9911796707
TMI Blog2018 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of Section 2(10) of the said Act and therefore not exigible to sales tax under Section 3 of the Act. The petitioners, before the Court, are engaged in the business of providing Cellular Mobile Telephone Services under a license issued by the Government of India, and the local area is served by the petitioner is Mumbai, Navi Mumbai, Thane and Kalyan Telephone Districts. It is the case of the petitioner that the services are provided by them as per the terms and conditions set out in the License Agreement entered by them with the President of India, through the Director (TM1), Department of Telecommunications. The petitioner being a licensee, is abiding by the specific terms and conditions incorporated by the License Agreement, since, 1994. It is the case of the petitioner that the license is issued to them to establish, maintain and operate Cellular Mobile Service upto the subscribers terminal connection in the local area served by them. The petition then refers to several clauses in the License to demonstrate what is referred by them is "SERVICE". As per the petitioner, in terms of the license issued in their favour, they provide SERVICE of conveyance of message or provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airwaves. There are other types of calls also. 3. According to the petitioners the airwaves are a natural resource and are owned by Government of India and such airwaves act as a medium to transmit the voice, produced by the subscriber, from one end to another. The airwaves are neither sold, nor delivered to the Subscriber and they remain where they. The Cellular Operators including the petitioners use these airwaves to transmit the voice to the Subscribers. According to the petitioners they are not producing the voice of the Subscribers unlike in the case of electricity, in which the equipment is used for producing/generating the electricity. There is neither production of anything on part of the Cellular Operator nor supply of any tangible item, whatsoever having any value except they are "Service Provider". However, it is no doubt true that while acting as service provider for transmitting voice from one end to the other and for making available the services, it involves mobile phone/hand set which can be brought by the subscriber from the market or from the cellular operators like the petitioners. In order to avail the services, subscriber then insert a SIM card "Subscriber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is defined as including a person who has been granted a Licence under the first proviso to subsection (1) of Section 4 of Indian Telegraph Act, 1885." 6. According to the petitioners, the petitioner's voice communication service is only a service and eligible to "Service Tax" as laid down in the Finance Act, 1994 and therefore they got themselves registered with the Central Excise Authorities and the petitioners are regularly depositing service tax. The dispute raised by the petitioners is about the applicability of the Sales Tax Act. According to the petitioners the word "goods" has been defined in Section 65(15) of Chapter V of the Finance Act, 1994 and the "goods" has been assigned same meaning under Clause (7) of Section 2 of the Sale of Goods Act, 1930. According to the petitioner the Central Excise Authorities under Service Tax law had treated the provision of mobile telephone service as "services" and not "goods". 7. According to the petitioners the transfer of right to use goods for any purpose has been made exigible to levy of tax by the State of Maharashtra pursuant to Circular dated 26.04.2001 with effect from 01.05.2002. As per the petitioners, the tax is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approached this Court by filing the present Writ petition in December 2003 they sought a relief of grant of interim order to the effect of staying effect on operation of the impugned notices for imposition of tax on voice transmission service which are not goods under Section 2(5) of the Sales Tax Act. 9. Along with the petition, the petitioners have annexed the interim orders passed by the various Courts including the High Court at Calcutta and Delhi High Court in the case of Bharti Cellular Ltd., V/s. State of Uttar Pradesh and Ors. 10. In response to the petition, the Senior Deputy Commissioner of Sales Tax, has filed an affidavit on record raising an objection about the existence of an alternate remedy in the form of an appeal being preferred under the Maharashtra Sales Tax Act. On merits it is stated by the respondents that while applying for registration, the petitioners had declared the goods for the purposes as "all types of telecommunications and electronic systems". The affidavit further sets out that the petitioners have not declared the goods under the cellular mobile telephone service at any time and the case is set out by the petitioners in the Writ Petition for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the Cellular Operator, which is an electronic chip which stores information about the subscriber's name, his mobile phone number etc. The SIM card is the property of the cellular operator and is governed by the Subscription Agreement. On activation of the SIM card petitioners start rendering services and the subscribers avail the services when the SIM card is deactivated the service comes to an end. For the service rendered the petitioner charge the tariff from the subscribers as per the provisions of the telecommunication services and such tariffs are prescribed and approved by the Telecom Regulatory Authority of India in exercise of powers conferred on it under the TRAI Act, 1997. The petitioner do not dispute that the voice communication service rendered by them is a service and liable to be subjected to "Service Tax" as provided by Finance Act, 1994 and accordingly the petitioners have got themselves registered with the Central Excise Authorities and are regularly paying the Service Tax. 13. The grievance of the petitioner pertains to the imposition by the State of Maharashtra by categorizing the services of the petitioner under the term "goods". The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time the petitioners had facilitated the customers with provision of handsets and made it available to the customers who opted for it for a limited period from 1999 and 2000. This was however done for the benefit of the subscribers and with a view to expand the subscriber base, since there was a shortage of the instruments, the mobile handsets came to be offered. The petitioner company who become liable to sales tax on the sale of the said item had obtained sales tax registration with the sales tax authority. However, the sale of mobile equipment is not a part of the Cellular Mobile Telephone Service being provided by the petitioners. 16. The controversy involved in the present petition has been put to rest by the Hon'ble Apex Court in the year 2006 in the judgment of the Bharat Sanchar Nigam Limited and Another V/s. Union of India and Others (2006) 3 SCC The Hon'ble Apex Court in the said judgment has held that the telephone service is a service. However, the nature of the transaction involved in providing telephone connection may be a composite contract of service and sale. Therefore, there may be transfer of right to use "goods", in the providing of access or a telepho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld otherwise, it was, in our humble opinion erroneous. 108. The contract between the telecom service provider and the subscriber is merely to receive, transmit and deliver messages of the subscriber through a complex system of fiber optics, satellite and cables. 109. Briefly, the subscriber originates/generates his voice message through the handset. The transmitter in the handset converts the voice into radio waves within the frequency band allotted to the petitioners. The radio waves are transmitted to the switching apparatus in the local exchange and thereafter after verifying the authenticity of the subscriber, the message is transmitted to the telephone exchange of the called party and then to the nearest Bast Transceiver Station (BTS). BTS transmits the signal to the receiver apparatus of the called subscriber, which converts the signals into voice, which the subscriber can hear. 117. The Sale of Goods Act, 1930 comprehends two elements, one is a sale and the other is delivery of goods, 20th Century Finance Corp. Ltd V/s. State of Maharashtra, SCC at P.44 para 35 ruled that : "35(c)(c) Where the goods are available for the transfer of right to use the taxable event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on activation charges. 19. The Hon'ble Apex Court after analyzing the components of the SIM card and on consideration of the factual aspect that the appellant was paying service tax for the entire collection as processing charges for activating cellular phone and paying the service tax on activation and on his acceptance that activation is taxable service held that SIM cards are never sold as goods independent from services provided. There lordships held that they are considered part and parcel of services provided and the dominant position of the transaction is to provide services and not to sale the material i.e. SIM Cards on its own which has no value as such. The Hon'ble Court therefore concluded that value of SIM cards forms part of activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. It is further observed that the Sales Tax Authority understood the aforesaid position that no element of sale is involved in the present transaction and in these circumstances it upheld the order passed by the Kerala High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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