HLS ASIA LTD Vs. STATE OF ASSAM

JUDGEMENT

(1.) THE question to be answered in this petition is whether services rendered in wire line logging and perforation activities consisting of electronic/seismic scanning of subterranean strata and rock formation in oil fields is sale within the meaning of section 2 (33) of the Assam General Sales Tax Act, 1993, hereinafter called the Act.

(2.) THE petitioner is a public limited company engaged in contract business with the Oil India Limited, and it renders high professional and technical services in prospecting, extraction and production of oil, and also engage themselves in wire line logging activities. The petitioner-company executed a contract with the OIL in the year 1995 for wire line logging and perforation activities. On completion thereof, another contract was also executed on September 10, 1999 for similar type of work.

(3.) IT is unfortunate that the State has not filed any affidavit though the matter pertains to the revenue of the State. The OIL in their affidavit submitted that clause 7. 14 of the contract provides for deduction of 5 per cent as tax under the Act or at applicable rate from rental invoices to be submitted by the petitioner and, accordingly, the contractor is to include 5 per cent as tax in their rental invoices. This amount charged as tax will be deducted by the OIL from the rental invoices and credited to the account of the State. It is further mentioned that the petitioner-company have been charging 8. 8 per cent over and above their bills for hiring charges of their equipments and tools as tax. The agreement which is in force for the last three years was acted upon till recently. It is pleaded that the OIL has no option but to insist for compliance of the Act of 1993 with regard to levy of sales tax and deduction thereof at source. Dr. Todi, learned Senior Counsel for the petitioner, during the course of argument tried to justify the contention of the petitioner-company that the services rendered by it in wire line logging and perforation activities cannot be construed as sale within the meaning of section 2 (33) of the Act. Dr. Todi further submitted that there being no transfer of goods in the property and the possession of high tech equipments used in the wire logging and perforation activities having been retained exclusively at the disposal of the petitioner-company, the services rendered to the OIL cannot be brought within the fold of the definition of "sale". According to him, the contract between the parties can be at best regarded as a licence which is not taxable under the provisions of the Act. In order to substantiate the above contentions, Dr. Todi relied upon the decisions in Khalil Ahmed Bashir Ahmed v. Tufelhussein Samasbhai Sarangpurwala (1988) 1 SCC 155, Capt. B. V. D'souza v. Antonio Fausto Fernandes (1989) 3 SCC 574 and Murlidhar Agarwal v. State of Uttar Pradesh AIR 1974 SC 1924. Mr. S. N. Sarma, learned Senior Counsel, submitted that the case at hand is one of breach of contract and, therefore, no writ would lie in the instant case. That apart, Mr. Sarma further submitted that the contract is binding between the parties and, therefore, the OIL cannot but deduct the tax charged by the petitioner-company in its invoices at source as per provisions of section 27 of the Act. Mr. Sarma, learned Senior Counsel, relied upon the decisions in Food Corporation of India v. Jagannath Dutta AIR 1993 SC 1494, Allied Traders v. State of Assam 2002 (1) GLT 482, Associated Cement Co. Ltd. v. Commissioner of Income-tax [1993] 201 ITR 435 and Mcdowell and Company Limited v. Commercial Tax Officer [1985] 59 STC 277; [1985] 154 ITR 148 of the apex Court as well as of this Court in support of his submission. The dispute relates to taxability of the services rendered by the petitioner-company. Hence, it would be apposite to deal with the question first. Sale has been defined in sub-section (33) of section 2 of the Act which reads as follows :