours at the sole discretion of the ONGC. Under clause 8.12, a contracto r is required to provide the crane on all days in the calendar month except 4 (f our) days which are to be treated as maintenance off days. Even on such maintena nce off days the ONGC can demand operation of the cranes by the contractor. Unde r clause 8.14 the employees provided by the contractor are to be provided with s uitable residence at a convenient place near the site of operations so as they c an be available for duty for 10 hours starting from 7.00 hours to 1700 hours or as directed by the authorized representative of the ONGC. Under clause 9.10 of t he contract agreement the contractor is to arrange the fuel lubricants and other consumable at all times. Under clause 8.15 the contractor is to additionally en sure that each crane while reporting for duty is provided with adequate fuel for at least 24 hours of work. Under clause 9.14 the staff of the contractor engage d in the operation of the crane is required to maintain the log books provided b y the ONGC and have the same signed at the required intervals by the authorized officer of the ONGC. Under clause 11.2 of the contract agreement apart from mont hly operational charges for 26 days at the rate of 10 hours per day (the remaini ng four days are maintenance off days) additions on account of excess operationa l hours is contemplated. Furthermore, even during maintenance off days ONGC is t o pay 50% of the operational charges per day though the crane may not be actuall y deployed in operations. 19. The above analysis of the relevant provisions of the contract agreement betw een the parties indicate the clear dominion and control of ONGC over the crane d uring the entire period of operation of the contract once a crane is placed at t he disposal of the ONGC under the contract. The crane is to be deployed at works ites as per the discretion of the ONGC and though the normal period of deploymen t is 10 hours in a day, such deployment at the discretion of the ONGC may be for any period beyond the normally contemplated 10 hours. The deployment of the cra ne in oil field operations as well as other hazardous situations is at the sole discretion of the ONGC. Though the cranes are operated by the crew provided by t he contractor such crew while operating a crane is under the effective control o f the ONGC and its authorities. Therefore, under the contract though the normal operational time is 10 hours in a day, the ONGC is entitled to deploy the cranes , if required, to the entire period of 24 hours to perform duties the kind of wh ich and the locations whereof is to be decided by the ONGC. The mere fact that a fter the operation of the crane is over on any given day the crane may come back to the owner/contractor will hardly be material to decide as to who has dominio n over the crane inasmuch as the crane can be recalled for duty by the ONGC at a ny time. Under the contract the crane is to be operated for 26 days in a month a nd the remaining four days are to be treated as maintenance off days. Though the crane is not operational on the maintenance off days, yet, 50% of the operation al charges is paid by the ONGC for the maintenance off days and the terms of the contract make it clear that even on the off days the crane can be called for op eration by the ONGC at its sole discretion. 20. The above features of the contract, in our considered view, makes it abundan tly clear that it is the ONGC and not the contractor who has exclusive control a nd dominion over the crane during the subsistence of the contract, though, durin g the aforesaid period, at times, physical possession of the crane may come back to the contractor. Such temporary physical possession of the contractor, accord ing to us, would hardly be relevant as under the contract the ONGC is vested wit h the authority to requisition the crane for operational purposes at any time. B esides, such temporary possession of the crane by the contractor does not mitiga te against the transfer of the right to use the crane which event, as already in dicated on the authority of the decision of the Apex Court in 20th Century Finan ce Corpn. Ltd. (supra), constitutes the taxable event under article 366(29A)(d) of the Constitution. We have heard learned counsel for the parties. Learned counsel for the revenue submits that this Court may not go into the ques tion as to whether the transaction covered by contract dated 22.6.2009 amounted to transfer of right to use so as to preempt the assessing authority from taking a decision. Alternatively, it was submitted that the real effect of the transa ction in question was to transfer the right to use of the cranes by the asssesse e to the ONGC for the hire charges as held in Dipak Nath, which was binding on l earned Single Judge and has been wrongly distinguished in spite of contract bein g identical. Further, the recital in the agreement shows that the notice invitin g tender was for ’hire of the cranes’ and for all