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TMI Blog2006 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 149 of 2004, W.P. (Civil) Nos. 162, W.P. (Civil) Nos. 468 of 2005 Senior Standing Counsel of Jharkhanad: Ms. Pinky Anand, for the parties. Additional Solicitor-General of India: P.P. Malhotra, for the parties. Senior Additional Advocate-General for Punjab: Sarup Singh, for the parties. Additional Advocate-General for Rajasthan: Aruneshwar Gupta for the parties. Senior Advocates: Harish N. Salve, K. Parasaran, C.S. Vaidyanathan, Parag P. Tripathi, Dushyant A. Dave, A.M. Singhvi, Rajiv Dutta, Ashok Desai, Sunil Gupta, T.R. Andhyarunjina, A.K. Ganguli, Rakesh Dwivedi, T.L.V. Iyer, S. Balakrishnan, V.A. Bobde, S.K. Dubey, A.K. Panda and S. Ganesh for the parties. Solicitor-General of India: G.E. Vahanvati for the parties. Additional Advocate-General for Himachal Pradesh: J.S. Attri, for the parties. Other Advocates: Maninder Singh, Ms. Pratibha M. Singh, S. Fernandes, Tejveer Bhatia, Y. Handoo, Ms. Aprajita Singh, Ms. Meenakshi Grover, Ankur Talwar, Saurabh Misra, Bishwajit Singh (Advocate for BSNL), V.K. Rao, Ms. Madhu Sikri, Ravi Sikri, Puneet Dutt Tyagi, Mukesh Verma, Ajay Choudhary, Ajay Bansal, Praveen Kr. Singh, Bharat Singh, V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction by which mobile phone connections are enjoyed. Is it a sale or is it a service or is it both? If it is a sale then the States are legislatively competent to levy sales tax on the transaction under Entry 54 List II of the Seventh Schedule to the Constitution. If it is a service then the Central Government alone can levy service tax under Entry 97 of List I (or Entry 92C of List I after 2003). And if the nature of the transaction partakes of the character of both sale and service, then the moot question would be whether both legislative authorities could levy their separate taxes together or only one of them. 2.The contenders are the service providers on the one hand and the States on the other. It is the case of the service providers (who are for the purposes of convenience referred to in this judgment as "petitioners" irrespective of the capacity in which they are arraigned in the several matters before us) that there is no sale transaction involved and that the attempt of the several States to levy tax on the provision of mobile phone facilities by them to subscribers was constitutionally incompetent. It is their case that the transaction in question was merely a serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice providers who were the writ petitioners before the Kerala High Court have questioned the correctness of the decision in appeals filed by them which are also disposed of by this judgment. Most of the other petitioners have however approached this Court by way of writ petitions under Article 32. When the Civil Appeals and writ petitions were listed before two learned Judges, an order was passed on 25th September, 2003 referring the matter to a Larger Bench as the "nature of the questions raised is important". 7.The State respondents have raised a preliminary objection and contended that the plea of BSNL and the other petitioners including the Union of India is barred by res judicata because the issue has been decided by this Court inter partes in State of U.P. v. Union of India - (2003) 3 SCC 239 . 8.The plea has been resisted by the petitioners on three grounds viz., (i) that the issue of the legislative competence of States to impose sales tax under Entry 54 of List II on transactions which are purely rendition of services, was not raised in that case, (ii) that the decision was without jurisdiction because of Article 131 of the Constitution, and (iii) that every assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision was in respect of a different period and said :- "In a sense, the liability to pay tax from year to year is a separate and distinct liability; it is based on a different cause of action from year to year, and if any points of fact or law are considered in determining the liability for a given year, they can generally be deemed to have been considered and decided in a collateral and incidental way." 12.After considering various earlier authorities on the issue, it was held that :- "If for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year. That, however, is a matter on which it is unnecessary for us to pronounce a definite opinion in the present case. In this connection, it would be relevant to add that even if a direct decision of this Court on a point of law does not operate as res judicata in a dispute for a subsequent year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Tax Act, 1950. The writ petition was dismissed by the High Court. The special leave petition was also dismissed. The same order of assessment was challenged by filing a second writ petition before the High Court. This was also dismissed by the High Court. The question, before this Court was whether it was open to the appellant to challenge the validity of the same order of assessment twice by two consecutive writ petitions under Article 226. The Court acknowledged that in regard to the orders of assessment for different years, the position may be different and said :- "Even if the said orders are passed under the same provisions of law, it may theoretically be open to the party to contend that the liability being recurring from year to year, the cause of action is not the same; and so, even if a citizen's petition challenging the order of assessment passed against him for one year is rejected, it may be open to him to challenge a similar assessment order passed for the next year. In that case, the court may ultimately adopt the same view which had been adopted on the earlier occasion; but if a new ground is urged, the court may have to consider it on the merits, because, strict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants had intervened in earlier proceedings. After the controversy was decided in those proceedings the appellants sought to reagitate the same issues in respect of the same matter contending that they had no opportunity of being heard. The submission was rejected and it was held that the second round was impermissible. 18.The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners contended that the service providers are licensees under Section 4 of the Telegraph Act, 1885 and provide 'telecommunication services' as provided under Section 2(k) under the Telecom Regulatory Authority of India Act, 1997. Service tax is imposed on them under the Finance Act, 1994 on the basis of the tariff realised from the subscribers. They further contended that in providing such service there is in fact no 'sales' effected by the service providers and that the States do not have the legislative competence to impose sales tax on the rendition of telecommunication services. Article 366(29A) which extended the definition of 'sale' in the Constitution did not apply to the transaction in question. Clause (d) of Article 366(29A) relied upon by the respondents contemplates a transfer of a legal right to use goods. According to the petitioners there is no transfer of any legal right by the service providers nor any delivery of any goods which may be covered under the Telegraph Act, 1885 as the same is barred and prohibited in terms of the licence granted to service providers under Section 4 of that Act. It is submitted without a delivery of goods, there could be no t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to sales tax. Therefore, even after the 46th amendment other transactions had been held not to be sales. Reliance has been placed on the Everest Copiers v. State of Tamil Nadu - (1996) 5 SCC 390, Rainbow v. State of Madhya Pradesh - (2000) 2 SCC 385 and Hindustan Aeronautics v. State of Karnataka - (1984) 1 SCC 707. It was contended in addition that the restrictions regarding the States inability to tax inter-state sales would continue to apply. Furthermore, the activity of providing the connection involved the use of instruments embedded to the earth or attached to what is embedded in the earth and therefore was immoveable property and outside the scope of sales tax. Thus there were no goods nor any transfer of any goods involved in the activity. 24.It is pointed out that none of the States could contend that telecommunication was not a service. It was submitted that the service did not allow for transfer of right to use goods. There was no transfer of control or equipments at any stage. It is submitted that what the service providers provide was a means of communication and what was transferred was the sounds of the message or signals which were generated by the subscribers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for the purpose of transferring the right to use and this had been held in the decision of this Court in 20th Century Finance Corporation Ltd. and Anr. v. State of Maharashtra - (2000) 6 SCC 12. It is submitted that in any event different aspects of a given transaction can fall within the legislative competence of two legislatures and both would have the power to tax that aspect. It is submitted that the question whether the goods were moveable or immoveable property as well as the question whether the tax was being levied on inter state sales or not were all matters of assessment and that the judgment in State of U.P. v. Union of India should be affirmed. 28.In addition, it has been submitted for the respondents that the expressions "telephone" and "telephony" do not necessarily include the factor of service. A subscriber makes use of the telephone system as a matter of right and is capable of asserting that right even against the Government. The subscriber's right to use his telephone line is to the exclusion of every other person and to that extent the right of the Government/service providers stands denuded. The right is based on contract and is in addition to the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event from the aspect of service, ultimately the question whether there was any splitting up of a composite transaction was also to be determined during assessment proceedings. 29.It was submitted that the mere fact that the union was levying tax on certain taxable services could not be used to deny the State's powers to tax the objects/provisions in the service. Therefore, the State's powers must be read harmoniously with the Union's power and it is only when such reconciliation is impossible that the primacy should be given to the non obstante clause under Article 248(1). Alternatively it was submitted that the theory of aspect would apply so that what was service in one aspect was a sale in the other. It was also submitted that because in sub-clauses (b) and (f) of Clause (29A) of Article 366 the tax on a component in a transaction of works is permissible, it cannot be assumed that in sub-clause (d) tax could not be imposed on an element of the sale component of that transaction. The sub-clause has no words or limitations and must be read as broadly as the language permitted. It was submitted that the test of dominant object of a composite works contract was no longer relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iders to carry on trade under Article 19(1)(g). [See Bengal Immunity Company v. State of Bihar - 1955 (2) SCR 603; Himmatlal Harilal Mehta v. State of Madras - 1954 SCR 1122.] We are consequently unable to accept either of these contentions of the respondents. 33.To answer the questions formulated by us, it is necessary to delve briefly into the legal history of Art. 366(29A). Prior to the 46th Amendment, composite contracts such as works contracts, hire-purchase contacts and catering contracts were not assessable as contracts for sale of goods. The locus classicus holding the field was State of Madras v. Gannon Dunkerley & Co. - IX STC 353 (SC). There this Court held that the words "sale of goods" in Entry 48 of List II, Schedule VII to the Government of India Act, 1935 did not cover the sale sought to be taxed by the State Government under the Madras General Sales Tax Act, 1939. The classical concept of sale was held to apply to the entry in the legislative list in that there had to be three essential components to constitute a transaction of sale - namely, (i) an agreement to transfer title, (ii) supported by consideration, and (iii) an actual transfer of title in the goods. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1972) 1 SCC 472 the question was whether the meals served at hotels to the residents were subject to sales tax. The Court held that if the difference is not distinct, the Revenue would not be entitled to split up the contract, estimate approximately the charges for such materials and treat them as chargeable on the mere ground that the transaction involved transfer of goods, whose value must have been taken into consideration while fixing charges for the service. 36.In 1967 the Madras High Court in A.V. Meiyappan v. Commissioner of Commercial Taxes, Board of Revenue, Madras and Anr. - (1967) XX STC 115 had to consider a situation where the Sales Tax Authorities had held that though the transaction was described as a lease for 49 years, the assessee had effected a sale of the negative print of a picture for a consideration and therefore the transaction was liable to sales tax under the Madras General Sales Tax Act, 1959. The Court set aside the demand holding that the transaction did not connote a sale at all and it was therefore not liable to sales tax. 37.The problem relating to the power of States to levy tax on the sale of goods was then referred to the Law Commission by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" 39.Clause (a) covers a situation where the consensual element is lacking. This normally takes place in an involuntary sale. Clause (b) covers cases relating to works contracts. This was the particular fact situation which the Court was faced with in Gannon Dunkerley and which the Court had held was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley was directly overcome. Clause (c) deals with hire purchase where the title to the goods is not transferred. Yet by fiction of law, it is treated as a sale. Similarly t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a composite transaction not covered by Article 366(29A). Transactions which are mutant sales are limited to the clauses of Article 366(29A). All other transactions would have to qualify as sales within the meaning of Sales of Goods Act, 1930 for the purpose of levy of sales tax. 42.Of all the different kinds of composite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been Constitutionally permitted in Clauses (b) and (g) of Clause 29A of Art. 366, there is no other service which has been permitted to be so split. For example the clauses of Art. 366(29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for sale of goods involved in the said works contract, and (ii) for supply of labour and service. This division of contract under the amended law can be made only if the works contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer in property takes place as an incident of contract of service.......... What is pertinent to ascertain in this connection is what was the dominant intention of the contract...... On facts as we have noticed that the work done by the photographer which as held by this Court in STO v. B.C. Kame - (1977) 1 SCC 634 is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the respondent State cannot be sustained". 46.This conclusion was doubted in Associated Cement Companies Ltd. v. Commissioner of Customs - (2001) 4 SCC 593 saying :- "The conclusion arrived at in Rainbow Colour Lab case [(2000) 2 SCC 385], in our opinion, runs counter to the express provision contained in Article 366(29-A) as also of the Constitution Bench decision of this Court in Builders Assn. of India v. Union of India - (1989) 2 SCC 645". 47.We agree. After the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the word 'goods' in the context of different State sales tax enactments. One of the such decisions was the case of Anraj v. Government of Tamil Nadu - (1986) 1 SCC 414 in which the question was whether sale of a lottery ticket was a sale of goods for the purpose of Entry 54 of List II. This Court held that the sale of a lottery ticket confers on the purchaser thereof two rights, (a) right to participate in the draw and, (b) a right to claim a prize contingent upon his being successful in the draw. It was held that the first was a right "in praesenti" and the second a contingent right. It was concluded that of these two rights the right to participate in a draw was "goods" for the purpose of levying sales tax. The decision was followed by a Bench of three Judges in the case of Vikas Sales Corporation v. Commissioner of Commercial Tax - (1996) 4 SCC 733 to hold that REP licences/Exim scrips were goods on the sale of which sales tax could be levied. Both the decisions were doubted in the case of Sunrise Associates v. Government of NCT of New Delhi - (2000) 10 SCC 420. In that case, the Court formed a prima facie opinion that the decision in Anraj required re-consideration on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-magnetic emissions, Radio waves or Hertzian waves, galvanic, electric or magnetic means; Explanation. - "Radio waves" or "Hertzian waves" means electromagnetic waves of frequencies, lower than 3,000 giga-cycles per sound propagated in space without artificial guide." 55.What is also important are the definitions of the words 'message' and 'telegraph line' in the 1885 Act which read : "message" means any communication sent by telegraph, or given to a telegraph officer to be sent by telegraph or to be delivered. "telegraph line" means a wire or wires used for the purpose of a telegraph, with any casing, coating, tube or pipe enclosing the same, and any appliances and apparatus connected therewith for the purpose of fixing or insulating the same. 56.Section 4 of the 1885 Act gives exclusive privilege in respect of telecommunication and the power to grant licences to the Central Government. Pursuant to such power, licences have been granted to service providers. According to the service providers in terms of their licence no further transfer of the rights to use the telegraph could be affected by them. Therefore, what was provided was a service by the utilization of the telegrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. Nor does the subscriber intend to use any portion of the wiring, the cable, the satellite, the telephone exchange etc. At the most the concept of the sale in a subscriber's mind would be limited to the handset that may have been purchased for the purposes of getting a telephone connection. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection. 60.We cannot anticipate what may be achieved by scientific and technological advances in future. No one has argued that at present electromagnetic waves are abstractable or are capable of delivery. It would, therefore, appear that an electro-magnetic wave (or radio frequency as contended by one of the counsel for the respondents), does not fulfill the parameters applied by the Supreme Court in Tata Consultancy for determining whether they are goods, right to use of which would be a sale for the purpose of Article 366(29-A)(d). 61.The learned Judges in State of U.P. v. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant. That was a case where two competing telephone companies contracted that one should confine its business to the city and the other to rural lines out of the city. The rural company had the option to buy the rural lines of the other. Two questions fell for consideration. The first question was whether the contract was specifically enforceable. This question was also answered in the affirmative. The second question was whether the contract was in violation of the anti-trust laws. This was answered in the affirmative. It was in that context that the Court opined that : "It is obvious that the statute is directed against contracts which are violative of the public policy of the state respecting restraints of trade and competition in the supply of any commodity in general use constituting a subject of commerce. The furnishing of telephone services may be classed within the general terms of the statute as the supplying of a commodity constituting a subject of commerce." 65.Apart from the fact that the context was wholly different, the question whether a telephone service was "goods" or not was not really in issue. Incidentally, the decision in Mckinley Telephones has been distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these circumstances the Court said that: - "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. (emphasis ours) 69.In determining the situs of the transfer of the right to use the goods, the Court did not say that delivery of the goods was inessential for the purposes of completing the transfer of the right to use. The emphasized portions in the quoted passage evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes 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 goods delivered. The delivery may not be 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. 74.Therefore whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. To the extent that the decision in State of U.P. v. Union of India held otherwise, it was, in our humble opinion erroneous. 75.It has been held in Builders Association of India v. Union of India - (1989) 2 SCC 645 that the clauses in Article 366(29A) do not amount to a separate entry in List II of the 7th Schedule to the Constitution enabling the States to levy tax on sales and purchase independent of Entry 54 thereof. [see also Larsen & Toubro Ltd. v. Union of India - (1993) 1 SCC 365, 383]. Article 366(29A) as introduced by the 46th Amendment not being equival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of taxable service. We are concerned with two amendments, one made in 2002 and the other in 2003. By Section 149(90)(b) of the Finance Act, 2002, service to a subscriber by a telephone authority was continued as a taxable service. "Telegraph" was defined in Section 149(92) as having the same meaning assigned to it in Clause (1) of Section 3 of the Indian Telegraph Act, 1885. "Telegraph authority" was defined incorporating the definition of the phrase Section 3(6) of the 1885 Act and included "a person who has been granted a licence under the first proviso in Section 4(1) of that Act. The liability of service providers to service tax was continued under Section 159(105), (110)(b) and (111) of the Finance Act, 2003. The definition of subscriber was added in sub-section (104) as meaning "a person to whom any service of a telephone connection or a facsimile (Fax) or a leased circuit or a pager or a telegraph or telex has been provided by a telegraph authority". Finally in 2003, List II of the Seventh Schedule to the Constitution was amended by including taxes on service under Entry 92C. By this time there were about 100 taxable services including the service of a telephone conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders, then a SIM card cannot be charged separately to sales tax. It would depend ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. There is insufficient material on the basis of which we can reach a decision. However we emphasise that if the sale of a SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. In our opinion the High Court ought not to have finally determined the issue. In any event, the High Court erred in including the cost of the service in the value of the SIM card by relying on the aspects doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 - "subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales, now that it has been clarified that electromagnetic waves or radio frequencies are not goods, the issue is really academic. 