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TMI Blog2013 (6) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... licence to have access to the passive infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorised representatives of the mobile operator. It is because an owner of a property has a bundle of rights, namely right to possess, right to use and enjoy, right to usufruct, right to consume, to destroy, to alienate or transfer, etc.. Therefore, to constitute a deemed sale under Article 366(29A)(d) having regard to the object with the 46th Constitutional Amendment was inserted, it is clear the right that is transferred under a contract should be a bundle of rights minus right to title. Therefore, in deciding whether a transaction falls within Article 366(29A)(d) so as to constitute a deemed sale, the purpose of the 46th Amendment, the mischief sought to be remedied and the object sought to be achieved by the said provision cannot be lost sight of. Thus in the facts of this case, looking into the various terms of the agreement it is clear under the contract, the assessee has not transferred any right in the passive infrastructure to the mobile operators. The right that is conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are arrayed to in Writ Appeal Nos. 3403-3439/2011 arising out of W.P. Nos. 11508/2011 and 12693-12727 of 2011. Factual Matrix 2. The assessee - M/s. Indus Towers Limited is a Company incorporated under the Companies Act, 1956, having its registered office in New Delhi and engaged in providing Passive Infrastructure and related operations and maintenance services to various telecommunication operators in India on a shared basis. The assessee is registered with the Department of Telecommunications (DoT) for providing Passive Infrastructure Services to mobile phone operators. The nature of services provided by the assessee was envisaged by Government of India initiative MOST (Mobile Operators Shared Towers). The DoT in a bid to create a high quality, low-cost, rapid, wide coverage mobile telecommunication network in India sought to propose, through the project MOST , a system of sharing of passive infrastructure by the various telecom service providers. 3. The main object of sharing the infrastructure is for ensuring economy by avoiding multiple Telecom sites for different Mobile Service Providers in the same area. This concept was mooted and promoted by the Ministry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipments. The air conditioners are used to keep the temperature below 35 degrees celsius inside the shelter room for smooth running of BTS. The assessee is also responsible for safety of the operators equipments at its site. For all these services (site access, power supply, power conversion, air conditioning and safe keeping), the assessee receives a consolidated service revenue from its customers. 5. The right, title, possession and control in the passive infrastructure located at the telecommunication site including and not limited to the tower, shelter, diesel generator sets, batteries, air conditioners and electrical and civil works including any enhancement carried out by the assessee vest solely with the assessee. 6. The sharing operator i.e., the telecom service providers, on execution of a service contract, has the right to install equipments such as BTS equipment, associated antennae and active infra network equipments and other requisite equipments required to provide telecommunication services by them to their customers. The right, title and interest in all such equipments installed on the site by the Sharing Operators would remain with such operators only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrolled, managed and owned by the assessee. However, the Sharing Operator will be responsible for the operation and maintenance of their equipments, for which purpose, access will be provided to the authorized employees/sub-contractors of the Sharing Operator. The assessee retains the right to provide access to the site including any infrastructure to other telecom service providers, for any purpose at, its discretion. The Sharing Operators also retain the right to seek passive infrastructure services from other Passive Infrastructure Service Providers. The assessee is responsible for obtaining the necessary clearances/permissions/approvals from local/municipal authorities/departments. For undertaking the said infrastructure sharing activity, the assessee collects service fees. The fees shall be determined in accordance with the Master Service Agreement. The charges that are determined in the said agreement are in the nature of service charges. The Sharing Operators are charged by the assessee for the Site Access Availability. The assessee is also assessed under the Finance Act, 1994 and is paying service tax. 8. The assessee was served with a notice under Section 39(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of the agreement they noticed that the cellular operator shall maintain on all the active infrastructure equipment identification marks to show that the equipment is the property of the cellular operator. Under the terms and conditions in the lease agreement, it is evident that the infrastructure provider has given their right to use the equipment exclusively to the telecom company. No immovable property like land or building has been transferred or the right to use any immovable property has been transferred. The right to use the said equipment has been transferred exclusively to the telecom company. Therefore, the assessee is liable to pay the tax on the transfer of right to use goods and the levy cannot be found fault with. After referring to various other clauses it is stated that, the fuel charges are paid by the cellular company and the equipments are maintained on behalf of cellular company and only the possession and effective control lies with the cellular operator. Any changes of security or any other factors have to be intimated in advance to the cellular operator and hence the effective control always with the cellular operator. When the cellular operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bles are movable. From the above facts and narration of the transactions of the assessee and the activities carried on by the assessee, the telecom towers are movable property and the leasing of these towers by collecting rentals are deemed to be a sale exigible to tax under the provisions of the KVAT Act, 2003. 