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TMI Blog2025 (2) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... . CAV ORDER (PER: HON'BLE MR JUSTICE KRISHNA S DIXIT) All these Petitions by the Assessees call in question orders made by the Karnataka Appellate Tribunal at Bengaluru whereby their Appeals filed under Section 62 (6) of the Karnataka Value Added Tax Act, 2003 have been negatived essentially holding that the Assessees have transferred to the subscribers the right to use Set Top Boxes for consideration and therefore, the same amounts to sale within the definition of Section 2 (29) (d) of the Act and as a consequence, levy of sales tax is unassailable. II. Since common questions of law & facts are involved, there is consensus at the Bar to hear & dispose off these cases by a common order and therefore, they are taken up accordingly. Learned Sr. Advocate Mr. T. Suryanarayana and other advocates appearing for the Assessees succinctly submit as under: (1) After the 46th Amendment, Article 366 (29A) has been introduced to the Constitution of India providing for tax on the sale or purchase of goods in an inclusive way; clause (d) of this Article enables the State to levy tax even on the transfer of the right to use any goods for any purpose for consideration; Section 2 (29) (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitions or argued by the Assessees is a question of law. (2) The definition of sale enacted in Section 2 (29) (d) of 2003 Act is a means & inclusive definition; a transaction that would not conventionally amount to sale is deemed to be a sale by virtue of inclusive part of the definition; the transfer of right to use goods for consideration without anything more constitutes a sale and therefore, attracts levy. (3) Admittedly, STBs are provided to the subscribers in terms of statutory obligation and they have to be of a prescribed standard; they have to be installed by the Cable Network Operators at the place of subscribers who make use of them in choosing channels of display on TVs or such other devices; the so-called activation charges are nothing but a consideration for the transfer of right to use. (4) The decisions cited on behalf of the Assessees do not support their case; a Division Bench of Hon'ble Tripura High Court in BHARTI TELEMEDIA LTD. vs. STATE OF TRIPURA (2015) 79 VST 561, having considered all aspects of the matter has ruled against Assessees of the kind; decision of Hon'ble Allahabad High Court in THE COMMISSIONER COMMERCIAL TAX U.P. LUCKNOW vs. S/S. MANSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute provides the remedy by way of an "appeal" and so also of a "revision". B. CHAPTER VII OF 2003 ACT: This chapter contains the provisions for Appeals & Revisions. Appeal to the Appellate Tribunal is provided by section 63 which has as many as twelve sub-sections that fairly indicate the scope, grounds, limitation & procedure. On the other hand, Section 65 provides for Revision by High Court 'in certain cases'. Section 65 has as many as twelve elaborate provisions. The entire section is reproduced for ease of understanding: "65. Revision by High Court in certain cases.- (1) Within [one hundred and Eighty days] from the date on which an order under sub-section (5) or (8) or (9) of Section 63 was communicated to him, the appellant or the respondent may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either failed to decide or decided erroneously any question of law: (2) The High Court may admit a petition preferred after the period of [one hundred and Eighty days] aforesaid if it is satisfied that the petitioner has sufficient cause for not preferring the petition within that period. (3) The petition shall be in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner as may be prescribed, and shall where it is preferred by any person other than an officer empowered by the Government under sub-section (1) of Section 63 be accompanied by a fee of one hundred rupees. (11) (a) With a view to rectifying any mistake apparent from the record, the High Court may, at any time within five years from the date of the order passed by it under sub-section (6), amend such order. (b) The High Court shall not pass an order under this sub-section without giving both parties affected by the order a reasonable opportunity of being heard. (12) In respect of every petition preferred under sub-section (1) or (10), the costs shall be in the discretion of the High Court." C. A THUMB NAIL DESCRIPTION OF SECTION 65: (1) It specifically states that Revision is available 'in certain cases'. Such an expression is not employed in section 63A and section 64 which too provide for revision respectively by the Joint Commissioner and by Additional Commissioner/Commissioner. This cannot be sans any significance. Since in Indian legislative practice, even titles to the sections are voted, they are part of the statute, although they may not control the substantive prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5: (1) Now, let us come to the substantive provision of Revision to High Court, namely sub-section (1) of Sec. 65. Textually, it requires a question of law that was raised but the Tribunal has 'failed to decide' or 'decided erroneously'. Therefore, we have to examine as to what is meant by 'question of law'. Salmond's Jurisprudence [12th Edition by P J Fitzgerald, pages 65 to 70], says that all questions that arise before court are broadly of four types: (i) questions of law, (ii) questions of fact, (iii) questions of opinion & (iv) questions of discretion. We are not much concerned with item Nos.