TMI Blog2013 (6) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said infrastructure had been transferred to them. They would have the right to use the passive infrastructure if they were in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the passive infrastructure. There is none in the present case. The passive infrastructure is shared by several telecom operators and that is why they are referred to as sharing telecom operators in the Master service agreement, MSA which merely permits access to the sharing telecom operators to the passive infrastructure to the extent it is necessary for the proper functioning of the active infrastructure. With several restrictions and curtailment of the access made available to the sharing telecom operators to the passive infrastructure and with severe penalties prescribed for failure on the part of the Indus to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how Indus could have intended to part with the possession of part of the infrastructure. That would have been a major impediment in the discharge of its responsibilities assumed under the MSA. The limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by it as well as the shelter, diesel generator sets, air conditioners, electrical goods, DC power systems, battery etc. Indus is a company registered with the Department of Telecommunication for providing passive infrastructure services and related operations and maintenance services to various telecommunications operators in India on a shared basis. It is the policy of the Government of India to encourage extensive infrastructure sharing and in pursuance with the policy, the telecom operators were required to create a high quality, rapid and wide coverage of mobile telecommunications network in India. The passive infrastructure facilities or services could be shared by several telecom operators so that it becomes cost-effective. Indus provides such passive infrastructure services to the extent permitted by the applicable laws in India and was willing to offer them and share the equipment with several telecom operators to the extent permitted by the laws of India. Accordingly, it put up passive infrastructure facilities at several places. The arrangement works this way. Indus would put up the towers and a shelter which is a construction in which the telecom operators are permitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration therefor. The questions before the Commissioner, Department of Trade and Tax, in his words, were as follows:- Whether in the facts and circumstances the provision of Passive Infrastructure Services by the Applicant to Sharing Operator's would tantamount to 'Transfer of right to use goods' as per Section 2(1)(zc)(vi) of the DVAT Act, 2004 and therefore become liable to tax under the DVAT Act. If yes, then how should the sale price as per section 9(1)(zd) of the DVAT act be determined for the purpose of discharging the liability under DVAT Act? The Commissioner on an examination of the agreement entered into between the petitioner and M/s Sistema Shyam Tele Services Ltd., which was taken as representative of the agreements entered into by the petitioner with various telecom operators, held that the entire amount of consideration received from the sharing telecom operators for providing access to the passive infrastructure would amount to consideration for the transfer of the right to use goods as defined in Section 2(1)(zc)(vi) of the DVAT Act and was exigible to tax under the said Act. He however held that since a separate bill was being rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to another Service Order shall be given priority by Indus while allocating such Passive Infrastructure to the relevant applicants. 2.1.4 With respect to each Site in relation to which Indus is able to grant Site Access Availability, the Parties shall execute a Service Contract in accordance with the procedure set out in Schedule 1 (Site Access Availability), and the provisions of each Service Contract shall include the standard terms set out in Schedule 5 (Standard Site Access Terms). Each Service Contract shall be duly stamped and the applicable stamp duty shall be at the Sharing Operator's expense. 2.1.5 Upon the execution of a Service Contract in respect of a Site, the Sharing Operator shall have the right to install the Sharing Operator Equipment or any portion thereof at such Site at the mutually agreed place. The Sharing Operator shall have access to each such Site for al installation activities and Indus shall provide to the Sharing Operator the necessary means of access for the purpose of ingress and egress from each such Site in accordance with the terms of the Service Contract. Provided, however, that only the representatives of the Sharing Operator w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 3.2 requires Indus to ensure that the operation and maintenance services which are provided by it to the sharing telecom operators are in accordance with good industry practice and only by suitably qualified, skilled and experienced personnel. The information relating to processes and proceedings to monitor the performance shall be shared with the sharing operators on a monthly basis. Certain consequences follow if operation and maintenance service levels fall short of the required standards which are not relevant for the present purpose. 7. Clause 4 provides for the rights of Indus. Under clause 4.1, so far as the sites are concerned, Indus shall have the right to require that whenever any access is needed by the sharing operator or its approved contractor, such access is supervised by Indus or its nominees. Indus shall also have the right to use and grant access to any site including the infrastructure provided by it (which obviously means the passive infrastructure) for the provision of such services to any party or for such other purposes as Indus may in its discretion decided to support from time to time. Clause 4.2 delineates the rights of Indus to ask for relocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor in any manner; in case of any such complaint from a telecom operator the hoardings/advertisement shall be removed. 