10. The learned single Judge, after clubbing all the writ petitions, which were pending before him, where identical issues were raised, passed the impugned order disposing of all the writ petitions. The reasoning of the learned single Judge in holding that the activity carried on by the assessee falls under Article 366(29-A)(d) of the Constitution is as under :- Various decisions rendered and referred to by the petitioner s counsel are in the context - what is movable and immovable. As a matter of fact finding, the reassessing authority having regard to the nature of the equipment used and its fixation to the earth i.e., civil foundation or on the roof of the building for proper functioning and the nature of the activity that is being transferred to the customers viz., telecom companies to use the equipment i.e., the tower raised and in consideration petitioner recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where, if the order of the learned Single Judge is given effect to, they have to return the service tax collected from these assessees under the provisions of the Finance Act, 1994. Rival Contentions 12. The learned Senior Counsel Sri. Venkataraman appearing for these assessees, assailing the impugned order contended that the assessees are the owners of Passive Infrastructure. It consists of a tower on a piece of land or roof top of a building, pre-fabricated shelters, DG sets, battery bank, power plant, power interface unit, air conditioners with some electrical works accessories like antennas, duplexers, combiners, transceivers, alarm extensions buses, control system etc. The same is operated and maintained by the assessees under the agreement entered into between the assessee and the shared operators. They give restricted access of their infrastructure to the service providers on non-exclusive terms. All rights, title, interest and ownership of the passive infrastructure always remains with the assessees exclusively. No portion of the tower or any other infrastructure is handed over to the service providers either physically, notionally or symbolically. The assessees co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract of pure services and no element of sale is involved. Therefore, the learned Single Judge without proper application of mind, has erroneously held that the transaction in question falls within the mischief of Article 366(29A)(1)(d) of the Constitution of India. 14. Sri N.R. Bhaskar, learned Counsel appearing for Union of India contended, that the nature of activity carried on by the assessee and also the nature of transaction under the agreement is a case of simple service contract. The assessees have rightly registered themselves as service providers under the Finance Act, 1994 and they have been paying the service tax. There is no element of sale involved. It is a pure case of extending service and therefore, the question of imposing VAT on the same aspect would not arise. The learned Single Judge has not properly appreciated this aspect and committed an error in holding that the nature of the activity amount to deemed sale and the State Government has to recover the VAT from the service providers paid by the assessee to Union of India. The said order is illegal and requires to be set aside. 15. Per contra, the learned Senior Counsel for the revenue Sri. Ashok Hara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Similarly, the learned Single Judge was not justified in setting aside imposition of interest and penalty as no tax is paid under the Act at all. That portion of the order is illegal and requires to be set aside. He also contended, under the statute, a statutory appeal is provided to the Appellate Commissioner against the order passed by the Assessing Authority whose order can be challenged before the Karnataka Appellate Tribunal and therefore there is no justification for the assessees to bypass a statutory remedy and approach this Court under Article 226 of the Constitution of India, as the appellants have an alternative and efficacious remedy of an appeal. Hence, these writ appeals are not maintainable. Point for Consideration 16. In the light of the aforesaid facts and the rival contentions, the point that arise for our consideration in these appeals is, Whether activity carried on and the service provided by the assessees to its customers constitute a deemed sale as defined under Article 366(29A)(1)(d) of the Constitution of India and therefore liable to value added tax. Let us see how the Assessing Officer has approached this question. Finding of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is a contract for Transfer of Right to use passive infrastructure which is goods . 22. Neither under Article 366(29A)(d) nor under Section 2(29)(d) of KVAT Act, is there a clear prohibition for permitting multiple use of goods like mobile towers. What is important is that the legal right transferred to use the goods in favour of a person should not get affected during the period of contract by permitting another person for similar use. In case of Telecom Towers, two or more mobile operators can be permitted to use, by clearly demarcating the space in the towers without affecting each other rights. Here as per the requirement of mobile operator, a fixed space on the tower at a particular height/direction is allotted along with other infrastructure. By means of a contract, Indus (Transferer) transfers the right to use passive infrastructure in favour of (transferee) mobile operator, by which the transferee gets the legal right to access/use the passive infrastructure. 