TaxTMI 
TaxTMI 
2011 (2) TMI 307
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Bharath Sanchar Nigam Limited (for short herein after referred to as the 'BSNL') is wholly owned Government of India undertaking providing all types of telecom services in the country except the metro cities of Delhi and Mumbai. It is the successor and assign of the erstwhile Department of Telecom. Ministry of Communication and IT (Government of India). The BSNL as a Service Provider merely facilitates its subscribers in transmission of their voice or data in its network. The transmission facilitation services are provided by using different medium of transmission depending upon the technology in use and in operation from time to time. The transmission of signals may be provided through over head lines, cabling systems, microwave systems, etc., by using complex system exchange network equipments. Each of these transmission systems has limited signal carrying capacity. With the explosive growth in telecommunications in India and exponential growth in subscribers, optical technology has also been adopted by BSNL in providing telecommunication services in view of its capacity, reliability, speed and dependability. 4. The Optical Fibre Cable (for short hereinafter referred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hem. The BSNL challenged the said notice dated 04.05.2009 in W.P.No.13315 /09 which came to be disposed off by an order dated 06.10.2009 directing the parties to approach the Committee on Dispute ( CoD ) headed by the Cabinet Secretary. The CoD , by an order dated 24.11.2009 permitted the BSNL to approach this Court. 7. Thereafter, the 3rd respondent issued a notice dated 15/22.02.2010 under Section 39(1) of the KVAT Act proposing to levy taxes for the respective years. The BSNL contested the demand by contending that there is no sale transaction in transmission of voice or data in telecommunication services, which would fall under the definition of either sale or deemed sale. The issue regarding levy of tax on telecom services has already been conclusively decided by the Apex Court wherein it has been held that electromagnetic waves of radio frequencies are not goods. The said findings squarely apply to the case of light energy. They set cut in detail the relevant facts/particulars in support of their contentions. Relying on the aforesaid judgment, they specifically contended that there is no element of goods in services provided by the BSNL. There is no transfer of right to us....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision before him and was completely based. The 3rd respondent had already made up his mind and come to a conclusion that the judgment of the Supreme Court in BSNL case was erroneous and that the BSNL was wrongly taking advantage of the judgment of the Apex Court. The said bias has translated itself in the reassessment order, which is apparent from the observations made by the 3rd respondent in paragraphs 35, 36 and 306 of the impugned order. 10. The BSNL further contends that, revenue receipts are generated from three streams viz., revenue from landline, mobile phone services and broad band services on OFC. In the impugned order, the 3rd respondent has taken into account, the revenue from all the three streams and not confined himself only to broadband OFC connected to subscribers. 11. Therefore, the BSNL preferred a writ petition in W.P.No.21836 /2010 challenging the reassessment orders dated 18.06.2010 before this Court. The learned Single Judge, after hearing the parties, rejected the writ petition on the ground that the judgment in the BSNL case is open ended; that, the case involves phenomenal scientific investigation and research and as the BSNL has an alternative and e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o why the amount claimed by the petitioner as income from services may not be considered as turnover in terms of Section 2(v)/2(36) of the Act. He also called upon the petitioner to show cause as to why the transactions of broadband, allegedly authorized by the Commissioner and also other transactions, not so covered by the alleged authorization, may not be taxed as sale of goods. The petitioner submitted a detailed reply to the show cause notices contending that its operations/business is a pure service and does not involve any element of sale and the light energy is not 'goods'. There is neither any agreement for the alleged sale nor is there any sale of light energy. The OFC is used in broad band . The entire revenue is not from the broadband or the alleged sale of light energy. The income from the leased lines is much less and the total revenue includes receipts towards other services as well and provided the break up of revenue from broadband services. They also enclosed the technical opinion from IIT , Mumbai to substantiate their contention. An enquiry was conducted. The technical experts were examined and they were permitted to be cross-examined. On consideration of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Indian Telegraph Act, 1885. 16. The appellant treated the activity carried on by them, namely rendition of broad band services to be a contract for services and has been periodically discharging taxes under the Finance Act, 1994. The appellant have also registered as dealers both under the Karnataka Sales Tax Act and Karnataka Value Added Tax Act. However, they did not disclose the receipts in respect of broad band services for the assessment year 2005-06. On completion of assessment, the authorities levied VAT on the broad band services. The petitioners challenged the said order before this Court in W.P.No.1537 / 2007 which came to be dismissed by the learned Single Judge on the ground of alternative remedy and the petitioner was permitted to file a statutory appeal. The said order of learned single Judge was challenged in W.A.No.629 /2007 which also came to be dismissed on merits upholding the assessment orders by an order dated 16.01.2009. The petitioner challenged the said order of the Division Bench before the Hon'ble Supreme Court in SLP 4481/2009. By an order dated 02.03.2009, the Supreme Court set aside the order of the Division Bench and restored the order of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of appeal against the re-assessment orders under Section 20 of the KST Act and 62 of the KVAT Act. It is the third respondent who has got valid jurisdiction to pass the impugned order and the reason given by the petitioners at Para 19 of the petition that the statutory appellate authority cannot decide the interpretation of definition of sale is not correct. They contend that in identical facts and circumstances in the case of M/s. Bharati Televentures , the learned