15. Whether Annual Main-tenance Contract involving the period prior to the date of Supreme Court judgment in Associated Cement Co. Ltd. (2001) 124 STC 59 (SC) wherein the decision of the Supreme Court in Rainbow Colour Labs Ltd. (118 STC 9) is overruled, is liable to tax under the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the execution of Works Contract (Re-enacted) Act, 1989

Held : No

The brief facts leading to the decision is as under:

The appellant is a dealer registered under the Works Contract Act. For the period 1-4-1998 to 31-3-1999 the appellant was assessed under the Works Contract which resulted in an extra demand of Rs. 78,556/-. In appeal before the Assistant Commissioner of Sales Tax the appellant contended that Annual Maintenance Contract is not liable to tax in view of the judgment of the Supreme Court in Rainbow Colour Labs Ltd. The contention was not accepted and the appellate authority
held that the annual maintenance contract is not covered under service contract.

Before the Tribunal the contention of the appellant was that the appellate authority had not considered the Trade Circular No.18T dated 26-9-2001 issued by the Commissioner on the subject of judgment in the case of Associated Cement Company. In the said Circular the Commissioner has clarified that in view of the doctrine of prospective overruling as discussed by the Supreme Court in case of Somaiya Organic (India) Ltd., (2001 (7) SC 1723, judgment in case of Rainbow Color Case becomes ineffective prospectively; i..e., from the date of the judgment in Associated Cement Company. The judgment in Associated Cement Company is delivered on 25-1-2001 and the period under appeal is 1-4-1998 to 31-3-1999. The sum and substance of the argument was that till the decision of the Supreme Court in Associated Cement Company, the maintenance contract was not liable for tax under the Works Contract Act and the appellate authority should have followed the circular instructions of the Commissioner.

After going through the various case laws on the subject especially based on Rainbow Colour Labs and the subsequent overruling of the said decision by the larger Bench of the Supreme Court in Associated Cement Company, the Tribunal observed that the appellate authority was bound by the clarification given by the Commissioner of Sales Tax in Trade Circular No.18T of 2001 regarding the prospective overruling of the effect of the judgment in the case of Rainbow Colour Lab Ltd. According to the Tribunal what is clarified in the trade circular is the policy decision of the department to follow the judgment in Rainbow Colour Lab till the date of pronouncement of the judgment in case of M/s Associated Cement Company in view of the doctrine of prospective overruling as discussed by the Supreme Court in Somaiya Organic Ltd. It therefore held that the appellant is entitled to relief in tax levied on the annual maintenance contract by virtue of the clarification given by the Commissioner of Sales Tax in the Trade Circular regarding the applicability of judgment in case of Rainbow Color Lab.

The Anil Engineers vs. The State of Maharashtra (Second Appeal No. 1670 of 2003 dated 7th April, 2007). The judgment of the Tribunal was delivered at Third Bench of the Tribunal by Hon’ble Member Shri D.H. Sali. The appellant was represented by Smt. S.S.Rangnekar, Chartered Accountant

16. Whether the edible refined blended vegetable oil which is an admixture of edible refined soyabean oil (40%) and edible refined palmolene oil (60%) is covered by Notification entry A-4 under section 41 of the Bombay Sales Tax Act 1959?

Held : Yes.

The appellant sold blended oils which is consisting of two types of vegetable oils; i.e., Soyabean oil and Palmolene oil to one M/s Prime Enterprises, Mumbai, and paused a question before the Commissioner as to whether the blended oil would be covered by Entry A-4 of the Notification issued under section 41. The contention of the appellant was that although the material sold consisted of two types of vegetable oils, they should be considered as covered by the said notification in spite of the blending of the two types of oils both of which were covered expressly by the said notification. It was also contended that there was no commodity as "blended oil" and it is only a vegetable oil and should be identified as an oil which is quantitatively more in the mixture. The learned Commissioner of Sales Tax held that the blended oil being not specifically covered by the said notification, the appellants would be liable to pay both turnover tax and surcharge, which is exempted in respect of specifically mentioned vegetable oils in the said notification.