23. It is the argument of the assessee that since he is maintaining the passive infrastructure, the effective control is retained by him. This is not correct, because as per the terms of the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure or execution of service contract reveals that to start with, sharing operator indents requirement of access to the tower through forecast . In response to the above request, Indus gives suggestions, comments and its plans for meeting the operator s requirement either with the existing sites or a new site. Then the operator sends a site request for which Indus will issue site proposal indicating its place to implement site request along with applicable charges either at an existing site or creation of new site. If the site proposal is acceptable to the sharing operator, he will issue a service Order in the prescribed form setting out the details of site required along with the technical requirement for installation of sharing operators equipment. Then, Indus would confirm the order by issuing Ready for Installation Notice . After receipt of the above notice; the sharing operator will inspect and approve the site if it is acceptable for all his technical requirements. After approval of the site as above, the sharing operator and Indus execute a contract called Service Contract which provides the sharing operator right to use/access the passive infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, Indus is not free to either self use or to allot the same to any other operator. However, only on termination of the contract. Indus re-acquires the allotted access and is free to allot the same to any other operator if it is suitable for him. Though Indus can allot use of passive infrastructure to more than one operator, he is not free to change specified allotted use to a particular mobile operator. Hence, it is not true that Indus has got right to transfer the specified use of the passive infrastructure to more than one operator, though he may allow sharing of entire passive infrastructure by two or more operators at a particular site. For the same reason specified use or access granted to an operator cannot be treated as on non-exclusive basis . Conclusions : 31. In other words clauses (d) and (e) are satisfied in the present facts and circumstances of the case. Thus there is a transfer of right to use specified passive infrastructure from Indus to the mobile operator, which comes within the ambit of Article 366(29-A)(d) of the constitution of India. There is a possession and effective control of the specified access of the passive infrastructure by the transferee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the terms of the agreement. What purports to be granted by way of lease are the entire world negative rights of the film and those rights are defined in the relevant clause 4(d) of the contract in this manner In buttressing this argument that what is really contemplated is not a lease of a right to exploit but an outright sale of the copyright in the production regarded as incorporeal movable property, reliance is placed by the department upon its assertion that what may be called the marketable value of the film becomes nil at the end of three years. In the counter-affidavit, it is said that the value of a film is completely wiped out by exhibition in the course of ten years or so The impugned order says that the normal life of a film is less than three years. If the film as an exploitable commodity has no value beyond a period of three years, the apparent tenor of the transaction as a lease to exploit the right of the owner of the copyright is in substance only an outright sale of all such rights of the owner so it is argued. In support of this argument, reliance is placed upon the fact that under the income-tax law, depreciation of the value of the film as an inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e event under section 5-E is the transfer of the right to use any goods. What does this phrase connote? This means that unless there is a transfer of the right to use the goods, no occasion for levying tax arises; providing a facility which involves the use of goods nor even a right to use the goods in not enough, there must be a transfer of that right. The Transfer of a right is an event which has a double aspect. It is the acquisition of a right by the transferee, and loss of it by the transferor. The vestitive fact, if considered with reference to the transferee is a derivative title, while from the point of view of the transferor it is an alienative fact. (Salmond on Jurisprudence - Twelth Edition at pages 332 and 333.) In Corpus Juris Secundum transfer is defined : The common use of the word transfer is to denote the passing of title in property, or an interest therein, from one person to another, and in this sense the term means that the owner of property delivers it to another person with the intent of passing the rights which he had in it to the latter. (Corpus Juris Secundum Vol. 87, page 892.) The essence of transfer is passage of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the execution of the project work on specified hire charges; the machinery was given in the possession of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for lending machinery attracted tax liability under section 5-E of the Act. 4. The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of section 5-E of the Act, i.e., transfer of right to use machinery, the hire charges collected by the respondent from the contracts were not exigible to sales tax. On a careful reading and analysis of the various clauses contained in the agreement and, in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable of the right to use any goods. Article 366 (29A)(d) empowers the State Legislature to enact law imposing sales tax on the transfer of the right to use goods. The various sub-clauses of clause (29A) of Article 366 permit the imposition of tax thus: sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; sub-clause (d) on transfer of the right to use goods : sub-clause (e) on supply of goods : and sub-clause (f) on supply of services. The words and such transfer, delivery or