TMI Blog2015 (8) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... convey by itself any interest in the property - The entire MSA has to be read as a whole without laying any undue emphasis upon a particular word or clause therein. What is permitted under the MSA is a licence to the telecom operators to have access to passive infrastructure and a permission to keep equipments of the sharing telecom operator in a prefabricated shelter with provision to have ingress and aggress only to the authorized representatives of the mobile operator. - Decision in the case of INDUS TOWERS LTD. [2013 (6) TMI 81 - KARNATAKA HIGH COURT] followed. The order of demand on the basis that the petitioner transferred the right to use passive infrastructure to the sharing telecom operators is quashed. - Decided in favor of assessee. - Writ Petition No.5340/2013, 11739/2013, 13352/2013, 6827/2014, 2175/2015 - - - Dated:- 20-8-2015 - P.K. Jaiswal and Tarun Kumar Kaushal, JJ. N. Venkataraman, Senior Counsel with Sumit Nema for the petitioner. Deepak Rawal, Assistant Solicitor General, Pushyamitra Bhargava, Deputy Advocate General and Prasanna Prasad for the respondents ORDER All these five writ petitions are filed by M/s. Bharti Infratel Limited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The petitioner has been registered with the DoT for providing such shared Passive Infrastructure Services to various telecommunication operators in India. For providing the said services, the petitioner has entered into identical Master Services Agreements (MSA) with telecom operators such as Airtel, Vodafone, Reliance, BSNL, Uninor, Idea Cellular Limited etc. Under the agreements, the telecom service providers are charged by the petitioner for the Site Access Availability i.e., for the access granted to them to the passive infrastructure, owned and possessed by the petitioner and for the related operation and maintenance services offered by the petitioner for the effective and efficient use of the passive infrastructure. These charges are in the nature of service charges and are not in the nature of consideration received for transfer of property or for transfer of right to use any goods. The petitioner provides required services along with the sharing of passive infrastructure i.e. Tower sites and shelter rooms for installation and safe keeping of equipments like antenna, microwave radios and Base Transceiver Station (BTS) belonging to telecom operations, while other equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum level of diesel in fuel tank of DG sets is maintained. The agreement between the petitioner and the Cellular Telecom Operator is on non-exclusive basis and the petitioner retains the right to provide access to the site including any infrastructure to other telecom service providers, for any purpose at its discretion and the telecom operators also retain the right to seek passive infrastructure services from other passive infrastructure providers. 11. The petitioner is treating the said transaction viz. provision of passive telecom infrastructure support service as rendition of services which is amenable to service tax under the taxable category of 'Business Support Service' and are accordingly discharging service tax liability at the applicable rates on the consideration received for the purpose of providing the infrastructure support service. The petitioner has been regularly filing its returns in Form ST-3 as specified under Section 70 of the Finance Act, 1994 before the Service Tax Authorities and the same has been regularly assessed by the authorities from time to time. The petitioner filed returns and relevant documents for the period from 01.04.2009 to 31.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over to the service providers either physically, notionally or symbolically. The petitioner continues to have possession and control of its infrastructure at all times of the contract with the service provider and, therefore, the transaction is purely a service transaction which attracts service tax, as per Finance Act, 1994. 15. As is clear from the terms of the contract as well as the intention of the parties as could be gathered from the terms of the contract, there is no intention to transfer the right to use the passive infrastructure to the shared operators. Therefore, neither the activity carried on by the petitioner nor the transaction entered into between the petitioner and the shared operators constitutes a deemed sale so as to fall within Article 366 (29-A) (1) (d) of the Constitution of India. He also submitted that it is settled law that on the same aspect both the State Legislature and the Parliament cannot Impose tax. Once it is covered by a parliamentary legislation exclusively, the power of the State to levy any tax in respect to the same aspect is totally lacking and therefore, no sales tax or value added tax could be imposed on the same aspect. The agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e site are handed over to the shared operators. The capacity is increased according to the requirements and specification of the shared operators and therefore when all these aspects are taken together, it shows that there is a transfer of right to use the passive infrastructure to the shared operators. It is settled law that to constitute a 'sale', actual delivery is not required. When once the right to use is granted to the shared operators, it presupposes the transfer of that right to use, as held by the Constitution Bench of the Apex Court in the 2 0 th Century Finance Corporation Limited v. State of Maharashtra reported in 2000 (6) SCC 12. Therefore, he submits that the tax is imposed on this aspect of transfer. The very purpose of the 46th amendment to the Constitution is to tax these types of transactions which directly do not fall within the definition of sale of goods but nonetheless the effect of such transaction is the transfer of right to use the goods. It is in order to avoid evasion of payment of tax by entering into such transaction, that the Constitution was amended and Clause (d) of Article 366 (29-A) was inserted. Keeping in mind the object with which thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Access Terms set out in Schedule 6 (Standard Site Access Terms). Sharing Operator Licence means any mobile telecommunications licence granted by the DoT to the Sharing Operator for the Permitted use. 20. Clause 2.1 of the MSA provides for provision of passive infrastructure by the petitioner, which reads, as under: - 2.1 Provision of Passive Infrastructure 2.1.1 Infratel shall provide Site Access Availability to the Sharing Operator in accordance with the terms and conditions of this Agreement. 2.1.2 Throughout the Terms of this Agreement, the Sharing Operator shall be entitled to provide notice to Infratel of those Sites in relation to which it wishes to be granted Site Access Availability (a Service Order ). The process for issuing a Service Order shall be as specified in Schedule 1 (Site Access Availability). 2.1.3 Infratel shall ensure that each site is capable of accommodating Sharing Operator Equipment in accordance with the standard configuration set out in paragraph 1 of Schedule 1 (Site Access Availability). Any additional requirements shall be specified by the Sharing Operator in the Service Order. 