TMI Blog2010 (1) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... R.B. Venkataramana, High Court Government Pleader, for the Respondent. [Order]. - Both these petitions are heard and disposed of together, since they raise identical issues and are filed under similar circumstances. 2. The petitioner is a company incorporated under the Companies Act, 1956 and is a licensee under the Indian Telegraphs Act. The petitioner is authorised to operate Cellular Mobile Telephone Services within the State of Karnataka and the Karnataka Telecom Circle. The petitioner provides various types of telephone services including a GSM Mobile Phone Service, which is activated by the use of a Subscriber' Identification Module Card popularly known as a SIM Card, which is an electronic chip. The petitioner also provides GSM Fixed Wireless Phone Services (hereinafter referred to as the FWP for brevity). The SIM Card and the FWP are enabling de vices supplied by the petitioner to its subscribers, so as to enable the subscriber to access the services provided. It is the petitioner's case that neither of these devices are supplied at a cost to the subscriber, but are retained as the property of the petitioner and are only provided to the subscribers in order to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the third respondent proceeding under the impression that the aforesaid device namely, the GSM FWP would meet the definition of a packaged commodity and hence was within the provisions of the Act and the Rules. Thus it is the contention of the petitioner that the issue as to whether such devices, as named above, provided by the telephone service providers for activation of services, would amount to sale or not for purposes of the Sales Tax Act, was raised before a three Judge Bench of the Supreme Court and the Bench having formed an opinion that imposition of Sales tax for any facilities of telecommunication services is untenable in law, as there is no element of sale, had remanded the matter for a fresh consideration to the jurisdictional Commissioner of Commercial Taxes, who in turn, has held that the element of sale was not involved and that the transfer of such goods would not attract the provisions of the Sales Tax Act. The above said judgment of the Supreme Court was in the case of Bharat Sanchar Nigam Limited and Another v. Union of India dated 2-3-2006 in Writ Petition (Civil) 183/2003 [2006 (2) S.T.R. 161 (S.C.)]. It is the petitioner's case that this legal and fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the SWM Act and Rules. 4. The respondents are represented by the Government Pleader and Statement of Objections are filed on behalf of the respondents in one of these petitions. It is contended in the Statement of Objections, which the Government Pleader seeks to reiterate, that Rule 1(3) of the Rules would indicate that the commodities are in a packed form, which are likely to be sold, or even which are likely to be delivered or offered or stored for distribution, would come under the purview of the SWM Act and the Rules. He would insist that anything packed or wrapped and caused to be sold are considered as pre-packed commodities. In the absence of any exemption under the Rules and since admittedly, the said commodities are displayed at a retail outlet, the SWM Act and the Rules would squarely apply notwithstanding any declaration on the package to the effect -"Not for Sale". "Packing is only for protection". "Not to be sold alongwith the Package", "Free Gift Package", "Displayed only for advertisement" etc. would not exempt the commodities from the rigour of the provisions of the SWM Act and the Rules. Further, importing any pre-packed commodities would requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riteria for addressing whether the provisions of the Act and the Rules would apply. There is no circumstance under which the said devices are sold across the counter. The charge, if any, that may be imposed on a subscriber to replace the devices if at all, would be relatable to such services being rendered of procuring and replacing the device and possibly assigning a distinct number of such a replaced device and it cannot be attributed as being the value of the de vice itself which is provided alongwith the services in the first instance. The belief of the third respondent that these devices carry a price and that it is cleverly worked into the service charges that are paid over time is a mere allegation and in the absence of any adjudication in this regard, there is no justification in the third respondent attributing such devious modus operandi on the part of the petitioner. The service charges attract service tax and the allegation that the petitioner intends to deprive the State of its revenue under other fiscal legislation is therefore not tenable. 6. In the light of the above rival contentions, it is firstly necessary to understand the nature of the transaction involved to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts in any manner whatsoever under the licence to third party. It is impossible to contend that the right to use goods, assuming without conceding that they are goods, which are essential for the rendition of service can never be a transaction or transfer of right to use goods. Nor can the contract between subscribers and licensee viz., service provider he interpreted as involving transfer of right to use goods xxx xxx xxx " .it is, not possible to interpret the contract between the service provider and the subscriber that the consensus was to mutilate the integrity of con tract as a transfer of right to use goods and rendering service These observations though made in the context of considering whether the trans action would attract sales tax, it is relevant to consider whether the above said devices in the case on hand are either sold or sought to be sold to a subscriber alongwith the services that are provided. On the face of it, in terms of the standard form agreement, which a subscriber is required to execute in availing the services provided by the petitioner, there is clearly a term which requires the subscriber to return these/devices on termination of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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