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2016 (5) TMI 297 - DELHI HIGH COURT

2016 (5) TMI 297 - DELHI HIGH COURT - 2016 (44) S.T.R. 399 (Del.) , [2016] 92 VST 414 (Del) - Liability of VAT - advertisement display sites - Petitioner submitted that Sites are being used by itself for rendering services and there is no transfer of any right to use those sites as alleged by the Revenue but the revenue contended that the Sites for display of advertisements are “goods” and the petitioner has transferred the right to use those goods to various advertising agencies/advertisers, wh .....

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ioner acquired any right to transfer any right to use the Sites in question. It is also important to examine the petitioner's contention that the Sites were being used by the petitioner for rendering services and no right to use the Sites had in fact been transferred by the petitioner. Merely, because the advertisements of the advertisers were displayed on the Sites would not necessarily lead to the conclusion that they had acquired the right to use the Sites. - In the present case, it is no .....

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s modified and the Special Commissioner is directed to consider the objections filed by the petitioner in light of the observations made in this order without insisting on pre-deposit of any amount. With regard to the impugned notices under Section 59 of the DVAT Act dated 8th May 2013 and 21st October 2013 requiring the Petitioner to produce documents stated therein for the period of 2012-13, the court directs the assessment be completed keeping in view the observations made in this order. - Pe .....

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e Constitution of India, inter alia, impugning separate notices of default assessment dated 5th August, 2013 whereby the Petitioner's entire turnover for the period 2010-11 and 2011-12 has been assessed to Value Added Tax (VAT) and penalty and interest has also been levied in addition to the tax assessed. The Petitioner also impugns an order dated 7th February, 2014 as rectified by an order dated 13th February, 2014 passed by the Special Commissioner (VAT) directing a deposit of ₹ 3,14 .....

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kiosks etc. are goods as defined under Section 2(m) of the Act and the advertisers are liable to pay VAT on the revenue received on account of deemed sale resulting from transfer of the right to use the said hoardings, panels, display boards, kiosks etc. A further challenge is also laid to the notices under Section 59 of the DVAT Act dated 8th May 2013 and 21st October 2013 requiring the Petitioner to produce the documents stated therein for the period of 2012-13. 2. The principal controversy in .....

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f advertisements are goods and the Petitioner has transferred the right to use those goods to various advertising agencies/advertisers, who use the Sites for display of their advertisement and/or advertisements of their clients. Factual background 3. The Delhi International Airport Ltd. (hereafter 'DIAL') had entered into Operations, Management and Development Agreement dated 4th April, 2006 (hereafter 'OMDA') with the Airport Authority of India (hereafter 'AAI') whereby .....

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loping, operating, maintaining and managing the Sites for display of advertisements; and (ii) granted rights to procure install and maintain Master Antenna Television Screens (MATV) and wall clocks at certain locations and display of brand logos in terms of the Sponsorship Agreement. The Petitioner successfully participated in the bidding process and was granted the licence for designing, setting up, developing, operating and maintaining the Sites for display of advertisements in terms of a lice .....

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itioner then prints and mounts the advertisement at the Sites and is remunerated for the same. 5. DIAL has also entered into a Sponsorship Agreement dated 17th August, 2010 and a supplementary agreement dated 18th August, 2011 with the Petitioner whereby, the Petitioner has been granted a nonexclusive licence for procuring, acquiring, installing, managing, maintaining and upgrading 318 nos. MATVs at designated locations at Indira Gandhi International Airport, New Delhi. The Petitioner is license .....

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der Section 65(105) (zzzm) of the Finance Act, 1994. The Petitioner was also duly registered with the Service Tax Department and regularly filed its returns of service tax in respect of the aforesaid services for the period August, 2010 to June, 2012. 7. The Finance Act, 1994 was amended w.e.f. 1st July, 2012 and a negative list of services was introduced by virtue of Section 66D of the Finance Act, 1994 specifying the services that were not exigible to service tax. It is asserted that the servi .....

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advertisement hoardings, panels, display boards, kiosks etc., whether attached to immovable property/earth or not, are goods as defined under section 2(m) of the DVAT Act, 2004. b) The advertisers are liable to pay Value Added Tax on the revenue received on account of deemed sale due to transfer of right to use of these hoarding, panels, display, kiosks etc. 9. In the aforesaid order, the Commissioner relied on the decision of the West Bengal Tax Tribunal in the case of Selvel Advertising Priva .....

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3 under Section 59 of the DVAT Act calling upon the Petitioner to submit details in respect of financial years 2009-10, 2010-11, 2011-12 and 2012-13 for the purposes of assessment under the DVAT Act. The Petitioner responded to the aforesaid notice by asserting that it was not engaged in any transaction that would constitute a sale within the meaning of clause (zc) of Sub-section (1) of Section 2 of the DVAT Act. The contention advanced by the Petitioner was not accepted and the VATO issued sepa .....

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the Special Commissioner (VAT) on 7th October, 2013. The Petitioner also filed an application seeking complete waiver of pre-deposit for hearing the objections. Whilst, the matter relating to the financial years 2010-11 and 2011-12 was pending, the VATO issued another notice under Section 59 of the DVAT Act on 21st October, 2013 calling upon the Petitioner to submit the details for the financial year 2012-13. The Petitioner filed its detailed response to the aforesaid notice on 18th November, 2 .....

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oner. Therefore, the Petitioner was constrained to file an application for rectification of the order dated 7th February, 2014 which was allowed by the Special Commissioner (VAT) by an order dated 13th February, 2014. Thereafter on 26th February, 2014, the objections filed by the Petitioner for waiver of pre-deposit was taken up for hearing and was adjourned. 13. The Petitioner apprehends that its objections would be rejected and, therefore, has filed the present petition. 14. At the outset, we .....

