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TMI Blog2025 (2) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... ion whereas suo moto Appeals are almost unknown - The scope of Appeal or Revision depends upon the text of the provision of a statute which creates the right of Appeal, or vests revisional power. It has been a long settled position of law that normally scope of Appeal is wider than that of Revision. Ordinarily, first appeal is both on law and facts unless the statute otherwise says. Thumbnail description of Section 65 - HELD THAT:- In terms of order on Revision, Assessment Orders have to be modified and any excess payment has to be refunded to and any deficit is to be made good by the Assessee, says Sub-section (9). Sub-section (10) (a) provides for review of the order made on Revision on the basis of facts that were not there when the Revision was decided. Sub-section (10) (b) empowers the government to make rules prescribing limitation period for Review and the manner in which Review should be preferred. Sub-section is on par with section 152 of Code of Civil Procedure, 1908 and it provides for rectification of mistakes in the order made in Revision. This would include order made in review as well. Rectification can be sought for at any time within five years; before effecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises of subscriber only, albeit license to visit the same for service/repair is accorded under the subject agreements. In deciding the question, what are the goods involved in a sale transaction of the kind and with what intent the parties have entered into it, would assume importance. The seller and purchaser, the words being used in their widest amplitude have to be ad idem as to the subject matter of the arrangement. To this to be added, the intent of law also. In finding answers to questions of the kind, the approach of the court should be of a reasonable person of average intelligence. There being nothing to substantiate pervasive control of the Assessee over the STBs, merely because they have license to gain entry to the premises of the subscriber for periodic inspection/repair. Consideration for transfer of right to use STB - HELD THAT:- The simple question is whether the transfer of right to use STBs is for consideration or it is free. The Authorities and the Tribunal have held that the consideration for right to use STB is Rs. 2,000/-. That estimate is made inter alia on the basis of a clause in the Inter-connect Agreement that obtained between the Assessees and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notification of 2021 could not have been issued with retrospective effect, pales into insignificance.
Conclusion - i) STBs are goods within the meaning of section 2(15) of the Act, capable of exclusive use by subscribers, and that the right to use them is transferred for valuable consideration. ii) Service tax and VAT are not mutually exclusive. iii) The notification dated 15.03.2021 could have retrospective effect.
Petition dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... en wrongly construed by the authorities and sustained by the Tribunal. (6) The Tribunal grossly erred in placing wrong construction on the provisions of Sections 173 & 174 of Karnataka Goods and Services Tax Act, 2017 and also the Notification dated 15.03.2021 bearing No. FD 04 CSL 2021 issued under Section 74 (2) that too with retrospective effect, when such power is not delegated. III. Learned AGA Mr. Aditya Vikram Bhat appearing on behalf of the Revenue vehemently resisted the Petitions making submission in justification of the impugned orders and the reasons on which they have been constructed. What he contended is concised as under: (1) The scope of Revision Petition under Section 65 (1) of 2003 Act is limited and a question of law is a sine qua non for the invocation of revisional jurisdiction; whether there is a sale, is a mixed question of law & fact, if not a pure question of fact; none of the questions raised in these Petitions or argued by the Assessees is a question of law. (2) The definition of sale enacted in Section 2 (29) (d) of 2003 Act is a means & inclusive definition; a transaction that would not conventionally amount to sale is deemed to be a sale by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormally scope of Appeal is wider than that of Revision. Ordinarily, first appeal is both on law and facts unless the statute otherwise says. What is observed in HINDUSTAN PETROLEUM CORPN. LTD. vs. DILBAHAR SINGH (2014) 9 SCC 78 being relevant is reproduced: "31. We are in full agreement with the view expressed in Sri Raja Lakshmi Dyeing Works [Sri Raja Lakshmi Dyeing Works v. Rangaswamy Chettiar, (1980) 4 SCC 259] that where both expressions "appeal" and "revision" are employed in a statute, obviously, the expression "revision" is meant to convey the idea of a much narrower jurisdiction than that conveyed by the expression "appeal". The use of two expressions "appeal" and "revision" when used in one statute conferring appellate power and revisional power, we think, is not without purpose and significance. Ordinarily, appellate jurisdiction involves a rehearing while it is not so in the case of revisional jurisdiction when the same statute provides the remedy by way of an "appeal" and so also of a "revision". B. CHAPTER VII OF 2003 ACT: This chapter contains the provisions