Telecommunication services are not sale of goods; sales tax applies only to separately identifiable goods or transfer rights.

Telecommunication services were treated as services, not as a sale of goods or a transfer of the right to use goods for sales tax purposes under the Bombay Sales Tax Act, 1959. The Court applied Article 366(29A)(d) to hold that tax could arise only where there is identifiable movable property, an agreement to transfer it, and actual transfer or a genuine right to use deliverable goods. Airwaves were not goods capable of delivery, and SIM cards were part of the service arrangement rather than independent goods. Separate liability could still arise if handsets or other instruments were actually sold by the operator.

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Issues: Whether cellular mobile telephone services, including the use of SIM cards, handsets and network infrastructure, constituted a sale of goods or a transfer of the right to use goods so as to attract sales tax under the Bombay Sales Tax Act, 1959, or whether the activity was merely a taxable telecommunication service.

Analysis: The service provider under the telegraph licensing regime was found to be engaged in receiving, transmitting and delivering messages through a network, while the airwaves used for transmission remained a Government resource and were not goods capable of delivery. Applying the constitutional concept of tax on the sale or purchase of goods under Article 366(29A)(d), the Court held that sales tax could be levied only where there was movable property constituting goods, an agreement to transfer such goods, and actual transfer of property or a discernible right to use deliverable goods. The Court relied on the principle that telecommunication service is, in substance, a service and that any sale element is confined only to separately identifiable goods such as handsets or accessories supplied by the operator. SIM cards, in the circumstances considered, were treated as part of the service arrangement and not as independent goods sold to subscribers.

Conclusion: The impugned notices seeking to levy sales tax on voice transmission services were unsustainable, and the petitioners were not liable to sales tax on telecommunication services. The assessing authority could, however, examine separately whether any handsets or instruments had in fact been sold by the service provider.

Ratio Decidendi: Telecommunication services are not liable to sales tax merely because they employ network equipment or transmitted signals; tax can be imposed only on a separately identifiable sale of deliverable goods or a genuine transfer of the right to use goods.

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