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TMI Blog2018 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government alone would be entitled to levy service tax under Entry 97 List I - The said judgment therefore has settled the issue that goods do not cover the electromagnetic waives or radio frequencies for the purposes of Article 366(29A)(d) and the goods in telecommunication are limited handset used for permissions of voice through airwaves. The impugned notices issued by the Sales Tax Officer (Enforcement), Mazagaon, Mumbai i.e. respondent No.3 for imposition of tax from voice transmission service cannot be sustained and are liable to be quashed and set aside - petition allowed - decided in favor of petitioner. - Writ Petition No. 3061 of 2003 - - - Dated:- 3-5-2018 - S.C. DHARMADHIKARI SMT.BHARATI H. DANGRE, JJ. Mr. Darius Shroff, Senior Counsel a/w Mr. Rahul P. Jain and Mr. Punit Anant i/by P.S. Anand for the Petitioner. Mr. Amar Mishra, AGP for Respondent No.1 State. JUDGMENT : (Per Smt.Bharati H. Dangre,J) 1. The present Writ Petition is filed by the petitioners, a private limited company incorporated under the Companies Act praying for issuance of writ of Certiorari calling for the record and proceedings of the notices issued under Section 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, audio tex, video tex services, radio paging and cellular mobile telephone services) which is made available to user by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio visual or rather electro magnetic means, but shall not include broadcasting services. According to the petitioner, they are engaged in providing the service of transmission of voice communication which involves transmission of voice of its subscriber from one end to the other. According to the petitioner in order to make available this service of transmission of voice from one end to other, the petitioners are required to establish a Cellular Mobile Telephonic Network which comprise of MSC, BSC and BTS, which is, in true sense, the brain of the network. All the elements in the network are fastened/embedded to the ground and are immovable properties. 2. The petitioner then sets out the functioning of the System/Network, involving the following steps: (a) The Subscriber Originates/generates/produces his own voice by speaking in the handset. (b) This voice generated by the Subscribers is transmitted, on airwaves, to the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which the petitioners provide its voice transmission services to the subscribers, namely, the 'post paid subscription' and 'pre paid subscription'. According to the petitioners the business carried out by them is simple provision of voice communication/transmission of service and the petitioners only transmit the voice through the air waives owned by the Government of India. There is no sale or transfer of property in goods by the petitioners to the subscriber and in essence what the petitioners are providing is service and in lieu of providing of such services they are charging subscribers for service so provided and therefore according to the petitioners the transmission of voice service is not eligible to Sales Tax. 5. The Central Government has chosen to levy service tax thereon with effect from 01.07.1994 in terms of Chapter V of the Finance Act, 1994 and the relevant entries under the said chapter are reproduced below : (a) 66. Charge of service tax (1) On and from the commencement of this Chapter, there shall be charged a tax (hereinafter referred to as the service tax), at the rate of five per cent of the value of the taxable services referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The petitioners are thus aggrieved by the act on the part of the respondents to treat the cellular operators including the petitioners service as goods and their attempt to levy sales tax on different financial years. The petitioners served with the notices for the purpose of assessment for the years 1995 96, 1996 97, 1997 98 and 1998 99 by the respondent No.5 they have also been served with notice under Section 49 of the Bombay Sales Tax Act, 1959, for the different financial years. The petitioners have submitted their reply responding to the notices. However, it is the contention of the petitioners that ignoring submissions advanced by the petitioners the respondents have chosen to render providing of service a sale and have threatened the petitioners that they intend to levy tax under the said Act upon the petitioner for the rentals collected by the petitioners from the subscribers. The petitioner would submit that there is no sale of goods involved in provision of telecommunication services and that only services are being provided and as such, the tax sought to be levied in the assessment proceedings is unconstitutional and without jurisdiction. The petitioners then referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the verification of the books of accounts and it is prayed that the petition is liable to be dismissed. 11. We have heard the learned Senior Counsel Shri.Darius Shroff for the petitioner and Mr.Amar Mishra for the Respondent No.1 State. 12. On perusal of the factual controversy involved in the issue it can be seen that Indian Telegraph Act, 1885 confers the exclusive privilege of establishing, maintaining and working telegraphs within India with the Central Government. However, the Central Government is empowered to grant license to any person to establish, maintain or work a telegraph within any part of India subject to such and in consideration of such payments as it things fit. The petitioner is engaged in the business of providing Cellular Mobile Telephone Services under the License issued by the Government of India and the terms and conditions subject to which the License is granted as stipulated in the Agreement entered into by the petitioner with the Director of Telecommunication. The petitioner make use of the airwaves, which no doubt are the natural resources and are owned by Government of India. The Government of India has only alloted the use of these airwaves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer, otherwise than in pursuance of a contract, of property in any goods for any cash deferred payment or other valuable consideration. (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (Whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash deferred payment or other valuable consideration; 15. However, in order to attract the provisions of the enactment imposing tax on sale or purchase of good, the necessary ingredients required is existence of the movable property constituting goods (not being newspapers or actionable claims or money, or stocks, or securities); existence of an agreement for transfer of property of such goods and actual transfer of property by one person to another. In any contingency the said ingredients are not found to be involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hone service could not reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves when a telephone connection is offered. As far as from the point of subscriber is concerned, the concept of sale would be limited to the handset that may have been purchased by him for the purposes of the availing service from the Cellular company. The Hon'ble Apex Court has held that no right to the use of any other goods, incorporeal or corporeal, is given to him with the telephone connection. It was therefore held that electromagnetic waives or radio frequencies are not goods within the meaning of the word either use in Article 366(12) or for the purpose of 366(29 A)(d) or use in the State legislations. The Hon'ble Apex Court observed thus : 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. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been competent to levy sales tax on the said transaction by invoking entry 54 of List II of the Seventh Schedule to the Constitution. However, it was only service then the Central Government alone would be entitled to levy service tax under Entry 97 List I. The said judgment therefore has settled the issue that goods do not cover the electromagnetic waives or radio frequencies for the purposes of Article 366(29 A)(d) and the goods in telecommunication are limited handset used for permissions of voice through airwaves. 18. Further in the case of Idea Mobile Communication Ltd. V/s. C.C.E. C., Cochin Civil appeal No.6319 of 2011 arising out of SLP(C) No.24690 of 2009, the Hon'ble Apex Court was confornted with the issue as to whether the value of SIM Cards sold by the appellant to the Mobile subscriber is to be included in taxable service under Section 65(105) zzzx of the Finance Act, 1994, which provides for levy of service tax on telecommunication service or whether it is taxable as sale of goods under the Sales Tax Act. The case arose out of the peculiar facts. The appellant Idea Mobile Communication Ltd. was selling the SIM cards to its franchisees and paying the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices rendered by the service provider, and utilized by the subscriber through these goods which he has purchased elsewhere, would be illegal. To the limited extent in the cases where the telephone instruments, mobile hand sets and modems are either sold or supplied by the service provider to the subscriber, the assessment orders levying tax thereupon must be upheld, provided the consideration brought to tax does not include the service element of such a composite transaction of sale and service. 21. In view of the aforesaid finding, the impugned notices issued by the Sales Tax Officer (Enforcement), Mazagaon, Mumbai i.e. respondent No.3 for imposition of tax from voice transmission service cannot be sustained and are liable to be quashed and set aside. It is to be noted that on 18.12.2003 when the present Writ Petition was admitted by this court, by way of interim order this court had directed that the assessment proceedings may proceed subject to hearing of the petition however, the final assessment order shall not be passed prior to leave of this court. Pursuant to the said order, the final orders of assessment have not been passed. In view of the findings recorded abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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