(ii), (iii) & iv). Salmond further says that ordinarily, a question assumes the character of law, if answer to that has to be found by turning the pages of statute book. However, that would be too restrictive an approach when it comes to the realm of adjudication process like this, in the light of statutory provisions. By now, it is well settled that a question may be treated as of law even if in Salmondian sense, it is not: when a finding of fact is recorded without evidence or contrary to evidence or founded on inadmissible evidence, ordinarily they are treated as questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blocks would make it wider than what conventionally a "means & includes" definition would import. The expression "all kinds of movable property" employed by the legislature lends support to this view. What is significant is the choice of term namely "all kinds of" and not "all types of". It is intended to be all pervasive, barring the specified exclusions in the definition. Apparently, STB does not fall into any of these exclusions. Whether it would fit into the substantive part of the definition, can be ascertained by a deeper examination of the commodity. (2) What the learned Author Mr. W. Fischer writes [Digital Video and Audio Broadcasting Technology, A Practical Engineering Guide] can be a prelude to our discussion in this regard: 'In the case of digital television, it is advisable to use an RGB (SCART) connection or a Y/C connection for the cabling between the receiver and the TV monitor in order to achieve optimum picture quality. In digital television only frames are transmitted, no fields. It is only at the very end of the transmission link that fields are regenerated in the set top box or in the decoder of the IDTV receiver. The original source material, too, is provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation 2(z) of the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012 defines "Set Top Box" means a device, which is connected to, or is part of a television and which allows a subscriber to receive in unencrypted and descrambled form subscribed channels through an addressable system. For ease of ocular understanding, prototype images are reproduced below: (5) It is not out of place to refer to a Central Government Office Memorandam dated 13.08.2014 which says that STBs fall within the definition of goods for the purpose of Central Sales Tax Act, 1956 and therefore, Form-C facility to be extended to them. The said OM reads as under: "F.No.32011/2/2014-SO(ST) Government of India Ministry of Finance Department of Revenue State Taxes Section *** New Delhi, Dated 13th August, 2014 OFFICE MEMORANDUM Subject:- Inclusion of Set Top Boxes in the definition of goods for sue in the "Telecommunications Network" under Section 8 (3)(b) of Central Sales Taxes Act, 1956, to extend the facility of Form 'C' to Set-Top Boxes. The undersigned is directed to refer to D.O.No. 35(5)/2013-IPHW dated 13th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under: "5. During the assessment year in question, the assessee was engaged in providing cable television network to its subscribers against value. It had been subjected to service tax as a service provider. The Tribunal has set aside the assessment order under the UP VAT Act, 2008 (hereinafter referred to as the 'Act') on the reasoning that the assessee was only a service provider. 6. Learned Standing Counsel has contended that there was some element of sale of goods namely, set top box in the value Rs.1,200/- received by the assessee from each subscriber. The argument so advanced, even if found to be factually correct, to any extent, may not itself lead to an assessment of tax liability under the Act, in absence of any enabling provision being first shown to exist on the basis of such calculation or bifurcation or apportionment of the total value may have been made." The decision does not mention any specific provision of law nor does it refer to Article 366 (29A) of the Constitution, either. This decision is bereft of any precedential value. Much is not necessary to specify. (iii) Learned AGA pressed into service a Division Bench decision of Tripura High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cash, deferred payment or other valuable consideration;" In STATE OF MADRAS vs. GANNON DUNKERLEY & CO. AIR 1958 SC 560, the Supreme Court had held that the expression "sale of goods" used in the Constitution involves an existence of any agreement between the parties for the sale of goods in which eventually property passes. To a great extent, the substratum of this decision is altered by introducing a fiction by which six instances of transactions are treated as sale, one of them being the transfer of the