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TMI Blog2015 (10) TMI 2783X X X X Extracts X X X X X X X X Extracts X X X X ..... ture services to various telecommunication operators in India on a shared basis. As a part of its activity, the petitioner installs the necessary infrastructure to facilitate telecommunication operation. For providing the passive infrastructure services, the petitioner enters into a Master Services Agreement with the sharing operators, wherein the inter se roles and responsibilities of each party are clearly defined. In order to provide infrastructure services, the petitioner puts up, either on sites belonging to it or on acquired sites, the passive infrastructure which is comprised of towers and a shelter. The latter is basically a construction, in which the telecom operators are permitted to keep and maintain their base terminal stations, associated antenna, back-haul connectivity to the network of the shared telecom operators and associated civil and electrical works required to provide the telecom service. In addition to the towers and shelters, the petitioner also provides diesel generator sets, air conditioners, electrical and civil works, DC power system, battery bank etc. All these components are together referred to as the passive infrastructure under the Master Services A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received by them for providing the services contemplated under the Master Services Agreement, they are paying Service Tax in terms of the Finance Act, 1994 as amended, and hence there cannot , at any rate, be a levy of KVAT also on the same consideration amount. 3. I have heard Sri.A. Kumar, the learned counsel appearing for the petitioners as also the learned Government Pleader appearing for the respondents in all the writ petitions. 4. Before proceeding to discuss the findings in the assessment orders, that are impugned in the writ petitions, it would be apposite to refer to some of the relevant clauses in the Master Services Agreement, entered into between the petitioners and the mobile service operators. Some of the relevant clauses in the said agreement are extracted hereunder: "Active Infrastructure" includes base terminal station equipment, associated antennae, backhaul connectivity to the Sharing Operators' network and other requisite equipment and associated civil and electrical works required to provide telecommunications services by the Sharing Operator at a telecommunications site other than Passive Infrastructure (as defined below): "BTS" means Base Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is already availing the services from Indus under this Agreement, the same may be provided by Indus subject to feasibility and availability. 2.1.2 Throughout the Term of this Agreement, the Sharing Operator shall be entitled to provide notice to Indus 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). 2.1.4 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 borne equally by both the Parties. 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, sanctions, etc. from DoT or Telecommunications Regulatory Authority of India or other applicable regulatory body or Government Authority, banks, financial institutions, etc. as may be required for the installation of Active Infrastructure at the Site from time to time. Indus shall provide information, within its control, required by the Sharing Operator. Further, Indus shall make best endeavours to provide copies of the SAFCA approval of the other sharing operator(s). 3 Operation and Maintenance 3.1 Provision of Operation and Maintenance Services 3.1.1 Indus shall provide Operation and Maintenance Services in relation to each Site and the Passive Infrastructure at each Site in accordance with the terms set out in Schedule 2 (Operation and Maintenance Services). 3.1.2 The Sharing Operator shall be responsible for the operation and maintenance of all Sharing Operator Equipment. In order to conduct such operation and maintenance activities, the Sharing Operator shall have the right to replace, repair, add or otherwise modify the Sharing Operator Equipment or any portion thereof and the frequencies over which such Sharing Operator Equipment operators. The Sharing Operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each Circle for each month is 99.95% across all Sites in that Circle that are utilised by the Sharing Operator. 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. Operation and Maintenance Service Level % of Total Rate payable by Indus 99.95% or greater 0.0% 99.90% or greater but less than 99.95% 5.0% 99.70% or greater but less than 99.90% 7.5% 99.50% or greater but less than 99.70% 10.0% 99.00% or greater but less than 99.50% 25.0% Less than 99.00% 30.0% Less than 94.00% 100.0% The Operation and Maintenance Service Credits payable by Indus in accordance with the table above shall be applicable in respect of those Sites in the relevant Circle which are below the Operation and Maintenance Service Level specified in paragraph 1.9.2 above. An example / illustration of this has been provided as Appendix 3. However the above shall not apply to sites where Electricity Board connection is not available or sites which are difficult to access. 