practical purposes the use of the cranes was transferred to the ONGC for the period of contract and the assess ee had no right to use the same, such right having been transferred to the contr acee ONGC for consideration. Mere fact that under the contract, responsibility f or the maintenance and proper use of the cranes was of the assessee did not devi ate from the nature of transaction being transfer of right to use. The transacti on was not covered by the Finance Act, 2008 as thereunder services of supply of tangible goods were taxable if right to possession and control was retained by t he service provider. Reliance was placed on judgment of the Hon’ble Supreme Cour t in Bharat Sanchar Nigam Ltd. & another vs. Union of India and others, (2006)3 SCC 1, particularly paragraphs 74, 75, 76, 77 and 97 as follows : 74. In determining the situs of the transfer of the right to use the goods, the Court did not say that delivery of the goods was inessential for the purposes of completing the transfer of the right to use. The emphasised portions in the quo ted passage evidences that the goods must be available when the transfer of the right to use the goods takes place. The Court also recognised that for oral cont racts the situs of the transfer may be where the goods are delivered (see para 2 6 of the judgment). 75. In our opinion, the essence of the right under Article 366(29-A)(d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the g oods must be available at the time of transfer, must be deliverable and delivere d at some stage. It is assumed, at the time of execution of any agreement to tra nsfer the right to use, that the goods are available and deliverable. If the goo ds, or what is claimed to be goods by the respondents, are not deliverable at al l by the service providers to the subscribers, the question of the right to use those goods, would not arise. 76. In State of A.P. v. Rashtriya Ispat Nigam Ltd. (2002)3 SCC 314 it was claim ed by the Sales Tax Authorities that the transaction by which the owner of certa in machinery had made them available to the contractors was a sale. The Court re jected the submission saying that: (SCC p. 315, para 4) [T]he transaction did not involve transfer of right to use the machinery in fav our of contractors. & the effective control of the machinery even while the mach inery was in use of the contractor was [(1984) 280 SC 138] that of the responden t Company; the contractor was not free to make use of the machinery for the work s other than the project work of the respondent or &. 77. But in Aggarwal Bros. v. State of Haryana (1999) 9 SCC 182 when the assessee had hired shuttering in favour of contractors to use it in the course of constr uction of buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and therefore, there was a deemed sale within the meaning of sub-clause (d) of clause (29-A) of Arti cle 366. What is noteworthy is that in both the cases there were goods in existe nce which were delivered to the contractors for their use. In one case there was no intention to transfer the right to use while in the other there was. 97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: (a) there must be goods available for delivery; (b) there must be a consensus ad idea as to the identity of the goods; (c) the transferee should have a legal right to use the goods-consequently all l egal consequences of such use including any permissions or licences required the refor should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to b e the exclusion to the transferor-this is the necessary concomitant of the plain language of the statute viz. a transfer of the right to use and not merely a licence to use the goods; (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others . Learned counsel for the assessee supported the view taken by learned Single Judg e, particularly the conclusion in para 33 of the judgment as follows : 33. In the face of the overwhelming clauses of the contract agreements which predominantly project the transactions for rendition of services of manned Cran es by the petitioners, the challenge laid to the competence of the Revenue to re alize tax under the Act in connection therewith, appears to be formidable. To re iterate the Revenue has admitted the transactions to be otherwise indivisible. The contract agreements, however do not evidence even a little of the intention of the parties to mutilate the integrity of the transactions engrafted therein i nto two independent undertakings for transfer of the right to use the Cranes and services, quantifying separate values therefor. The essence of the contract ag reements is not the Cranes, but the covenants to employ the same. As has been en visioned in paragraph 97 of Bharat Sanchar Nigam Limited (Supra) the essential f eature of sale amongst others are (1) the legal right of the transferee to use t he goods to the exclusion of the transferor during the period of the contract an d not merely a licence therefor, (2) the legal right of the