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TMI Blog1998 (12) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners in this writ petition moved an appeal which was rejected by the appellate authority and they filed a revision and the Additional Commissioner (CT) and Joint Commissioner (Legal) who was the revisional authority granted stay on the disputed tax but subject to payment of Rs. 50 lakhs. 3.. In another writ petition, i.e., W.P. No. 6742 of 1996 show cause notices were issued vide proceedings No. 9997/96-97/APGST, dated February 27, 1996 for the period from April, 1993 to March, 1994 and vide proceedings No. 9997/ 94-95/APGST, dated February 27, 1996 for the period from April, 1994 to March, 1995, and proceedings No. 9997/95-96/APGST, dated February 27, 1996 for the period from April 1, 1995 to January 31, 1996, assessment order was issued vide proceedings No. 9997/95-96/APGST, dated March 19, 1996 and the demand notice was issued vide proceedings No. 9997/95-96/APGST, dated March 27, 1996. 4.. These proceedings have been challenged by way of these writ petitions. When these writ petitions came to be filed, this Court passed interim directions suspending the operation of impugned demand notice challenged in W.P. No. 25864 of 1997 on condition of petitioners depositing Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore they are being decided by this common order. One of the writ petition is taken as a model because the controversy is the same in all the writ petitions. 8.. The case of the respondents appears to be based on the following factual premise. As can be made out from the show cause notices given to the writ petitioners, one of the show cause notices being dated August 8, 1997, it was stated that as per section 2(e) of the A.P. General Sales Tax Act, 1957 the Central Government was a dealer and in terms of section 5-E of the Act a dealer who transfers the right to use any goods for any purpose whatsoever is liable to pay sales tax of 5 per cent on the amount realised by the dealer for transfer of right to use goods. Construing section 2(e) and section 5-E in the manner as the respondents constitute, they found that the petitioners were collecting lease rentals every month from its telephone subscribers and therefore the petitioners, i.e., the Telephone Department was liable to pay tax for the rentals collected by them for use of goods belonging to the Telephones Department. Ultimately the assessment orders were passed; one of the orders was passed on September 9, 1998. In the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributes goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration shall be deemed to be dealer for the purposes of this Act. 9.. There is not much dispute and the parties are not at variance to the fact that Central Government is a dealer within the meaning of section 2(e) read with Explanation III of the Act. Section 5-E of the Act provides: 5-E. Tax on the amount realised in respect of any right to use goods.Notwithstanding anything contained in this Act,- (a) Every dealer who transfers the right to use any goods for any purpose, whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realised or realisable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licensee, pay a tax at the rate of five paise in every rupee of the aggregate of such amount realised or realisable by him during the year; (b) the transfer of right to use any such goods entered into by any dealer, shall be deemed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty of the Union from State taxation.-(1) The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. (2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State. Article 289 lays down: 289. Exemption of property and income of a State from Union taxation.- (1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the matter has been decided by a Constitutional Bench of nine judges in in re: Sea Customs Act, S. 20(2), Special Ref. No. 1 of 1962 AIR 1963 SC 1760. The question before the court was, whether article 289 of the Constitution of India precluded Union of India from imposing customs duty on the import or export of the property of a State. While considering this question the Chief Justice B.P. Sinha and His Lordship then was delivering the judgment on his behalf and also on behalf of Justice Gajendragadkar, Justice Wanchoo, Justice Shah and Justice Ayyangar, held that, while interpreting article 285 and article 289 one has to keep in mind as to what is the taxing event and in this context held: 25. This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast sales tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 5-E levies tax on the transfer of the right to use any goods for any duration to a lessee or licensee for cash or other valuable considerations in the course of business. The tax is payable on the total amounts realised or realisable by the transferor on such transfer of the right to use goods from the lessee or the licensee. In State Bank of India v. State of A.P. [1988] 70 STC 215 (AP), the question arose whether hiring lockers by the bank to the customers amounts to transfer of the right to use the goods within the meaning of section 5-E. The question was answered in the negative and against the Revenue. Though the decision rested on several grounds some of which are not directly relevant in the context of the present case, the following observations are quite apposite: It cannot, therefore, be gainsaid that persons pay the hire charges for the lockers not only for the right to use the lockers but also for a host of other services referred to above closely associated with the maintenance of lockers by the banks. In that sense the hire charges collected by the banks from the constituents represent a consolidated charge levied by the bank for a variety of services and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... telephone. Rule 434 lays down the schedule of fee and charges. It is significant to note that the preamble to rule 434 indicates that the charges are for various services . Installation is laid down under section 1 of rule 434. It is interesting to note that in case of internal wiring being done by consumer himself he gets a rebate of Rs. 250 as has been laid down in Note 3(a) to rule 434. It has also been stated in clause (b) to Note 3 that, if the consumer provides his own internal wiring and his own instrument, then he shall be able to get a rebate of Rs. 500. 21.. Section III of rule 434 lays down scale of charges for departmental exchange connections under the heading Measured rate system , bi-monthly rental and call fee are given and they vary according to the capacity of the exchange. The disputed turnover broadly represents the charges collected from the customers from the subscribers of the telephones provided as per the measured rate system. As seen above, the definition of Measured rate system makes it clear that the rental is for the line connecting the telephone to an exchange. It is further clear from the definition that the charges collected under the meas ..... 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