TMI Blog2016 (5) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not disputed that the Sites in question are located in a restricted area and none of the advertisers have an unmitigated access to those Sites; the petitioner affirms that possession of the Sites is retained by DIAL. Therefore, it would be difficult to accept the view that the transactions entered into by the petitioner with the advertisers constituted transfer of the right to use the Sites in question. Also the order dated 7th February, 2014 (as rectified by the order dated 13th February, 2014) is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be liable to pay VAT on the revenue earned from display of advertisement at the Sites. According to the Petitioner, the Sites are being used by the Petitioner itself for rendering services and there is no transfer of any right to use those sites as alleged by the Revenue. The Revenue, on the other hand, contends 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, 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 AAI has granted DIAL, the exclusive right and authority to operate, maintain, develop, design, construct, upgrade, modernize, finance and manage the Indira Gandhi International Airport. With the view to develop, setup, operate, maintain and manage various sites for display of advertisement, DIAL issued a Request For Proposal ( RFP ) on 11th M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 service pertaining to selling of space or time slots for advertisements other than advertisements broadcasted by radio or television, is covered under the said list and, according to the Petitioner, the services rendered by it in respect of advertisement are thus exempt from the levy of service tax with effect from 1st July, 2012. 8. In the meantime, on 6th April, 2011, the Commissioner (Trade and Taxes) Delhi, VAT passed an order under Section 85 of the DVAT Act, inter alia, holding as under: a) The 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deposit a sum of ₹ 3,14,00,000/- as a pre condition for hearing the objections. The order erroneously indicated that the said condition of pre-deposit of the amount was agreed to by the Petitioner. 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 must state that the question whether the levy of service tax and VAT/Sales Tax are mutually exclusive, is no longer res integra. 15. The legislative competence of the Parliament to tax Services is traced to entry 97 of list I of the Seventh Schedule to the Constitution of India while the power of a State to levy Sales Tax or VAT is traced to entry 54 of List II of the Seventh Schedule to the Constitution of India. Undisputedly, States have the power to levy sales tax/VAT but the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 taxing statutes are different but the measure of such taxes is similar or overlapping. 19. In Governor General in Council v. Province of Madras: (1945) FCR 179 P.C., the Court explained the distinction between the subject of tax and measure of tax in the context of duties of excise and sales tax in the following words: ...The two taxes, the one levied upon a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But 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 explained that the law with respect to a subject might incidentally af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so paid service tax may not be determinative of the 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 sale by virtue of clause (vi) of Section 2(1)(zc) of the DVAT Act, that is, whether there is any 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. However, we feel that it is necessary to reiterate certain established principles. In Bharat Sanchar Nigam Ltd. (supra) the Supreme Court had explained that to constitute a transaction of transfer of a right to use goods, the transaction must have the following attributes: (a) There must be goods available for delivery; (b) There must be a consensus ad idem as to the identity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 366 (29-A) of the Constitution of India. It is important to note that under the expanded scope of tax on the sale or purchase of goods , tax on transfer of the right to use goods has been included; this is not the same as a tax on the use of goods and the two expressions cannot be read synonymously. Therefore, for a transaction to fall within the meaning of Section 2(1)(zc)(vi) of the DVAT Act, it is necessary that there should be a transfer of the right to use. 28. In the State of Andhra Pradesh and Anr. v. Rashtriya Ispat 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 for the purposes of executing the contracted works in consideration for certain charges. The Supreme Court upheld the decision of the High Court that the hire cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which Sharing Telecom Operators were permitted to keep and maintain their base terminal stations, associated antenna, back-haul connectivity to the network of the Sharing Telecom Operator and associated civil and electrical works required to provide telecom services. Indus Towers Ltd. also provided other facilities such as diesel generator sets, air conditioners, electrical and civil works, DC power system, battery bank etc. The Commissioner (VAT) held that the consideration received by Indus Towers 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied where the necessary concomitants of sale under Section 2(1)(zc)(vi) are absent there has been no transfer of the right to use goods and/or the possession of the goods in question is retained by the owner and not transferred to the advertisers. 35. The decision in the case of Selvel Advertising Pvt. Ltd. (supra) also cannot be read as an authority for the proposition 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 provisions of the relevant taxing statute contain clauses, which are similarly worded as Article 366 (29-A) of the Constitution of India. 36. In the case of Upasana Finance Ltd. (supra), the Tamil Nadu Taxation Special Tribunals had itself clarified that it would have to be found on facts whether a person who erects the hoar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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