supply... in the latter portion of clause (29A), therefore, refer to the words transfer, delivery and supply, as applicable, used in the various sub-clauses. Thus, the transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a deemed sale in case of sub-clause (c), the supply of goods and services respectively will be deemed sales in the cases of sub-clauses (e) and (if) and the transfer of the right to use any goods will be a deemed sale in the case of sub-clause (d). Clause (29A) cannot, in our view, be read as implying that the tax under sub-clause (d) is to be imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale would be execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods. 28. No authority of this court has been shown on behalf of respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed. 38. The Apex Court in the case of State of U.P. v. Union of India [(2003) 3 SCC 239 = 2004 (170) E.L.T. 385 (S.C.)] a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is placed on the decision of the High Court of Andhra Pradesh in Rashtriya Ispat Nigam Ltd. v. CTO which was affirmed by this Court in State of A.P. v. Rashtriya Ispat Nigam Ltd. It is unnecessary to deal with these cases in any detail : suffice it to say, in that case there was a finding of fact that the transaction did not involve transfer of the right to use the machinery in favour of contractors and that determined the issue. 27. It may be mentioned that during the relevant period (1988) no service tax was enforced. It was in 1994 that service tax was levied for the first time as per Chapter V of the Finance Act 1994. Section 66 thereof created charge of service tax in regard to taxable services. Service tax is defined in clause (34) of Section 65 to mean tax chargeable under the provisions of that chapter. Taxable service is defined [under sub-clause (b) of clause (41) of Section 65] to mean any service provided to, inter alia, a subscriber by the telegraph authority in relation to a telephone connection. No provision of the U.P. Act or the said Finance Act, 1994 or the Constitution of India is brought to our notice to hold that rentals collected by DoT from the subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concomitant for completing a transaction of scale for the purpose of Article 366 (29-A(d) of the Constitution. In that decision the Court had to determine where the taxable event for the purpose of sales tax took place in the context of sub-clause (d) of Article 366(28-A). Some States had levied tax on the transfer of the right to use goods on the location of goods at the time of their use irrespective of the place where the agreement for such transfer of right to use such goods was made. Other States levied tax upon delivery of the goods in the State pursuant to agreements of transfer while some other States levied tax on deemed sales on the premise that the agreement for transfer of the right to use had been executed within that State (vide para 2 of the Judgment as reported). This Court upheld the third view, namely, merely that transfer of the right to use took place where the agreement were executed. In these circumstances the Court said that : (SCC p. 42, para 28) 28. No authority of this Court has been shown on behalf of the respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of the machinery for the works other than the project work of the respondent or.... 77. But in Aggarwal Bros. v. State of Haryana when the assessee had hired shuttering in favour of contractors to use it in the course of construction of buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and therefore, there was a deemed sale within the meaning of sub-clause (d) of clause (29-A) of Article 366. What is noteworthy is that in both the cases there were goods in existence which were delivered to the contractors for their use. In one case there was no intention to transfer the right to use while in the other there was. 78. But if there are no deliverable goods in existence as in this case, there is no transfer of user at all. Providing access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate. Of course the toll payer will use the road or bridge in one sense. But the distinction with a sale of goods is that the user would be of the thing or goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it held, the transactions fell within the amended definition of the word sale as there was a transfer of the right to use the shuttering. Challenging the said finding before the Apex Court, it was contended having regard to the Entry 54 of Part II of Schedule VII, the transfer contemplated by Sub-clause (d) of clause (29-A) of Article 366 is a legal transfer of the right in the goods. It has to be a transfer of goods. It has to be permanent. It has to be something like a lease. The giving of goods on hire is not such a transfer and, therefore, falls outside the ambit of sub-clause (d) of clause (29-A) of Article 366. In the case of Dhampur Sugar Mills Ltd. v. Commissioner of Trade Tax, U.P. reported in (2006) 5 SCC 624, the Apex Court held as under :- In the said case, a deed of licence was executed by the Company in favour of the assessee. Thereafter, the assessee executed a performance guarantee to ensure performance of the said deed of licence dated 3-9-1987. In terms of the said agreement dated 3-9-1987, a performance guarantee was executed by the appellant herein, wherein it was agreed to by and between the parties that a major part of the licence fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould come within the purview of definition of sale. By reason of Clause 29-A of Article 366, the ratio in Gannon Dunkerley Co. has been overcome, as title to the goods, although, may remain with the transferee, a transfer of right to use the goods would also be a sale. Even a lease of goods would be a sale. Thus, by reason of the said definition, though an essential ingredient of a sale as defined in the Sale of Goods Act, 1930, may be absent, the transaction may amount to a sale for the purpose of levy of sales tax under the Act. What has not been altered by reason of the said provision is the meaning of the word goods . In this case, the concept of goods is not in dispute. Molasses is indisputably goods. It can be transferred for a definite price. xxxx Molasses manufactured in the sugar mills, was the property of the appellant and it answers the description of goods . In view of the terms and conditions of the deed of licence, the appellant was the owner thereof. The Company was to use the molasses for the purpose of manufacture of sugar in its factory. Transfer of such molasses by the appellant to the Company, would not be a transfer by way of transfer of stock. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the first 14 days the loan was free from payment of any charges. However, thereafter a fixed amount was levied by the assessee as a charge for overretention. According to the impugned Judgment the said charge for overretention was in the nature of penalty imposed on the customer in order to dissuade the customer from retaining the cylinders. The assessee required empty cylinders to be returned so that the said cylinders could be refilled and sold/transferred by way of loan. In our view when the said goods (cylinder containing medical oxygen) were given on loan to the customer the transfer of the right to use the said goods came into existence. It may be that for the first 14 days the said loan is free from payment of any charges. However, exemption from payment would not militate against the concept of transfer of the right to use the goods. Again, the Apex Court in the case of Association of Leasing and Financial Service Companies v. Union of India and Others reported in (2011) 2 SCC 352, at paras 35, 51 and 54 = 2010 (20) S.T.R. 417 (S.C.) it held as under : 35. According to Chitty on Contract, a hire-purchase agreement is a vehicle of instalment credit. It is an agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1994. Even in the matter of allocation between the principal and finance/interest charges, adjudication under the Act was warranted which has not been done. One must also bear in mind that Article 366(29-A) is essentially sales tax specific. It was brought in to expand the tax base which stood narrowed down because of certain Judgments of this Court. That is the reason for bringing in the concept of deemed sale under which tax could be imposed on mere delivery on hire purchase [see clause (c)] which expression is also there in the second limb of the said article. From the aforesaid judgments, it is clear that law on the point is fairly well settled. 41. Once access is provided, transferee uses the infrastructure. However, while using such infrastructure, there is no transfer of any interest in the infrastructure in favour of the transferee. The infrastructure continues to be in possession of the transferor. What is used by the transferee is the service which is provided by the transferor. The transferee never gets the possession of the infrastructure. Getting access to infrastructure does not tantamount putting the transferee in possession of the infrastructure. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e simultaneous with the transfer of the right to use. But the goods must be in existence and deliverable when the right is sought to be transferred. Whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. 43. In the case of lease, there is a transfer of interest. Though no absolute interest is transferred, partial interest in the property is transferred and therefore by virtue of the contract, the transferee gets right to use the property. It presupposes that there is transfer of such right to use. 44. As pointed out by the Apex Court in Rashtriya Ispat Nigam Ltd. case, whether there is a transfer of right to use or not, is the question of fact, which has to be determined in each case having regard to the terms of the contract under which there is said to be a transfer of the right to use goods. Therefore, the question whether there is transfer of right to use cannot be decided in vacuum. It has to be decided in the light of the terms of the contract, intention of the parties and their attendant circumstances. 45. In this background it is necessary to look into the terms of the contract entered into between the parties, which is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.1.4 In the event that the Service Orders received by Indus in respect of any Site(s) mean that the available Passive Infrastructure at such Site(s) are over subscribed, an applicant whose Service Order was received by Indus prior to another Service Order shall be given priority by Indus while allocating such Passive Infrastructure to the relevant applicants. 2.1.5 With respect to each Site in relation to which Indus is able to grant Site Access Availability, the parties shall execute a Service Contract in accordance with the procedure set out in Schedule 1 (Site Access Availability), and the provisions of each Service contract shall include the standard terms set out in Schedule 6 (Standard Site Access Terms). Each Service Contract shall be duly stamped and the applicable stamp duty shall be at the Sharing Operator s expenses. 2.1.6 Upon the execution of a Service Contract in respect of a Site, the Sharing Operator shall have the right to install the Sharing Operator Equipment or any portion thereof at such site. The Sharing Operator shall have access to each such Site for all installation activities and Indus shall provide to the Sharing Operator the necessary mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Levels specified in Schedule 2 (Operation and Maintenance Services). 3.2.3 Indus shall ensure that it puts in place processes and procedures to monitor its performance against the Operation and Maintenance Service Levels and shall report such information to the Sharing Operator on a monthly basis. 3.3 Operation and Maintenance Service Levels. 