LexM/S. K.P. MOZIKA versus OIL AND NATURAL GAS CORPORATION LTD. AND ORS
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* Author [2024] 1 S.C.R. 488 : 2024 INSC 27 M/s. K.P. Mozika v. Oil and Natural Gas Corporation Ltd. and Ors. (Civil Appeal No.3548 of 2017) 09 January 2024 [Abhay S. Oka* and Rajesh Bindal, JJ.] Issue for Consideration In a group of appeals, the assessee have, under a contract, agreed to provide different categories of motor vehicles, such as trucks, trailers, tankers, buses, scrapping winch chassis, and cranes, to the Oil and Natural Gas Corporation Limited (ONGC). In the other cases where Indian Oil Corporation Limited (IOCL) has entered into agreements with transporters to provide tank trucks to deliver its petroleum products. Whether, by hiring the motor vehicles/ cranes, there is a transfer of the right to use any goods. If there is a transfer of the right to use the goods, it will amount to a sale in terms of Clause 29A(d) of Art. 366 of the Constitution of India. Whether the transactions will amount to service, thereby attracting liability to pay service tax. Headnotes Constitution of India – sub-clause (d) of Clause 29A of Art. 366 – Assam General Sales Tax Act, 1993 – Assam Value Added Tax Act, 2003 – Finance Act (brought into force with effect from 16.05.2008) – s. 65(105)(zzzzj) – The entire controversy revolves around the question whether the transactions reflected from the agreements subject matter of these appeals amount to a sale within the meaning of sub-clause (d) of Clause 29A of Article 366 of the Constitution of India and, consequently, whether it is a “sale” within the meaning of clause (iv) of sub-section (43) of Section 2 of the VAT Act: Held: On a conjoint reading of the terms of the contract, it is apparent that the contract is for providing the service of cranes to ONGC – The reason is that the transferee (ONGC) is not required to face legal consequences for using the cranes supplied by the contractor – Therefore, the tests laid down by Dr AR Laxmanan, J. in clauses (c) and (d) of paragraph 97 in the case of Bharat Sanchar [2024] 1 S.C.R. 489 M/s. K.P. Mozika v. Oil and Natural Gas Corporation Ltd. and Ors. Nigam Limited & Anr. v. Union of India & Ors. [2006] 2 SCR 823 are not fulfilled – Moreover, on a conjoint reading of the clauses, it appears that the use of the cranes provided by the contractor to ONGC will be by way of only a permissive use – Though the cranes are used for carrying out the work as suggested by ONGC, the entire control over the cranes is retained by the contractor, inasmuch as it is the contractor who provides crew members for operating the cranes, it is the contractor who has to pay for fuel, oil, etc. and for maintenance of any loss or damage to the equipment of the contractor, staff of the contractor, any third party and staff and property of ONGC – Therefore, as regards the contract to provide cranes, the finding of the High Court that there was a transfer of the right to use cranes was not correct – Similarly in other cases, it is apparent that there is no intention to transfer the use of any particular tank truck in favour of IOCL – The contract is to provide tank trucks for the transportation of goods – Once the tank trucks provided by the contractor are loaded with goods, the entire responsibility of their safe transit, including avoiding contamination, delivery, and unloading at the destination, is of the contractor – The test (c) is not satisfied – Therefore, it is impossible to conclude that there is a transfer of the right to use tank trucks in favour of IOCL – In the given appeals, all the five tests laid down by Dr AR Laxmanan, J. are not fulfilled – When the substantial control remains with the contractor and is not handed over to the user, there is no transfer of the right to use the vehicles, cranes, tankers, etc – Whenever there is no such control on the goods vested in the person to whom the supply is made, the transaction will be of rendering service within the meaning of Section 65(105) (zzzzj) of the Finance Act after the said provision came into force – All the appeals preferred by assessee are allowed. [Paras 35, 40 and 42] Constitution of India – sub-clause (d) of Clause 29A of Art. 366 – What are the tests applied to determine whether the transaction involved the transfer of the right to use any goods under sub-clause (d) of Clause 29A of Article 366 of the Constitution of India. Held: What is relevant in the case of Bharat Sanchar Nigam Limited & Anr. v. Union of India & Ors. [2006
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