The contention of the appellant before the Tribunal was that the Notification Entry A-4 includes palmolene oil and soyabean oil at serial No. 13 and 3 respectively and the benefit of the notification entry is applicable to the product in question for the reason that the blended vegetable oil contains 60% palmolene and even after blending the final product remains the same; i.e., vegetable non-essential oil. The ingredients and the final product could not be said to be different commercial commodities. The appellant relied on the decision of the Tribunal in National Dairy Development Board (Second Appeal No. 951 of 1998 dated 30-6-2001. Alternatively it was submitted that considering the major component is palmolene oil and therefore the blended oil can be taken as palmolene which is included in the said notification. The revenue on the other hand submitted that the wording provided in entry A-4 is "edible oils" namely, soyabean oil, palmolene oil or palmolene in refined state only and nowhere the blended oils have been included and therefore no benefit under the notification is admissible. It also relied on the decision of the Apex Court in Union of India vs. Wood Papers Limited (83 STC 251) in support of the submission that exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly.

The Tribunal observed that the only objection of the revenue appears to be that the impugned notification provides benefits to the specified edible oils per se along and not to the blended oils. The Tribunal referred to the decision in National Dairy Development Board (referred to above) wherein it was categorically held that blended oil (Lok Dhara) obtained by mixing two different oils will not amount to a process of manufacture within the meaning of section 2(17) of the Act. According to the Tribunal when no different commodities emerge by admixture of these two edible oils, it is not necessary to include the blended oil specifically in the notification entry. The Tribunal further observed that even applying the test of exemption provision strictly, still it has no hesitation to hold that the appellant is entitled for the benefit of the impugned entry as the intention of the legislature is clear to grant of exemption of turnover tax and surcharge for sale of palmolene oil and soyabean oil and this benefit cannot be denied on the ground of selling the admixture of the same particularly when no different commercial commodity emerge.

The Godrej Industries Limited vs. The State of Maharashtra (Appeal No.19 of 2004 dated 20th April, 2007). The judgment of the Tribunal was delivered at First Bench of the Tribunal by Hon’ble President Shri G.D. Parekh. The appellant was represented by Shri S.S. Gaitonde, Advocate.

17. Whether "rendering work of Remanent Life Assessment of boiler can be treated as "transfer of technical knowhow" liable to tax under the Bombay Sales Tax Act, 1959?

Held : No.

The appellant had claimed service/labour charges to the tune of Rs. 78,85,048/-. This amount is in respect of receipts for rendering the services of inspecting the old boilers, and preparing a feasibility report. On the basis of the report corrective action is taken by the customer. Without technical advice and assessment of the condition of boiler, the customer cannot run the boiler and the appellant is charging for the same.

The Tribunal discussed the meaning of technical know-how It also referred to the decision of the Supreme Court in the case of State of Madras vs. Gannon Dunkerly & Company (Madras) Limited (9 STC 353) as to whether there is a sale of technical knowhow between the parties in terms of the agreement. The Tribunal also refereed to the entire gamut of 46th Constitutional Amendment. It referred to the scope of the work done by the appellant and came to the conclusion that the customers are carrying out the work at the advice of the appellant. The appellant has to identify the various actions to be taken for life extension and for smooth, safe and economic operation of the unit. There is absolutely no transfer of property. There is not a transfer of design or pattern of a boiler. It is not transfer of any device for carrying out, preparing and maintenance of a boiler or to increase the life of boiler. It was held that what the appellant was doing was pure technical service for ascertaining the condition of boiler and recommending the corrective actions and by no stretch of imagination it can be said to be a sale of technical know how exigible to tax.

Thermax Babcock & Wilcox Limited vs. The State of Maharashtra (Second Appeal No. 1575 of 2004 dated 20th April 2007).The Judgment of the Tribunal was delivered at First Bench of the Tribunal by Hon’ble President Shri G.D. Parekh. The appellant was represented by Mr. A.B. Ghanekar, Sales Tax Practitioner.