3.3.1 If Indus fails to provide the Operation and Maintenance Services in accordance with the Operation and Maintenance Service Levels then Operation and Maintenance Service Credits shall become payable in accordance with Schedule 2 (Operation and Maintenance Services). The Sharing Operator may, on a quarterly basis and with a notice of 30 days, deduct any such Operation and Maintenance Service Credits from the next invoice due under this Agreement or, if no further invoices are due, may recover the Operation and Maintenance Service Credits as a debt from Indus due and payable within 30 days of demand. 3.3.2 The Parties agree that the Operation and Maintenance Service Credits are an estimate of the adjustment to the Charges to reflect the value of services and are not a penalty, and are at the amounts stated in this Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates shall cease to apply until such time as the relevant invoice is paid in full. In addition, upon the expiry of the 90 days period. Indus my, at any time, choose to terminate the relevant Service Contracts and the relevant Exit Amounts shall be payable by the Sharing Operator in accordance with the relevant Service Contracts. 6.4 Disputed Items If the Sharing Operator or Indus reasonable and in good faith disputes : (i) an obligation to pay part or all of an invoice submitted by Indus this Agreement; (ii) part or all of a Site Access Service Credit or an Operation and Maintenance Service Credit. then notwithstanding anything to the contrary in this Agreement. 6.4.1 The Party disputing the invoice or Site Access Service Credit or Operation and Maintenance Service Credit, as the case may be, must notify the other party in writing of the amount of the invoice or Sire Access Service Credit or Operation and Maintenance Service Credit which it disputes (the Disputed Amount ) together with detailed reasons why it considers it is not obligated to pay the Disputed amount. 6.4.2 Such party s failure to pay the Disputed Amount wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r source of power source like SEB power over DG set power as a measure to reduce fuel cost. All fuel reimbursement bill shall be accompanied by site wise DG running log sheet and Cellular operator shall have the right to carry out random fuel reconciliation audit at Cellular Operator s own discretion. 4.2.3 The power consumption between sharing operators shall be divided based on the DC current consumption of the respective systems and the Infrastructure Provider shall install suitable measuring mechanism to measure and bill accordingly. All power reimbursement bills shall be accompanied by site wise calculation sheets and Cellular Operator shall have right to carry our random power reconciliation audit at Cellular Operators s own discretion. 5. Service Level Agreement Infrastructure Provider shall provide the following services : 5.1 Infrastructure Provider shall provide supervision, operation and control of the Services relating to all infrastructure equipment provided by Infrastructure Provider at the sites. 5.2 To carry out periodic servicing/overhauling of Diesel Generator sets based on actual running hours, Air Conditioners other infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lizers, static stabilizer, line conditioning equipment Air Conditioners Incoming EB connection Site electrical system Site earthing system Lightning protection system Civil Construction Fire Alarm System The Infrastructure Provider will provide space for installation. 2.6 The SLA s shall be applicable for each of the Infrastructure elements, functions as well as for the complete system. 2.7 BSNL shall carry out maintenance, upgrade or replace the hardware/software as and when required within the allotted space during the contract period. 2.8 Any consequences due to delay in payment/penalties of power, fuel, other utilities bills and statutory payments in time, shall be to the Infrastructure Providers account. 2.9 The Infrastructure Provider shall ensure good housekeeping of site and BSNL or its authorized representative shall have 24 hours 365 days access to the site. 2.10 The Infrastructure Provider shall have necessary skilled manpower at the cluster level to administer the operation and maintenance. The organization chart detailing the fault monitoring arrangem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Provider. (b) In case of an existing Site If it s an existing site of the Infrastructure Provider, it will be offered in 10 days. 5.0 Power plant (not applicable in case of outdoor BTS) IPL shall provide SMPS power plant with weather proof enclosure (IP-55) of appropriate capacity with spare modules. 6.0 Battery set (not applicable in case of outdoor BTS) IPL shall provide 2 sets of Maintenance - free Batteries of appropriate capacity with a power backup of 6-8 hours. 7.0 Power Requirement IP shall be provide AC-Mains/DG Supply as per SLA. The infrastructure Provider shall provide 2 nos. 50 Amps DC MCB for connecting the BTS along with the Power Plant. Up to 4 nos. 16Amps MCBs for Radio equipments AC power from SEB grid, with suitable connected load atACDB. Power back up from a Diesel Generator of suitable capacity. Neutral to Earth voltage should be less than 2 volts Class B C surge Protection should be provided in the Power lines in parallel for non-lightening prone areas. However in lightening prone areas, surge filter should be provided in power line before entering into shelter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adder. In areas which experience heavy lightning, active/specialized lightning protection based on advanced technologies need to be provided. The tower legs should be earthed with an earth ring. 11.0 Fire Alarm System The Fire Alarm system should have following features : A digital temperature sensor with settable high temperature alarm independent of air conditioner alarms shall be provided. Potential free contacts of the below mentioned alarms shall be wired to the alarm termination box through shields/armoured cable. Infrastructure Provider for their fault management centre may use same alarms. Input power fail Fire System fault High room temperature 12.0 Tower The tower shall be for specified wind zone and antenna loading : tower designs