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to the transaction falling within the parameters of a 'sale'. Taxing a transaction of rendering service would fall outside the legislative competence of a State legislature and thus, even by a device of legal fiction, such transactions cannot be subjected to levy of Sales Tax or VAT. 16. In Gujarat Ambuja Cements Ltd. v. Union of India: (2005) 274 ITR 194 (SC), the Supreme Court had held that This mutual exclusivity which has been reflected in Article 246(1) means that taxing entries mus .....

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arat Sanchar Nigam Ltd. v. Union of India: 2006 (3) SCC 1 , held that: No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal f .....

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bstance in order to examine whether imposition of wealth tax on agricultural lands, by virtue of an amendment to the definition of 'net wealth' under the Wealth Tax Act brought about by the Finance Act, 1969 fell within the legislative competence of the Parliament or the States. The Supreme Court has also in several cases explained the difference between the incidence of tax and the measure of tax. In several cases, it is seen that the subject and the pith and substance of two or more ta .....

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in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time upon the occasion of its sale..... 20. In Federation of Hotel & Restaurant Association of India v. Union of India: (1989) 3 SCC 634, the Supreme Court referred to the Aspect doctrine and explain .....

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Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes &Ors.: (2008) 2 SCC 614, the Supreme Court unequivocally held that the levy of service tax and VAT were mutually exclusive and even in cases of composite contracts, sales tax would not be payable on the value of the entire contract irrespective of the element of service provided. 22. In cases where the contracts are indivisible - other than those contracts which are by legal fiction deemed to be divisible under Article 366 (29-A) .....

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nd ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. 23. In view of the above, if a transaction has been held to be one of providing services then the same would not be chargeable to VAT. The dominant object of the transaction (other than those deemed to be divisible under Article 366 (29-A) of the Constitution of India) would be determinative of the .....

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e true nature of the transaction and certainly, the authorities under the DVAT cannot be precluded from independently examining the transactions in question. 25. The objections filed by the Petitioner against notices of default assessment are pending consideration before the Objection Hearing Authority and, therefore, we do not consider it apposite to determine the question whether the transaction entered into by the Petitioner or the revenue earned by it would be assessable to VAT as a deemed s .....

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he 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 licenses required therefore 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 concomitan .....

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use (29), the following clause shall be inserted, namely:- (29A) tax on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a .....

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drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; . 27. Clause (vi) of Section 2(1)(zc) of the DVAT Act is identically worded as clause (d) of Article 366 (29-A) of the Constitu .....

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pat Nigam Ltd.: (2002) 3 SCC 314, the Supreme Court rejected the contention of the State of Andhra Pradesh that higher charges collected by Rashtriya Ispat Nigam Ltd. (Respondent therein) for sophisticated machinery provided to the contractors was liable to be assessed to tax under Section 5-E of the Andhra Pradesh General Sales Tax Act, 1957. In that case, the Respondent, Rashtriya Ispat Nigam, had contracted certain works to contractors and had also undertaken to supply sophisticated machinery .....

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was made available to the contractors for a charge, they were not free to make use of the machinery for other works. Even though, the machinery was placed in the custody of the contractors and they had the effective control of the machinery in question, the same did not result in the transfer of the right to use that machinery. 29. In the facts of the present case, it would be necessary for the authorities to examine the transactions entered into by the Petitioner from the stand point whether t .....

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signing, setting up, developing, managing, operating and maintaining the Sites for display of the Advertisements thereat pursuant to the execution of the License Agreement awarded to the Selected Bidder for the License Term. 31. On a plain reading of the aforementioned definition, it is doubtful whether the Petitioner would have any right to transfer any right to use the Sites in question. It is also important to examine the Petitioner s contention that the Sites were being used by the Petitione .....

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o provide passive infrastructure on a sharing basis to other telecom operators (referred to as Sharing Telecom Operators ) could be understood as transferring the right to use such infrastructure. In that case, the Petitioner - Indus Towers Ltd. entered into arrangements to provide passive infrastructure facilities to Sharing Telecom Operators to the extent permitted within the regulatory framework. In terms of the arrangements, Indus Towers Ltd. argued to put up shelters at their towers in whic .....

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Ltd. from the Sharing Telecom Operators was chargeable to VAT as it constituted consideration for sale as defined in Section 2 (1)(zc)(vi) of the DVAT Act. This view was rejected by this Court as it was held that there was no intention on the part of Indus Towers Ltd. to part with the possession of its passive infrastructure. The Master Service Agreement entered into by Indus Towers with Sharing Telecom Operators merely permitted access to the passive infrastructure and the Sharing Telecom Oper .....

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but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise. In the present case, it is not disputed that the Sites in qu .....

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DVAT Act is concerned, it is obvious that the aforesaid order must be applied keeping in view the facts of each case. The said order cannot be read to mean that in every case where advertisements are displayed on hoardings, panels, display boards, kiosks, etc., the advertisers would be liable to pay VAT on the amount received for display of such advertisements. The said decision has limited application and would be applicable only in cases where it is found as a matter of fact that there has bee .....

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position that in all cases where advertisements are displayed on hoardings, the revenue earned would be chargeable to VAT. However in cases where the hoardings, display boards, etc. are found to be movable property (i.e. goods) and there is a transfer of the right to use such hoardings in favour of the advertisers, the ratio decidendi of Selvel Advertising (supra) would be applicable and the consideration received for the right to use hoardings could undoubtedly be bought to tax if the provision .....

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