2.1.4 In the event that the Service Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities, it shall have the right to replace, repair, add or otherwise modify the sharing operator equipment and the frequencies over which the equipment operates. In order to do so, the sharing operator shall be provided access to the sites by providing ingress and aggress from such site by only the authorised representatives of the sharing operator or its properly authorized sub-contractors. Clause 3.2 requires petitioner 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 be 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. 22. Clause 4 provides for the rights of petitioner. Under clause 4.1, so far as the sites are concerned, petitioner shall have the right to require that whenever any access is needed by the sharing operator or its approved contractor, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right to advertise on the passive infrastructure. It says that petitioner shall have the exclusive right to lease, licence or grant space on each site or passive infrastructure on the site to any their party for the purposes of placing hoardings, banners and other advertisements and the sharing telecom operator shall not have any right of objection. However, the right of petitioner to do so shall not adversely affect the connectivity network or passive infrastructure of the sharing telecom operator in any manner; in case of any complaint from a telecom operator the hoardings / advertisement shall be removed. 26. Schedule I 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 petitioner to ensure proper access to the sites for all authorized personnel of sharing telecom operator for the purposes set out in Clause 3.1.2 which we have already noticed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem, that is to say - xxxxx xxxxx xxxxx (29-A) tax on the sale or purchase of goods includes - xxxxx xxxxx xxxxx (d) a tax on the 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. Clause (12) defines goods to include all materials, commodities and articles . 29. In MP VAT Act, 2002, the words 'goods' and 'sale' are defined under Section 2 (m) and 2 (u), which read, as under: - Section 2 Definitions In this Act, unless there is anything repugnant in the subject or context, - (m) 'Goods' means all kinds of movable property including computer software but excluding actionable claims, newspapers, stocks, shares, securities or Government stamps and includes all materials, articles and commodities, whether or not to be used in the construction, fitting out, improvement or repair of movable or immovable property, and also includes all growing crops, grass, trees, plants and things attached to, or forming part of the land which are agreed to be served before the sale or under the contract of sale. (u) 'Sale' with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The situs of sale can only be fixed either by the appropriate legislature or by judge made law, and there is no settled principles for determining the situs of sale. There are conflicting views on this question. One of the principles providing situs of sale was en-grafted in Explanation to clause (1) (a) of Article 286, as it existed prior to the Constitution (Sixth Amendment) Act, which provided that the situs of sale would be where the goods are delivered for consumption. The second view is, situs of sale would be the place where the contract is concluded. The third view is, that the place where the goods are sold or delivered would be the situs of sale. The fourth view is, that where the essential ingredients, which complete a sale, are found in majority would be the situs of sale. There would be no difficulty in finding out situs of sale where it has been provided by legal fiction by the appropriate legislature. In the present case, we do not find Parliament has, by creating any fiction, fixed the location of sale in case of the transfer of right to use goods. We, therefore, have to look into the decisional law. 26. Next question that arises for consideration is, where is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Also of no relevance to the deemed sale is where the goods are delivered for use pursuant to the transfer of the right to use them, though it may be that in the case of an oral or implied transfer of the right to use goods, it is effected by the delivery of the goods. 27. Article 366 (29-A) (d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The contention put forward on behalf of the respondents (VAT department) is that the question whether there was any transfer of the right to use the goods can be decided only on the basis of the facts of the case. It was in this context submitted that the Karnataka High Court had posed to itself an erroneous question for decision, the question making an erroneous assumption that the petitioner was carrying on an activity which was a service provided by it and since the question itself was framed on an erroneous assumption, the answer given by the Court was consequently wrong and, therefore, the entire matter needs to be looked into afresh. It was submitted that having 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 petitioner in favour of the sharing telecom operators attracting the levy of value added tax. 35. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be read along with the above clause. The tables set out in this schedule providing for payment of service credits by petitioner to the sharing operators for failure to achieve the uptime service levels and those prescribing payment of service credits by petitioner to the sharing operators for non-submission of the reports and providing for stiff penalties for any failure on the part of petitioner show that it is the responsibility of petitioner to ensure that the passive infrastructure functions to its full efficiency and potential, which in turn means that it has to be in possession of the passive infrastructure and cannot part with the same in favour of the sharing telecom operators. With several such 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 petitioner to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how the petitioner 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 responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a permission to keep equipments of the sharing telecom operator in a prefabricated shelter with provision to have ingress and aggress only to the authorized representatives of the mobile operator. 39. In the matter of Indus Towers Limited v. Union of India decided on 18th April, 2013 [Writ Petition (C) No.4976/2011] almost a similar question was raised by the petitioner therein before the Delhi High Court and the Division Bench of Delhi High Court in complete agreement with the view taken by the Karnataka High Court in the case of M/s. Indus Towers Limited v. The Deputy Commissioner of Commercial Tax four others (supra) has allowed the writ petition. 40. For these reasons, we are of the view that the judgment of the Karnataka High Court will be fully applicable in the present facts and circumstances of the case. The order dated 13.03.2013 (Annexure P/1) passed by the Additional Commissioner, Commercial Tax, Indore (Respondent No.3) on the basis that the petitioner transferred the right to use passive infrastructure to the sharing telecom operators is quashed. 41. In the result, Writ Petition No.5340/2013, Writ Petition No.11739/2013, Writ Petition No.13352/2013, Writ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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