Permissive use of passive infrastructure does not amount to transfer of the right to use goods for tax purposes.

Passive infrastructure under a Master Services Agreement was held not to amount to a transfer of the right to use goods where ownership, control, maintenance, and risk remained with the provider and operators received only restricted access. Applying the settled test for deemed sale, the arrangement was treated as a licence or permissive use, not exclusive possession or legal control, so no Kerala VAT liability arose on that basis. Assessment orders were also unsustainable because the assessing authority failed to record a finding on the jurisdictional fact of transfer of the right to use, resulting in non-application of mind; the assessments and recovery notices were set aside.

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Issues: (i) Whether the arrangement under the Master Services Agreement for passive infrastructure amounted to a transfer of the right to use goods so as to attract levy under the Kerala Value Added Tax Act, 2003. (ii) Whether the assessment orders could be sustained when the assessing authority had not recorded a finding on the essential jurisdictional fact of transfer of the right to use the passive infrastructure.

Issue (i): Whether the arrangement under the Master Services Agreement for passive infrastructure amounted to a transfer of the right to use goods so as to attract levy under the Kerala Value Added Tax Act, 2003.

Analysis: The agreement showed that ownership, control, maintenance, and risk of the passive infrastructure remained with the petitioner. The mobile operators were given only restricted access for installation, operation, and maintenance of their equipment. Applying the settled tests for transfer of the right to use goods, the arrangement did not confer possession or exclusive legal control on the operators. The permission granted was only a licence or permissive use, not a transfer of the bundle of rights necessary to constitute a deemed sale.

Conclusion: The arrangement did not amount to a transfer of the right to use goods and was not liable to tax as a deemed sale.

Issue (ii): Whether the assessment orders could be sustained when the assessing authority had not recorded a finding on the essential jurisdictional fact of transfer of the right to use the passive infrastructure.

Analysis: The assessment orders proceeded only on the movable or immovable character of the infrastructure and did not address the core question whether the contractual arrangement effected a transfer of the right to use. That omission meant the foundational fact necessary to assume taxing jurisdiction was not examined, and the orders suffered from non-application of mind.

Conclusion: The assessment orders could not be sustained and were liable to be quashed.

Final Conclusion: The writ petitions succeeded and the impugned assessments and recovery notices were set aside, as the passive infrastructure arrangement was only a permissive, non-exclusive use and not a taxable transfer of the right to use goods.

Ratio Decidendi: A contract for passive infrastructure does not attract deemed-sale tax unless it transfers exclusive legal possession and the right to use the goods to the transferee; mere access or permissive use under a retained-control arrangement is insufficient.

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