should be independently checked and certified by institutes like SERC. ❖ Tower material sourcing, fabrication, and erection shall be done as per relevant IS codes and standard detailing practices. ❖ Tower erection shall be done as per accepted industry practices. Foundation base assembly shall be leveled within tolerance given in IS-5613. All b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating at the site. However, if the site is ready in all respects including DG set and if the EB connection is not available then BSNL at its own discretion can start its operations on the site. Till such time EB connection is not available, site shall run on DG. And the expenses for the DG shall be born by the BSNL as detailed in Schedule 3 15.0 Ready for Installation (RFI) While the infrastructure provider declares the site Ready for Installation (RFI), BSNL should be able to move in their Communication equipment for Installation. While RFI is communicate to BSNL, following aspects are assumed to be completed. ❖ Shelter/Equipment room is fully ready and all debris are cleared off to move the equipment. ❖ Electrical wiring completed, energized and tested. ❖ Air-conditioner commissioned, tested and operational ❖ Tower erection, Earthing, vertical and horizontal cable tray complete. Painting complete (if not complete, BSNL and Infrastructure Provider can take a mutually agreed decision on a case by case basis) ❖ DG set with Acoustic enclosure installed, tested for Sound suppression. Vibration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter/room with identification for Customer MCB, space for BTS marked, IEDB EEDB holes for Customer marked. ❖ Cable tray layout O/D and I/D and area marked for Customer cables. ❖ List of equipment, capacity, serial numbers. Infrastructure Provider name, service engineer s contact name and telephone number. Service Level Agreement This Service Level Agreement (SLA) is for Round the Clock Operation and Maintenance of Passive infrastructure forming part of the infrastructure sharing agreement dated _____2008. 1.0 Scope of work The infrastructure Provider shall provide the following services : 1. Supervision, Operator and control of the Services relating to passive infrastructure equipments as per schedule 1 including their maintenance, service, supervision, repairs etc. at the specified site. 2. Carry out periodic servicing/overhauling of Diesel Generator sets based on its actual running hours. 3. Shall ensure DC Power uptime in a circle - 99.99%, measured on monthly basis. 4. Shall attend/resolve all the infrastructure related alarms twenty fours hours, seven days a week i.e., @ 24X7. 5. Shall ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineer. This will be ensured for 99.90% availability. 14. Infrastructure Provider Surge and lightening protection at the input of AC power supply. 15. Infrastructure Provider to provide 3 phase EB, 50 Hz line voltage 240V-480V (Line to line) and 140V to 280V (Line to neutral). 16. Infrastructure Provider to provide Dust free and clean shelter room. Also periodic Rodent/Pesticide control has to be undertaken by Infrastructure Provider. 17. Infrastructure Provider to ensure Leakage free Shelter room. 18. Infrastructure Provider to provide quality antistatic flooring. 19. Infrastructure Provider to ensure Earth resistance not more than 0.5 ohm under normal soil condition. A yearly check on the value of Earth resistance to be conducted and necessary action be taken by Infrastructure Provider under the knowledge of Cellular Operator. 20. Infrastructure Provider to provide suitable Fire Extinguishers (ABC type or similar) with periodic check on their refilling. 21. Infrastructure Provider to provide Aviation Light Lightening Arrestor (with separate Earthing) 22. All electrical equipment such as Microwave, Antennas, Cables, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure located at such site which is permitted by Law to be shared by the Parties, including but not limited to the tower, shelter, diesel generator sets, air conditioners and electrical and civil works. At the site, the service provider will erect a tower. In order to operate and maintain the tower, he needs diesel generator sets, air conditioners and electrical equipment. All these have to be kept in a room which is called a shelter. The active infrastructure includes base terminal station equipment, associated antennae, backhaul connectivity to the sharing operator s work and other requisite equipment and associated civil and electrical works required to provide telecommunication services by the sharing operator at a telecommunications site other than passive infrastructure. It means, that the sharing operator mounts his antennae on the tower which is a part of passive infrastructure. To operate that antennae at the base, he keeps his equipment and by operating those equipment, he provides telecommunication services to their clients. 50. Working of the telecommunication network, involves the process of receiving, amplifying and transmitting the signals. As indicated s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat each site is capable of accommodating Sharing Operators equipment in accordance with the standard configuration. In other words, the assessee has to provide accommodation to the Sharing Operator to keep his equipments i.e., the permission to keep his equipments in the shelter, provided by the assessee. On execution of the service contract, the Sharing Operator shall have the right to install the Sharing Operator s equipment or any portion thereof at such Site. The Sharing Operator shall have access to each such site for all installation activities and the assessee shall provide to the Sharing Operator the necessary means of access for the purpose of ingress and egress of each site in accordance with the terms of the service contract. In other words, possession of the site is not handed over to the mobile operator. Mobile operator is permitted to keep his installations in the property belonging to the assessee of which he is in possession. The right given to the mobile operator is right to ingress and egress that too for the purpose of operating his active infrastructure. Further it is made clear that such ingress and egress is not available to all the employees of the mobile o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that such advertising act should not hinder the right of the mobile operator to have uninterrupted access of the infrastructure. 