right to use any goods for any purpose for consideration. Incidentally, the validity of this Amendment came to be upheld in BUILDERS ASSOCIATION OF INDIA vs. UNION OF INDIA (1989) 2 SCC 645. There is force in the submission of learned Sr. Advocate Mr. Suryanarayana that section 2 (29) has to be read with section 2 (15) and Article 366 (29A) (d) of the Constitution, since they have a thick kinship. (3) The submission that STB is not capable of being exclusively used by the subscriber is bit difficult to countenance. Let us drift a bit to the cognate provisions of law namely 2012 Regulations again. Regulation 17 obligates every Multi Service Operator like the Assessees herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 licence 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 authorized representatives of the mobile operator... in the facts of this case- if we look into the various terms of the agreement it is clear under the contract, the assessee has not transferred any right in the passive infrastructure to the mobile operators. The right that is conferred on the mobile operator is a permission to have access to the passive infrastructure, a permission to keep the active infrastructure in the site belonging to the assessee, a permission to mount the antenna on the tower erected by the assessee and to have the benefit of a particular temperature so as to operate the equipments belonging to the mobile operator. No sale of goods or transfer is involved in the transaction in question. Therefore, it does not fall within the mischie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantiate pervasive control of the Assessee over the STBs, merely because they have license to gain entry to the premises of the subscriber for periodic inspection/repair. G. AS TO CONSIDERATION FOR TRANSFER OF RIGHT TO USE STBs: (1) In Cable Networks of the kind, almost invariably STBs are employed and that they are installed in the house of the subscribers, is not in dispute. The submission of the Assessees that even if the subscribers are held to be using the STBs, unless the same is for consideration, the requirement of section 2 (29) (d) of the 2003 Act read with Article 366 (29A) (d) of the Constitution of India is not satisfied as a proposition, is true. In a fictional sale too, law requires consideration inasmuch as the expression "for cash, for deferred payment or other valuable consideration" is employed both in the said provisions. The simple question is whether the transfer of right to use STBs is for consideration or it is free. The Authorities and the Tribunal have held that the consideration for right to use STB is Rs. 2,000/-. That estimate is made inter alia on the basis of a clause in the Inter-connect Agreement that obtained between the Assessees and their l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of more than one tax on a subject matter, if incidence of each of the taxes is different from the other and such taxes may be imposed under different statutes. A tax on the sale of goods is envisaged under Entry 54 of List II (Sales Tax) of Schedule 7 of the Constitution and the taxable event is transfer of goods including fictional sale envisaged under Article 366 (29A). In the case at hand, sales tax is levied under the State Enactment. There the State is not levying tax on service aspect of the transaction, since that exclusively belongs to the domain of the Parliament, which has enacted Finance Act, 1994. Therefore, reliance of the Assessees on QUICK HEAL TECHNOLOGIES supra would not come to their aid, especially when sale element is discernible from the transaction. (3) Learned AGA made use of the very same decision by drawing our attention to what has been articulated at paragraph 53.5, 53.6 & 53.9 as under: "53.5 In the case of Article 366 (29A) (d) the goods are not required to be left with the transferee. All that is required is that there is a transfer of the right to use goods. In such a case taxable event occurs regardless of when or whether the goods are delivered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so repealed; ..." A perusal of these clauses shows that there is a limited deeming of non-repeal of the Act, at least in effect. This is as of necessity. (3) Now let us examine the text & context of Sub- section (2) of Sec. 174 which reads as under: "(2) Not withstanding anything contained in section 173, for the purpose of giving effect to sub-section (1), the State Government may, by notification, in the Official Gazette make such provision as appears to it necessary or expedient,- (a) for making omissions from, additions to and adaptations and modifications of the rules, notifications and orders issued under the repealed Acts; (b) for specifying the authority, officer or person who shall be competent to exercise such functions exercisable under any of the repealed Acts or any rules, notifications or orders issued thereunder as may be mentioned in the said notification". Obviously this is an enabling provision that empowers the government even to tinker with the purport & e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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