for Appeals & Revisions. Appeal to the Appellate Tribunal is provided by section 63 which has as many as tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding on any specific question or issue. (8) Notwithstanding that a petition has been preferred under sub-section (1), the tax shall be paid in accordance with the assessment made in the case. (9) If as a result of the petition, any change becomes necessary in such assessment, the High Court may authorize the prescribed authority to amend the assessment and the prescribed authority shall amend the assessment accordingly and thereupon the amount overpaid by the person concerned shall be refunded to him without interest or the additional amount of tax due from him shall be collected in accordance with provisions of this Act, as the case may be. (10) (a) The High Court may, on the application of either party to the petition, review any order passed by it under sub-section (6) on the basis of facts which were not before it when it passed the order. (b) The application for review shall be preferred within such time and in such manner as may be prescribed, and shall where it is preferred by any person other than an officer empowered by the Government under sub-section (1) of Section 63 be accompanied by a fee of one hundred rupees. (11) (a) With a view to rectifying any mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, Assessment Orders have to be modified and any excess payment has to be refunded to and any deficit is to be made good by the Assessee, says Sub-section (9). Sub-section (10) (a) provides for review of the order made on Revision on the basis of facts that were not there when the Revision was decided. Sub-section (10) (b) empowers the government to make rules prescribing limitation period for Review and the manner in which Review should be preferred. Sub-section (11) is on par with section 152 of Code of Civil Procedure, 1908 and it provides for rectification of mistakes in the order made in Revision. This would include order made in review as well. Rectification can be sought for at any time within five years; before effecting rectification, stakeholders need to be heard. Sub-section (12) provides for discretionary levy of cost while making orders on Revision. D. AS TO WHAT IS A QUESTION OF LAW WITHIN THE MEANING OF SECTION 65: (1) Now, let us come to the substantive provision of Revision to High Court, namely sub-section (1) of Sec. 65. Textually, it requires a question of law that was raised but the Tribunal has 'failed to decide' or 'decided erroneously'. Therefore, we h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. E. AS TO WHETHER A SET TOP BOX IS GOODS U/S.2 (15) OF THE ACT: (1) It is the submission of learned counsel appearing for the Assessees that a Set Top Box or a Set Top Unit is only an Information Appliance Device and it does not answer the definition of "goods" u/s. 2 (15). Therefore, the examination of STB assumes importance. Section 2 (15) reads as under: "'Goods' means all kinds of movable property (other than newspaper, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities and articles (including goods, as goods or in some other form) involved in the execution of a works contract or those goods to be used in the fitting out, improvement or repair of movable property, and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale." Textually, the definition is too wide. Its building blocks would make it wider than what conventionally a "means & includes" definition would import. The expression "all kinds of movable property" employed by the legislature lends support to this view. What is significant is the choice of term namely "al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions itself. The Oxford Journals Set-top boxes are used in cable TV, satellite TV, terrestrial TV and Internet Protocol TV Systems, as well as other uses such as Digital Media Players ("streaming boxes"). Learned AGA Mr. Aditya Vikram Bhat is right in telling us that alternatives to Set Top Boxes are the smaller dongles, and TV sets with built- in TV tuners. The signal source might be an Ethernet cable, a satellite dish, a coaxial cable, a telephone line (including DSL connections), broadband over power lines (BPL), or even an ordinary VHF or UHF antenna. Content, in this context, could mean any or all of video, audio, Internet web pages, interactive video games or other possibilities. Satellite & Microwave based services also require specific external receiver hardware. Set Top Boxes can also enhance source signal quality. (4) A Set Top Box is an appliance between cable outlet and a subscriber's receiver, cannot be disputed. Regulation 2(z) of the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012 defines "Set Top Box" means a device, which is connected to, or is part of a television and which allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paragraph 87 observed "what a SIM card represents is ultimately a question of fact.." Therefore, matter was remitted to the authorities which after verification of the factuals, held that SIM cards are not goods. This ultimately received imprimatur at the hands of the Apex Court in BHARAT SANCHAR NIGAM LTD. vs. STATE OF ANDHRA PRADESH REVENUE DEPARTMENT (2023) 5 Centax 287. There is a sea difference between a SIM card and a STB. Structurally & functionally, they are poles apart. It hardly needs to be stated