STATE OF GUJARAT Vs. BHARAT PEST CONTROL

JUDGEMENT

(1.) This appeal is filed by the State Government challenging judgment of the Value Added Tax Tribunal. While admitting the appeal, following substantial questions of law were framed:

(2.) The questions arise in the following background. Respondent-assessee is a proprietary concern and is engaged in the business of providing pest control service to various commercial establishments. The assessee is registered as a service provider for the purpose of service tax in the category of cleaning activity service. The assessee was awarded a work order by Reliance Industries for carrying out pest control measurements in the premises of the company. The State Government holds belief that the pesticides and other raw materials used by the assessee in execution of such contract would be exigible to value added tax, on the basis that in the process, there has been sale of such goods. The assessee however contends that the contract is one for providing service, it is a skilled service which also involves providing labour. Use of pesticides is incidental. In any case, such material is consumed during the course of the work. The title in the goods therefore, never passed from the assessee to the company who has awarded such contract.

(3.) The assessee in view of such debatable issue had approached the Joint Commissioner of Commercial Tax by filing an application under Section 80 of the VAT Act asking for his determination on the question whether Value Added Tax would be payable on such goods. The said authority by its order dated 26-10-2009 held that the assessee had entered into service contract of pest control. Various pesticides used in the process were transferred to the Reliance Petroleum, the company which had awarded the contract. According to him thus the title in goods passed to the purchaser. This transaction would therefore, fall within clause (b) of sub-section (23) of Section 2 of the VAT Act and exigible to tax. This order of determination, the assessee challenged before the Value Added Tax Tribunal ('the Tribunal' for short). The Tribunal by the impugned judgment dated 28-10-2010 reversed the decision of the Joint Commissioner. In a detailed consideration, the Tribunal came to the conclusion that the assessee had to carry out activities as per the terms of the contract awarded by Reliance Petroleum. As per such contract, the assessee was providing service of anti-termite treatment, rodent control, pest control, etc. The activity of the assessee was only in the nature of service and no sale of goods was involved. The pesticides and chemicals used by the assessee were for the purpose of treatment against pests and rodents and were consumed in the process of rendering service. The titles of the goods never passed to Reliance Petroleum since the goods ceased to exist. The Tribunal also referred to the amended definition of sale under Article 366(29A) of the Constitution by virtue of 46th Amendment, but was convinced that even with the aid of this expanded definition of term 'sale', the transaction in question could be taxed as a sale of goods. We may recall the relevant expansion made by virtue of the said amendment was to allow the State to levy tax in the nature of sales tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract. The Tribunal noted that term 'dealer' defined under Section 2(10) of the VAT Act contained a similar expression where it provides that a dealer would mean besides other any person who transferred property in goods whereas goods (or in some other form) involved in the execution of works contract. The Tribunal also referred to definition of term 'sale' contained in the VAT Act under Section 2(23) which in Clause (b) contained a similar expression, under which, the sale of goods would include transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The Tribunal concluded as under: