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2020 (6) TMI 57

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..... n in whose favour such transfer of right to use is made. From the facts that has been disclosed in the documents filed before this court, it is evident that there is no exclusive transfer of the temporary shelter or the transmission tower/mast in favour of any one of the Mobile Telecommunication Operators. The space in the shelter and the transmission tower/mast is given on shared basis and charged separately therefore it would not come within the fold of the extended definition of saleSection 2(33) of the TNVAT Act, 2006. Thus, it is evident that wherever extended definition of sale in Article 366(29-A) are attracted the transaction can be taxed both under the provisions of TNVAT Act, 2006 and under the provisions of Finance Act, 1994. However, it is for Assessing Officers under the respective enactments to determine the value of the two transactions and collect tax - In the present case, no transfer of right to use goods as contemplated under Article 366(29-A) (d) and Section 2(33)(iv) of the TNVAT Act, 2006 is discernable. Even though the temporary shelter and the mast are goods within the means of Article 366(12) and Section 2(21) of TNVAT Act, 2006 yet there is no exclusive tr .....

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..... the following directions: The learned counsel appearing for the petitioner invited the attention of this Court to an earlier order dated 24.07.2014 in W.P.(MD)No.12123 of 2014 in the case of T.V.S.Sri Chakra Limited vs. Assistant Commissioner, Madurai, wherein, this Court after considering a similar case, directed instead of bank guarantee, the petitioner therein can furnish a personal bond. The petitioner has raised several grounds before the first respondent and he has pointed out that the petitioner has paid ₹ 2,50,313/- and ₹ 7,89,045/- respectively being 25% as ordered by the first respondent, the petitioner has paid ₹ 5,00,626/- and ₹ 15,78,090/- respectively which contains to 50% of the disputed tax and if the petitioner is directed to furnish bank guarantee for the remaining amount, he will be put to irreparable hardship as the petitioner is engaged in the business of providing infrastructural support services to telecom operators and under financial constraint due to heavy business competition. 7. Hence, this Court is of the view that the petitioner on deposit of 25% of disputed tax, should be directed to furnish a personal bond instead of bank guar .....

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..... ent Years. 10. Thereafter, the impugned orders dated 29.07.2016 came to be passed by the 1st respondent for the respective assessment years. By the impugned orders, the 1st respondent has noted inter-state purchase of several goods from other states amounting to ₹ 1,54,46,232/- during the Assessment Year 2008-09 and ₹ 4,04,90,379/- for the Assessment Year 2009-10. 11. On the aforesaid interstate purchase, the 1st respondent has added 15% to arrive at the value of the deemed sale of ₹ 1,77,63,137/- and ₹ 4,65,63,936/-. 12. For the respective Assessment Years, the 1st respondent has re-determined the turnover ₹ 1,77,63,167.00 and ₹ 41,65,63,396.00 to demand tax that had allegedly escaped assessment on the deemed sale effected by the petitioner. 13. For the Assessment Year 2009-10, an additional amount of ₹ 4,89,672/- also has been demanded on the civil contract work carried out by the sub- contractor of the petitioner. Vide impugned orders, the 1st respondent has demanded tax and the penalty. Details of tax and penalty read as under:- Sl. No Subject 2008-2009 (Rs.) 2009-2010 (Rs.) 1 Deemed Sales Turnover 1,77,63167 4,65,63,396 2 Tax at 12.5% .....

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..... t of telecom service provided by them. 17. Assailing the impugned orders passed by the 1st respondent, it is the contention of the petitioner that the impugned orders have been passed pursuant to notices dated 14.03.2016 for the respective Assessment Years which do not contain any reasons and therefore, the impugned orders are violation of principal of natural justice and are contrary to law. It is further stated that the tax and the penalty have been increased without any notice and therefore, the impugned orders were liable to set aside. 18. It is a case of the petitioner that the passive infrastructure petitioner include a temporary shelter and tower which can be used by two or more Mobile Telecommunication Operators (MTO) for the purpose of their mobile service. 19. It is submitted that under the business model, the petitioner has signed Master Service Agreement with these Mobile Telecommunication Operators (MTO). Thereafter, under the umbrella of the master agreements, site specific agreements were signed. 20. The passive infrastructure service provided by the petitioner allows two or more to Mobile Telecommunication Operators (MTO) to house their Base Transceiver Station (BTS .....

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..... maintenance and over all control is also with the petitioner, it could be specifically said that the right to use the goods has been transferred by the petitioner to the telecom companies and that very much falls within Art. 366 (29 A) (d) of the Constitution. 25. He submitted that the view taken in the above case may not be correct and has been overruled in Indus Towers Ltd . Vs. DCCT , 2012 (285) ELT 3 (Kar). It is further submitted that the petitioner has paid service tax on the gross amount received from its clients namely, Mobile Telecommunication Operators (MTO). He also relied on the decision of the Hon'ble Supreme Court in Imagic Creative Pvt.Ltd. Vs. Commissioner of Commercial Taxes, 2008 (9) S.T.R.337 (S.C.) to state that VAT levy and service tax are mutually exclusive. He relied on the following passages from the said judgment: 25. If the submission of Mr. Hegde is accepted in its entirety, whereas on the one hand, the Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. A distinction must be bor .....