4. Indus Rights 4.1 Sites Indus shall have the right: 4.1.1 where the Sharing Operator, any Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harmful interference with or physical obstruction of, any Sharing Operator Equipment existing at the Site at the time of such installation and in case any harmful interference or obstructions is caused to Sharing Operator Equipment at the said Site, to take all steps necessary to make any other sharing operator to correct or eliminate such interference or obstruction, including but not limited to powering down the newly installed equipment; 5.2.3 shall endeavour to share the Passive Infrastructure in a manner that will enable the simultaneous use by other sharing operators, without affecting the Sharing Operator Equipment or the Sharing Operators utilisation of the same. 5.2.4 shall maintain the Passive Infrastructure in a good and safe state of repair and condition to enable Indus to meet the Operation and Maintenance Service Levels; 5.3 Sharing Operator Warranties and Covenants The Sharing Operator covenants, warrants and represents that it shall: 5.3.1 comply, and procure that its employees, agents and/or subcontractors comply, with the terms of all applicable Service Contracts: 5.3.2 not commence use of the Sharing Operator Equipment at any Site until: (i) it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd business interruption insurance policies." 5. It will be apparent from a consideration of the various clauses in the Master Services Agreement that, what is contemplated therein is the provision of certain infrastructural facilities by the petitioner, which could be tapped into by various mobile services operators, who have entered into an agreement with the petitioners, on payment of a fee as consideration. What is evident from a perusal of the various clauses is that the ownership of the infrastructural facility continues to be with the petitioners. The obligation to maintain and control the passive infrastructure is also retained with the petitioners. The risk attached to the maintenance of the infrastructural facility continues to lie with the petitioners and for this reason, the obligation to take out an insurance in respect of the passive infrastructure is also with the petitioners. The mobile service operators are given only a limited permission to use the infrastructural facility in accordance with the terms and conditions in the agreement. It is in the backdrop of the said arrangement between the parties that one has to examine the legal provision under the KVAT Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears to us that under the terms of the contract there is no transfer of right to use the passive infrastructure conferred on the sharing operator/mobile operator. What is permitted under the contract is, a permission in the nature of a license to have access to the passive infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorised representatives of the mobile operator. It is because an owner of a property has a bundle of rights, namely, right to possess, right to use and enjoy, right to usufruct, right to consume, to destroy, to alienate or transfer, etc. Therefore, to constitute a deemed sale under article 366 (29A)(d) having regard to the object with the 46th Constitutional Amendment was inserted, it is clear the right that is transferred under a contract should be a bundle of rights minus right to title. It is because of the earlier Constitution Bench judgment of the apex court where the right to use the property was transferred by the person who retained the title as only a nominal owner with the benefit of the goods has been passed on to the transferee, without p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the order of the assessment order or in terms of any interim order passed in the writ petitions or in pursuance of the final order shall be refunded to the assessees within three months from the date of receipt of a copy of this order, failing which the said amount to be refunded would carry simple interest at nine per cent after the expiry of 90 days till the date of payment. (g) No costs" 7. The aforesaid decision of the Karnataka High Court has since been followed by the Delhi High Court in the judgment reported in Indus Towers Limited v. Union of India and Others [2013 (62) VST 422] wherein also, the Hon'ble High Court considered the various clauses in the Master Service Agreement and found that the right to use goods could be said to have been transferred by the provider of passive infrastructural facilities to the sharing telecom operators only if the possession of the said infrastructure had been transferred to them. It was found that, they would have the right to use the passive infrastructure, if they were in lawful possession of it. There had to be therefore, an act demonstrating the intention to part with the possession of the passive infrastructure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that was maintained by them and this degree of control, that was exercised by the petitioners over the passive infrastructure, ensured that the mobile service operators, who were given permission to use the infrastructural facility, obtained only a licence to access the infrastructural facilities offered by the petitioner, and did not get a right to use the goods transferred to them in the process. I therefore, find that, in these cases, there is no transfer of the right to use the infrastructural facilities, from the petitioners to the mobile services operators, that could be brought to tax under the KVAT Act. The impugned assessment orders in all these writ petitions are therefore liable to be quashed and I do so. 9. Before parting with these cases, I must note that, in the assessment orders that are impugned in the writ petitions, the assessing officer has not dealt with the factual aspects of the case to the extent dealt with in this judgment. As a matter of fact, the finding of the assessing officer, in the assessment order, is solely on the issue of whether or not the passive infrastructure, that was set up by the petitioners, constituted an immovable property or a movable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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