TMI Blog2010 (4) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner-company, as claimed in this petition, is engaged in the business of providing cellular mobile telephone service (CMTS) to various subscribers in India including West Bengal. In the course of providing such CMTS, the petitioner-company during the year in question supplied or caused to be supplied subscriber identification module card (SIM card) and recharge coupon vouchers (also known as cash cards). As it appears from the order dated June 26, 2007, respondent No. 1 held that SIM cards were goods and supply of SIM cards by the petitioner-company to its distributors fell within the meaning of sales of taxable goods as per provision of the 1994 Act. Similarly, it was held by respondent No. 1 that supply of recharge coupon vouchers against consideration meant sale of goods. The petitioners are represented by Sri R.N. Bajoria, senior advocate, Sri S.K. Bagaria, Sri Atish Ghosh and Sri Niladri Khanna, advocates, whereas Sri P. Basu, senior advocate along with Sri B. Bhattacharyya, advocate, represent the respondents. Both the sides have submitted written notes of arguments. Initiating the arguments, Sri Bajoria, learned senior advocate, points out that the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explaining the nature of recharge coupon vouchers, it is submitted by the learned senior advocate that the petitioner has two categories of its telecom services (i) prepaid and (ii) post-paid. Recharge coupon vouchers are not required for the subscribers who make payment towards telecom services availed of by them on receipt of the bills. But in respect of small consumers, such payments are collected in advance through selling of recharge coupon vouchers as it is not feasible and economical for the petitioners to raise so many individual small bills. But such claimant cannot also be ignored from the business point of view as growth of telecom services depends on connectivity and extensive use of such services. Had there been no presence of an agent in between the service provider (the petitioners) and the service user, the position would have been otherwise. In that event it could have been inferred that the consumer is making payment against purchase of recharge coupon vouchers for the intended service he would like to avail of. The learned senior advocate refers to some proceedings initiated by the income-tax authorities against the petitioner-company contending that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording ground for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. The learned senior advocate relying on the definition as above argues that recharge coupon vouchers are the acknowledgement of advance receipt of money for rendering telecom services in future. The recharge coupon vouchers represent the right to get the services equal to the value they represent. They represent the beneficial interest in the contract for receiving telecom services which are movable property. Irrespective of whether such beneficial interest is existent or accruing or conditional or contingent it would be an actionable claim. It is, therefore, submitted by the learned senior advocate that recharge coupon vouchers are nothing but actionable claim and are not goods falling within the meaning of goods as defined in section 2(13) of the 1994 Act and hence no tax can be levied on transfer of such recharge coupon vouchers. Transferability, contends the learned senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or change their character. The learned senior advocate admits that these recharge coupon vouchers are not made available directly to the consumers (subscribers) who are availing of the services rendered by the service provider (petitioner) because of difficulty in reaching the large number of individual consumers but at the same time, it is argued that the mode of transfer of an asset does not change the nature and character of an asset. Transfer of such recharge coupon vouchers through distributors/agents only facilitates rendering of services to consumers/subscribers. The manner of transferring such recharge coupon vouchers is only incidental to the service being provided by the service providers/petitioner. Before concluding his submission that recharge coupon vouchers are not goods but actionable claims not exigible to sales tax on transfer, he draws a line of distinction between the facts of the case of Tamil Nadu Kalyana Mandapam Assn. v. Union of India [2004] 135 STC 480 (SC) relied upon by the respondents in the instant case. The issues raised in that case and in the present one are totally different and the said decision of the honourable apex court has no applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim must be an unsecured debt. It is argued that concept of guarantee is akin to the concept of secured debt and, therefore, in order to qualify as unsecured debt, the said matter must relate to money and nothing else. It is further argued that concept of liability under a guarantee is never the same as the concept of liability under general contract. Recharge coupon vouchers are reaching to the ultimate consumers in two stages first one from the service provider to the distributors/agent and thereafter from the distributor/agent to the ultimate consumer. In the instant case, the transfer of recharge coupon vouchers from the service providers to its distributors/agents against consideration is the issue under scrutiny. He, therefore, addresses the question as to whether such recharge coupon vouchers can be termed to be a beneficial interest in a movable property which is not in a possession of the claimant. It is admitted by him that honourable apex court in the case of Sunrise Associates [2006] 145 STC 576 held lottery tickets to be actionable claim. But the same conclusion was arrived at after considering that . . . on purchasing a lottery ticket, the purchaser would have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. It has already been discussed hereinbefore that subject to the determination by the honourable Calcutta High Court, where a petition of this petitioner is lying pending, the petitioner for the time being accepts the transaction made with its distributors/agents as sale transaction. But it disputes the taxability of recharge coupon vouchers claiming such vouchers as actionable claims. In support of the submission, learned senior advocate, Sri Bajoria, relied on a decision of the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576. The honourable apex court in that case was considering whether lottery tickets were goods and were liable to sales tax. The honourable apex court concluded that . . . there was no sale of goods within the meaning of the Sales Tax Acts of the different States but at the highest a transfer of an actionable claim. . . . The honourable apex court also drew a line of distinction between actionable claims and other goods on the sale of which tax may be levied, and observed, the distinction lies in the definition of 'actionable claim'. Therefore, if a claim to the beneficial interest in movable property not in the vendee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rely on the definition of goods and property as given under clause (7) and clause (11), respectively of section 2 of the Sale of Goods Act, 1930 and contend that talk time does not contain the general property in goods which on the other hand can at best be treated as a special property . As regards this contention of the respondents, we would like to refer to the observation made by the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576. Paragraphs 34, 35 and 36 of the said judgment are reproduced hereinbelow: 34. The word 'goods' for the purposes of imposition of sales tax has been uniformly defined in the various sales tax laws as meaning all kinds of movable property. The word 'property' may denote the nature of the interest in goods and when used in this sense means title or ownership in a thing. The word 'may' also be used to describe the thing itself. The two concepts are distinct, a distinction which must be kept in mind when considering the use of the word in connection with the sale of goods. In the Dictionary of Commercial law by A.H. Hudson (1983 edition) the difference is clearly brought out. The definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers for availing of the telephone services provided by the service providers. Distributors/ agents cannot transfer these recharge coupon vouchers for any other purposes except for accessing telephone services provided and guaranteed by the service provider. On the strength of such recharge coupon vouchers, the subscriber cannot even avail of the services offered by other service providers. The interest of the subscriber is restricted only to the use of the services offered by the service provider for a pre-determined fixed period of time, obviously against monetary consideration equivalent to the telephone services one intends to avail of. Keeping in mind the facts of this case and the principle as laid down by the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576, we are of the view that the recharge coupon vouchers fall within the meaning of actionable claims and hence are not taxable. The assessment order dated June 26, 2007, therefore, stands set aside. The matter is remanded back to the assessing authority for a fresh assessment keeping in view the observation made hereinbefore. We, however, do not like to make any observation with regard to othe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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