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..... ing 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. 79. 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. 35. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The Appeal is allowed. No costs. 26. Learned counsel for the petitioner placed reliance on the decision of the Honourable Supreme Court in State of AP Vs. Rashtriya Ispat Nigam, 2002 126 STC 114, in support of the contention that there is no transfer of right to use goods. He further submits that to attract the extended definition of sale of transfer of right to use within the meaning of Section 2(33)(iv) of the TNVAT Act, 2006, there should be a transfer of possession to the exclusion of the others. The petitioner has no access to the passive infrastructure. 27. In this connection, a reference was made to the decision of the Hon ble Supreme Court in BSNL V .....

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..... Limited Vs. Collector of Central Excise, Hyderabad , (1998) 1 SCC 400. ix. Federation of Hotel and Restaurant Association of India, Etc Vs. Union of India and Others , (1989) 3 SCC 634. x. Commissioner of Income Tax Vs. Arvind Investments Ltd., 1990 SCC OnLine Cal 376. xi. Bhagirath Ram Chand Vs. State of Punjab and Others , AIR 1954 PH 167. xii. Union of India and Others Vs. Bombay Tyre International Ltd. and Others , (1984) 1 SCC 467. 34. I have considered the arguments advanced on behalf of the petitioner and the respondents. The petitioner no doubt provides passive infrastructure service to be Mobile Telecommunication Operators (MTO.). Under the business model the petitioner has the real estate namely lease of land on which it has erected a temporary shelter which is equipped with Air Conditioners and is connected with power supply generators and antenna. In the temporary shelter, the Base Transceivers of Mobile Telecommunication Operators are placed. Next to be temporary shelter the transmission tower/mast is erected. The power generator, which is part of the power management system of the petitioner, is also in the same vicinity to ensure continuous supply of power to BTS et .....

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..... egment capacity both in local and global markets. There, it was concluded that there was a transfer of right to use the leased capacity under the contract of agreement executed by the Department of Space with the customers and the leased space segment capacity in a transponder of a satellite was goods within the meaning of Article 366(12) of the Constitution of India. 41. It was therefore held that the transaction came within the scope of Article 366(29A)(d) of the Constitution of India, inasmuch as, there was delivery of possession of the goods by transfer (Department of Space) to the transferee (customer) and in law, the transferee had effective control over the goods, i.e., space segment capacity in the transponder of satellite, though its technical operation was handled by the Department of Space. 42. In BSNL Vs. Union of India, (2006) 3 SCC 1, the Hon ble Supreme Court observed that Gannon Dunkerley [ State of Madras Vs. Gannon Dunkerley Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] survived the Forty-sixth Constitutional Amendment in two respects. First with regard to the definition of sale for the purposes of the Constitution in general and for the pu .....

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..... s. 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 out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases. 48. While answering the above illustration, in para 45, the Court observed as under:- 45.The reason why these services do not involve a sale for the purposes of Entry 54 of List II is, as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley case [State of Madras v. Gannon Dunkerley Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] , namely, if there is an instrument of contract which may be composite in form in any case other than the exceptions in Article 366(29-A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then th .....

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..... e in custody of the car though the hirer will have the possession and effective control of the cab. This may be contrasted with the case when a taxi car is hired for going from one place to another there the driver will have both the custody as well as the possession; what is provided is service on hire. In the former case, there was effective control of the hirer (transferee) on the cab whereas in the latter case it is lacking We may have many examples to indicate this difference. 51. In Aggarwal Bros. Vs. State of Haryana , (1999) 9 SCC 182, the Hon ble Supreme Court has held that 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. 52. The Hon ble Supreme Court in BSNL case supra ultimately while dealing with the issue as to whether electromagnetic waves are not goods or not within the meaning of Article 366(12) of the Constitution of India and whether the telephone instrument given by BSNL .....

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..... extracted below. 97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: ( a ) there must be goods available for delivery; ( b ) there must be a consensus ad idem as to the identity of the goods; ( c ) the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee; ( d ) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor- this is the necessary concomitant of the plain language of the statute viz. a transfer of the right to use and not merely a licence to use the goods; ( e ) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. 55. Thus, it is evident that wherever extended definition of sale in Article 366(29-A) are attracted the transaction can be taxed both under the provisions of TNVAT Act, 2006 and under the provisions of Finance Act, 1994. However, it is for Assessing Officers under the respective enactmen .....

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