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2013 (5) TMI 539 - HC - VAT and Sales TaxInterstate sale or not - CST - passive infrastructure provider - whether goods purchased by the petitioners/dealers (for the purposes of building, operating and maintaining passive telecom infrastructure and where on the towers erected and maintained but nonetheless continued to be owned by the petitioner the passive infrastructure provider ; goods which are indisputably integrally associated with the building and maintenance of the cell towers), are goods falling within the ambit of section 8(1) read with the provisions of section 8(3)(b) of the CST Act, and thus eligible only at the concessional rate of tax provided in section 8(1). Held that - In the facts and circumstances of this lis, in view of the rationales deducible from the judgments of the Supreme Court in Rajasthan Electricity Board 1996 (8) TMI 455 - (SC) and in J. K. Cotton Spinning and Weaving Mills Co. Ltd. 1964 10 TMI 2 - (SC) , we are of the considered view that the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates) of registration under the CST Act granted to them against issue of C forms and where the goods have been employed in erection and maintenance of cell phone towers which are integral to telecommunication network, fall within the ambit of section 8(1) read with section 8(3)(b) of the CST Act and are entitled to be taxed accordingly. The fact that the goods purchased by the petitioners were neither sold nor used in the manufacture of goods for re-sale does not constitute violation of the C forms. Consequently, levy of penalty, on the factual parameters apparent on the record of these cases, is unsustainable. - Penalty waived - Decided in favor of assessee.
Issues Involved:
1. Validity of penalty orders under the Central Sales Tax Act, 1956. 2. Interpretation of "telecommunications network" under Section 8(3)(b) of the CST Act. 3. Applicability of concessional tax rate under Section 8(1) of the CST Act. 4. Whether the petitioners are telecom service providers. 5. Misuse of Form C declarations. Detailed Analysis: 1. Validity of Penalty Orders under the CST Act: The court examined the penalty orders dated October 7, 2011, confirming penalties for assessment years 2008-09 and 2009-10. It was argued that the penalties were imposed under Section 10A read with Section 10(d) of the CST Act. The court found that the penalty orders were based on the assumption that the petitioners misused Form C declarations and did not utilize the goods for the purposes specified. 2. Interpretation of "Telecommunications Network" under Section 8(3)(b) of the CST Act: The court analyzed whether the goods purchased by the petitioners for building and maintaining passive telecom infrastructure fell under the term "telecommunications network" as per Section 8(3)(b). It concluded that the term includes infrastructure like towers, shelters, generators, and other equipment integral to the network, thus qualifying for the concessional tax rate. 3. Applicability of Concessional Tax Rate under Section 8(1) of the CST Act: The court held that the concessional tax rate of 2% under Section 8(1) is applicable if the goods are used in the telecommunications network. It emphasized that there is no requirement for the goods to be resold or used in the manufacture of goods for sale. The mere use in the telecommunications network suffices. 4. Whether the Petitioners are Telecom Service Providers: The court rejected the Revenue's contention that the petitioners were not telecom service providers because they did not possess a license from the Department of Telecommunication (DOT). It clarified that the petitioners were registered as infrastructure providers (IP-1) and were engaged in providing telecom infrastructure services, which falls under the telecommunications network. 5. Misuse of Form C Declarations: The court found that the Revenue's assertion of misuse of Form C declarations was unfounded. It noted that the goods purchased were indeed used for the erection and maintenance of telecom towers, which are integral to the telecommunications network. The court emphasized that the petitioners did not resell the goods or suppress any sales. General Analysis and Precedents: The court referred to several precedents, including the BSNL judgment and the Rajasthan Electricity Board ruling, to support its conclusions. It highlighted that the goods used in the telecommunications network are eligible for the concessional tax rate and that the petitioners' activities were in line with the provisions of the CST Act. Conclusion: The court quashed the penalty orders, stating that the petitioners' purchase and use of goods for telecom infrastructure were within the ambit of Section 8(1) read with Section 8(3)(b) of the CST Act. The writ petitions were allowed, and the penalty orders were set aside.
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