85.For the reasons aforesaid, we answer the questions formulated by us earlier in the following manner: (A) Goods do not include electromagnetic waves or radio frequencies for the purpose of Article 366(29A)(d). The goods in telecommunication are limited to the handsets supplied by the service provider. As far as the SIM cards are concerned, the issue is left for determination by the Assessing Authorities. (B) There may be a transfer of right to use goods as defined in answer to the previous question by giving a telephone connection. (C) The nature of the transaction involved in providing the telephone connection may be a composite contract of service and sale. It is possible for the State to tax the sale element provided there is a discernible sale and only to the extent relatable to such sale. (D) The issue is left unanswered. (E) The aspect theory would not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be transferred, the owner cannot again transfer the same rights to others. 92.In my opinion, none of these attributes are present in the relationship between a telecom service provider and a consumer of such services. On the contrary, the transaction is a transaction of rendition of service. Pre-enacting history 93.In the present case, the history as it prevailed before 46th Amendment is as follows : The liability to sales tax of the goods involved in composite works contract fell for determination before this Court in The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. - (1959) SCR 379. This Court ruled at page 413 - "If the words 'sale of goods' have to be interpreted in their legal sense, that sense can only be what it has in the law relating to sale of goods." Since this judgment has been elaborately considered in the main judgment, I am not reproducing the verdict of this Court occurring at page nos. 413, 425, 426 and 427. 94.The same Constitution Bench in Mithan Lal v. The State of Delhi and Another - (1959) SCR 445 at 451 ruled that - "It would, therefore, be competent to Parliament to impose tax on the supply of materials in building contracts and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the execution of such contract as it has been held that there is no sale of the materials as such and the property in them does not pass as movables. 99.The Parliament had to intervene as the power to levy tax on goods involved in works contract should appropriately be vested in the State legislatures as was pointed out in Gannon and Dunkerly & Co., the passages quoted hereinabove. There were 5 transactions in which, following the principles laid down in Gannon Dunkerly & Co. relating to works contract, this Court ruled that those transactions are not exigiable to sales tax under various State enactments. The Parliament, therefore, in exercise of its constituent power, by 46th Amendment, introduced Article 366(29A). The Statement of Objects and Reasons has fully set out the circumstances under which 46th Amendment was necessitated. 100.The Amendment introduced fiction by which six instances of transactions were treated as deemed sale of goods and that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase 'tax on sale or purchase of goods' occurs. This definition changed the law declared in the ruling in Gannon Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmit and deliver messages of the subscriber through a complex system of fibre optics, satellite and cables. 104.Briefly, the subscriber originates/generates his voice message through the handset. The transmitter in the handset converts the voice into radio waves within the frequency band allotted to the Petitioners. The radio waves are transmitted to the switching apparatus in the local exchange and thereafter after verifying the authenticity of the subscriber; the message is transmitted to the telephone exchange of the called party and then to the nearest Base Transceiver Station (BTS). The BTS transmits the signal to the receiver apparatus of the called subscriber, which converts the signals into voice, which the subscriber can hear. 105.The modern legislature makes laws to govern a society, which is fast-moving. It is aware of the changing concepts of the emerging times. The law adapts itself to social, economic, political, scientific and other revolutionary changes. 106.Traditionally, a contract for carriage of goods or passengers is by roadways, railways, airways and waterways. This is associated with carriage of tangible goods. Such a carrier has no right over the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is consensual. The contrast between sub-Article (a) and all other sub-clauses clearly manifests that the transaction involved in the present dispute are contractual. The fiction operates to deem what is not otherwise a sale of goods as a sale of goods i.e. even the transfer of a right to use goods is deemed to be a sale of the goods. 111.It is not possible to interpret the contract between the service provider and the subscriber that the consensus was to mutilate the integrity of contract as a transfer of right to use goods and rendering service. Such a mutilation is not possible except in the case of deemed sale falling under sub-clause (b). Nor can the service element be disregarded and the entirety of the transaction be treated as a sale of goods (even when it is assumed that there is any goods at all involved) except when it falls under sub-clause (f). This will also result in an anomaly of the entire payment by the subscriber to the service provider being for alleged transfer of a right to use goods and no payment at all for service. The licence granted by the Central Government fixes the tariff rates and all are for services. 112.Sale of Goods Act, comprehends two eleme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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