that a case is an authority for the proposition that is actually laid down in a given fact matrix and not for all that which would follow from what has been so laid down vide QUINN vs. LEATHEM (1901) UKHL 2. (ii) The second decision pressed into service on behalf of the Asessees was THE COMMISSIONER COMMERCIAL TAX U.P, supra. A learned Single Judge of Allahabad High Court vide order dated 16.10.2019 at paragraphs 5 & 6 observed as under: "5. During the assessment year in question, the assessee was engaged in providing cable television network to its subscribers against value. It had been subjected to service tax as a service provider. The Tribunal has set aside the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods on hire purchase or any system of payment by installments; (d) a 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." (Explanations not being relevant, are not reproduced). (2) The above definition is coined by the State Legislature in the light of 46th Amendment to the Constitution of India whereby, clause (29A) came to be introduced to the definition clause enacted in Article 366. This Amendment expands the concept of sale and thereby, enlarges the power of State Legislatures to tax the transactions simulating sales but not conforming to the conventional meaning of sale under the Sale of Goods Act, 1930. Clause (29A) (d) being relevant, is reproduced below: "tax on the sale or purchase of goods" includes- (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;" In STATE OF MADRAS vs. GANNON DUNKERLEY & CO. AIR 1958 SC 560, the Supreme Court had held that the expression "sale of goods" used in the Constitution involves an existence of any agreement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed, what needs to be demonstrated is the exclusive use of STBs at the hands of the subscriber. In support of this they relied upon a Co-ordinate Bench decision of this court in INDUS POWERS LTD., vs. DEPUTY COMMISSIONER OF COMMERCIAL TAXES (2013) 29 Taxmann.com 301 Karnataka. This decision refers to Apex Court Ruling in BSNL vs. UOI supra wherein it is observed that to constitute transfer of right to use goods, it should be inter alia to the exclusion of transferor since it is not just merely a license to use. In the light of that, the Bench after perusing various terms of the contract, observed at para 64 as under: "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 acces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred or not is by ascertaining who has effective control over the goods. As far as STBs are concerned they are in total control of the customer. Under his effective control the STBs are installed in the house of the customer. He can use the STB when he wants to. He can use the STB to view whichever channel he wants to view. He may or may not use the STB. The company does not even have the power of entering the premises of the customer. Most importantly as per the terms of the agreement, the companies are responsible for the functioning of the STBs only for a period of 6(six) months. The warranty is valid only for six months and thereafter there is no warranty. Therefore, if STB of a customer is spoiled after six months he will have to pay for repair or replacement of the same. We are of the considered view that this amounts to transfer of the right to use goods." We are in complete agreement with this view, there being nothing to substantiate pervasive control of the Assessee over the STBs, merely because they have license to gain entry to the premises of the subscriber for periodic inspection/repair. G. AS TO CONSIDERATION FOR TRANSFER OF RIGHT TO USE STBs: (1) In Cable Networ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax as Cable Operator Services u/s. 65 (105) (zs) of the Finance Act, 1994 and therefore the same charges cannot be subjected to VAT under 2003 Act, appears attractive at the first blush. However, a deeper examination shows its fallacy: A transaction may involve a composite arrangement comprising of service & sale. In such an instance, there may be transfer of a right to use goods as in the case of a telephone connection, which would also include service. It is competent for the State to tax the sale element provided there is a discernable sale and only to the extent relatable to such a sale. True it is, that in IMAGIC CREATIVE PRIVATE LIMITED vs. COMMISSIONER OF COMMERCIAL TAXES (2008) 2 SCC 614 has said that the payment of service tax and remittance of VAT are mutually exclusive, the nature of levies being different. However, different aspects of a single transaction can be taxed under different statutes. (2) There can be levy of more than one tax on a subject matter, if incidence of each of the taxes is different from the other and such taxes may be imposed under different statutes. A tax on the sale of goods is envisaged under Entry 54 of List II (Sales Tax) of Schedule 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act inter alia repeals the 2003 Act. Section 174 enacts a saving clause; sub-section (1) (d) & (e) have the following text: "(1) The repeal of the Acts specified in section 173 shall not - (a) ... (b) ... (c) ... (d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the repealed Acts; or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so repealed; ..." A perusal of these clauses shows th ..... 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