11. Schedule 1 to the contract provides for site access availability and provides for several technical details and requirements relating to the antenna, ground based tower, roof top tower, time lines for site deployment, site access service credit for acquisition and deployment etc. Schedule 2 provides for operation and maintenance service . Only 3 clauses need to be noticed. Clause 1.8 obliges Indus to ensure proper access to the sites for all authorised personnel of sharing telecom operator for the purposes set out in Clause 3.1.2 which we have already noticed. Clause 1.9.3 sets out the rates at which the petitioner has to pay the operation and maintenance service credits to the sharing operator for its failure to ensure the required uptime service levels. The said clause may be reproduced since considerable emphasis was laid by the petitioner on it, which we shall notice later: 1.9.3 The Operation and Maintenance Service Credits payable by Indus to the Sharing Operator for failure to achieve the above Uptime Service Levels are as set out below. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) In this Act, unless the context otherwise requires,- xxx (zc) Sale with its grammatical variations and cognate expression means any transfer of property in goods by one person to another for cash or for deferred payment or for other valuable consideration (not including a grant or subvention payment made by one government agency or department, whether of the central government or of any state government, to another) and includes- xxxxx xxxxx xxxxx (vi) 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; 15. In the light of the above provisions, the question for consideration is whether there is a transfer by Indus of the right to use any goods in favour of the sharing telecom operators which would attract value added tax within the terms of the DVAT Act, 2004. 16. The main point urged on behalf of the petitioner was that there was no transfer of the right to use any goods by Indus in favour of the sharing telecom operators since the provision of Passive Infrastructure was essentially a service which was taxed as a service provided in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving regard to the terms and conditions of the MSA and the facts brought on record, the conclusion that is inescapable is that there was a transfer of the right to use the Passive Infrastructure by Indus in favour of the sharing telecom operators attracting the levy of value added tax. 19. We are in respectful agreement with the view taken by the Karnataka High Court in the judgment sited (supra). The right to use the goods - in this case, the right to use the passive infrastructure - can be said to have been transferred by Indus to the sharing telecom operators only if the possession of the said infrastructure had been transferred to them. They would have the right to use the passive infrastructure if they were in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the passive infrastructure. There is none in the present case. The passive infrastructure is an indispensible requirement for the proper functioning of the active infrastructure which is owned and operated by the sharing telecom operators. The passive infrastructure is shared by several telecom operators and that is why they are referred to as sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrictions and curtailment of the access made available to the sharing telecom operators to the passive infrastructure and with severe penalties prescribed for failure on the part of the Indus to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how Indus could have intended to part with the possession of part of the infrastructure. That would have been a major impediment in the discharge of its responsibilities assumed under the MSA. The limited access made available to the sharing telecom operators is inconsistent with the notion of a right to use the passive infrastructure in the fullest sense of the expression. At best it can only be termed as a permissive use of the passive infrastructure for very limited purposes with very limited and strictly regulated access. It is therefore difficult to see how the arrangement could be understood as a transfer of the right to use the passive infrastructure. 21. When Indus has not transferred the possession of the passive infrastructure to the sharing telecom operators in the manner understood in law, the limited access provided to them can only be regarded as a permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but that does not take away anything from the substance of the judgment, if we may say so with respect. The substance of the judgment is what we have paraphrased in the previous paragraph. 24. Several authorities were cited before us, particularly on behalf of the petitioner. However, we do not think it necessary to refer to them since the question whether there was any transfer of right to use the goods is essentially a question to be determined on the facts and circumstances of each case and having regard to the terms of the agreement entered into between the parties. We therefore do not think it necessary to burden this judgment with a discussion of the authorities. 25. In CM 3589/2005, the petitioner has prayed for quashing of the assessment order dated 16.1.2012 which was passed subsequent to the filing of the writ petition. Since we have accepted the contentions of the petitioner, the assessment order framed on the basis that the petitioner transferred the right to use the passive infrastructure to the sharing telecom operators is quashed, as also the impugned order dated 29.04.2011. 26. In the result the writ petition is allowed. There shall be no order as to costs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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