56. Schedule 2 to the contract deals with operation and maintenance services. Apart from other things mentioned in the Schedule, the operation and maintenance services to be provided by the assessee in respect of each Site shall include general upkeep of tower and site premises including ensuring that the Sharing Operator has space to access its cables laid in the cable trays at all times; the Sharing Operator has space to access its antennae at all times; mountings are kept tight and rust free and tower bolts are tight as per torque requirements. This is in so far as tower is concerned. In so far as power supply is concerned, the assessee has to ensure power supply to the Site in accordance with paragraph 1 of Schedule 1 at all times including Class B and Surge Protection in the power lines at Sites where AC power is provided. The assessee is also under an obligation to maintain earthing system, i.e., earth resistance value of less than 2 ohms, internal earth distribution bar of electrolytic grade copper with 24 holes of 8mm diameter to be provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fire Extinguishers/protection system (18) Battery Bank. (19) SMPS (rectifiers). (20) Aviation Lamp. (21) Cable Tray. (22) UPS Power Inventors. (23) Flooring/Ceiling panel. (24) Non-conventional energy sources-Solar power system windmill power generation systems, Fuel Cell, Free Cooling Unit Passive cooling Material. (25) All IBS related infra-RF cables. Distributed Antennae system repeaters, amplifiers, splitters, etc. (26) All Machinery equipment, parts, spares, components, accessories, consumables other items for use in telecommunication network or in generation or distribution of electricity. (27) High speed diesel Lubricant oil for use in DG set. (28) Acoustic Material. (29) All types of Transmission cables. (30) All other goods for use in the telecommunication network/generation or distribution of electricity or any other form of power. (31) Spare parts, accessories and components of goods mentioned above. 58. The entire infrastructure/instruments/appliances and exchange are in the physical control and possession of the assessee/service provider at all times and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control over the infrastructure as held by the assessing authority. As is clear from the material on record, at a times, the assessee can provide access of the passive infrastructure to its mobile operators at different heights. As long as there is a contract and he wants to honour the contract certainly during the period of contract he cannot make available the same facility to another mobile operator. There is nothing in law which prevents him from putting an end to the contract and providing access to another mobile operator. It is not a case where he has to go to a Court of law to recover possession of a property which is delivered to the mobile operator. Therefore, none of the tests which are prescribed to constitute a sale of goods or the extended meaning of the sale of goods inasmuch as deemed sale is present in the instant case. 60. In this context it is useful to notice the nature of right the mobile operator, in substance, gets under the contract. It is in the nature of a licence as defined under Section 52 of the Easements Act, 1882 which reads as under :- 52. Licence defined . - When one person grants to another or to a definite number of others persons, a right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in a particular way under certain terms while it remains in the possession and control of the owner thereof, it will be a licence. The legal possession thereof continues to be in the owner of the property but the licencee is permitted to make use of the premises for the particular period. But for the permission his occupation would be unlawful, and does not create in his favour any estate or interest in the property. 64. It is well settled that, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole to determine the nature of the transfer. From a close reading of all the clauses in the agreement it appears to us that under the terms of the contract there is no transfer of right to use the passive infrastructure conferred on the sharing operator/mobile operator. What is permitted under the contract is, a permission in the nature of a licence to have access to the passive infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorised represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is declared that under the contract entered into between the parties there is no sale of goods and at any rate there is no deemed sale so as to attract levy of tax under the Karnataka Value Added Tax Act, 2003. (d) In so far as the State appeals are concerned, the appeals preferred against the order of the learned single Judge in so far as denying the penalty and interest are rejected as we have held there is no liability to pay tax at all. (e) In so far as the direction issued by the learned single Judge that the State has to recover the tax from the Union of India, in view of our finding that there is no liability to tax, that portion of the order of the learned single Judge is hereby set aside. (f) The payments made by the assessees either in terms of the order of the assessment order or in terms of any interim order passed in the Writ Petitions or in pursuance of the final order shall be refunded to the assessees within three months from the date of receipt of a copy of this order, failing which the said amount to be refunded would carry simple interest at 9% after the expiry of 90 days till the date of payment. (g) No costs. - - TaxTMI - TMI ..... 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