2000 (11) TMI 1190 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 2(1)(iv) of the Haryana General Sales Tax Act, 1973.
2. Validity of assessment orders and demand notices issued by the Assessing Authority, Ambala Cantonment.
3. Classification of the Department of Telecommunications as a "dealer" under Section 2(c) of the 1973 Act.
4. Determination of whether the provision of telephone connections constitutes a "sale" under Section 2(1)(iv) of the 1973 Act.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 2(1)(iv) of the Haryana General Sales Tax Act, 1973:
The petitioners initially sought to strike down Section 2(1)(iv) of the 1973 Act. However, during the proceedings, the petitioners' counsel stated that they did not wish to press this prayer. Consequently, the court refrained from adjudicating upon the vires of the said section.

2. Validity of Assessment Orders and Demand Notices:
The petitioners challenged the assessment orders and demand notices issued by the Assessing Authority, Ambala Cantonment, for the assessment years 1985-86 and 1986-87. They argued that the orders were without jurisdiction and ultra vires the provisions of the 1973 Act. The court found that the orders and notices were issued without proper jurisdiction and were liable to be quashed.

3. Classification of the Department of Telecommunications as a "dealer":
The petitioners contended that the Department of Telecommunications does not fall within the definition of "dealer" under Section 2(c) of the 1973 Act. They argued that the department does not carry on any business or trade in the telecommunication system but merely discharges public duties and charges rent for the public utility service rendered. The respondents, on the other hand, argued that the telecommunication service is a commercial activity and not a sovereign function of the State, thus falling within the definition of "dealer" under the 1973 Act. The court, however, agreed with the petitioners' view, stating that the department's activities do not constitute a business or trade that would classify it as a "dealer."

4. Determination of whether the provision of telephone connections constitutes a "sale":
The petitioners argued that providing telephone connections does not constitute a "sale" as defined under Section 2(1)(iv) of the 1973 Act. They maintained that the entire telecommunication system, including the instrument and exchange, cannot be described as goods, and there is no transfer of any right to use any goods. The court referenced similar judgments from the Andhra Pradesh and Allahabad High Courts, which held that the provision of telephone facilities is a service and not a sale of goods. The court concluded that the rent charged for connecting the instrument to the telephone exchange cannot be equated with the sale of goods or deemed sale of goods within the meaning of the 1973 Act.

Conclusion:
The court allowed the writ petitions, declaring the impugned assessment orders and demand notices illegal and quashed them. The parties were left to bear their own costs. The judgment emphasized that the activities of the Telecommunications Department do not constitute a sale of goods and that the department does not fall within the definition of "dealer" under the 1973 Act.