single Judge had dismissed Writ Petition No.1537 /2007 by an order dated 16.3.2007 holding that the competence of the State to levy tax on 'goods' being a question of fact in any given case and such question of fact is the basis for levy of tax by the authorities, the writ jurisdiction of this Court cannot be invoked. However, the learned single Judge had permitted the petitioner therein to avail the statutory remedy of appeal. Against that order, an appeal came to be filed before the Division Bench of this Court in W.A . No.629 /2007 which also came to be dismissed on merits by judgment dated 16.1.2009 upholding the assessment orders passed by the assessing officer. Against that order, M/s Bharathi Televentur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of not only the data transfer through specific infrastructure/network but also transfer of specific goods (specifically required energy), which is intentionally created by the telecom dealers, for the sole purpose of data transfer. The sole goods element required for data transfers. The sole goods element required for data transfers is the specific light carrier, (i.e. specially required energy), which acts as a data carrier, and carries data to the desired destinations at light speed, delivers that data there, and gets consumed. The customers are charged on the basis of use/consumption of this carrier energy, which is directly related to the quantity of data transferred by them, which is digitally measurable. 23. The subject matter of the impugned orders is all about the energy, which precisely is the data carrier in telecommunications. The similarly operating electrical energy has already been held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax Vs. Madhya Pradesh Electricity Board (25 STC 188) as 'goods'. The electrical energy is a flow of electrons and similarly operating Light Carrier, or the ACLE, is the flow of photons. Thus, the thir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as categorically held that the dominant intention will determine whether it is the one for sale of goods or rendition of service. Since these transaction are purely commercial transactions, by the business houses wherein the only binding bond between the telecom dealer and their customers, is the 'payment of price', and since the Light Carrier is the only discernible and transferable 'goods' element in the network, the dominant intention of the contract is to sell as much of the goods as possible and maximize profits (goods in the context of telecommunications being the data carrier energy, i.e , light carrier). It is evident in the public domain that the customers are being wooed by the telecom dealers by giving them incentives, to attract them towards their brands. Thus, telecom contracts for data transfers are composite cum indivisible contracts of sale. 27. The State contends that, even presuming for a moment that dominant intention is not sale of goods, the transfer of property in 'goods' that is taking place in these telecom contracts for data transfers would take the shape of compulsory/involuntary transfer of property in 'goods' for a cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contracts. The telecom contract for data transfers are neither works contracts nor catering contract, and therefore, splitting of the contract into goods and service components is legally not possible. The telecom dealers too are not collecting their charges separately, one portion for goods, and the second for the service (utilization of network). Thus, telecom contracts for data transfers are indivisible contracts of sale-for sale of goods i.e., energy, since nothing else is present in the date transfer network, other than this energy. 31. It is the further case of the respondent-State that in the BSNL case, it is clearly recorded that no arguments were addressed before the Supreme Court that electromagnetic waves are 'abstractable' or 'are capable of delivery'. This makes it clear that the BSNL verdict is rendered in the absence of arguments on the properties of the electromagnetic waves. BSNL verdict was rendered in connection with mobile telephone connections, as forthcoming from the very first para of the verdict. In mobile telephones, the data carrier is the electromagnetic Energy in space, which is generated by the customers, and which moves in all direct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assed on technical opinion of reputed technical bodies in the country, detailed reasons are given for rejecting the contention of the petitioners and, therefore, there is no substance in the said contentions. The respondents have also filed one more additional statement of objections referring to the deliberations of the committee on Subordinate Legislation and the correctness of the said report and reiterating their earlier assertion that there is no bias. 33. The Union of India have filed their statement of objections. They contend, that, so far as the levy of service tax on the activities of the petitioner is concerned, neither the petitioner nor the State of Karnataka have denied the right or questioned the validity of levy of service tax. There is no challenge in regard to legislative competence / constitutional validity of levy of service tax by the Central Government. The petitioner is duty bound to pay the service tax and the same is beyond any doubt. The question of the legislative competence of the State Government to levy sales tax on the activities/transactions of the petitioner has to be deduced from the ratio of the various judgments of the Apex Court and other Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court in BSNL case. The State of Karnataka was a party to the said case in Supreme Court. The arguments which they are canvassing now in this proceedings were never canvassed in the said proceedings. The 3rd and 35th reports of the Legislative Committee of the State of Karnataka make it abundantly clear that in the face of the judgment of the Supreme Court, they were unable to levy tax on the activity of appellants. Therefore they took a decision to move the Supreme Court by way of review. Accordingly, a Review Petition came to be filed urging the very same grounds which are urged in these proceedings. The Supreme Court rejected the review petition both on merits as well as on the ground of delay However, after the Review Petition was dismissed, the State is making an attempt to turn round and contend that the issues involved in these appeals were not the subject matter of judgment in BSNL case. Their contention that only mobile telephone services were subject matter of the said proceedings and the Supreme Court was concerned about the deemed sale and that both are not the subject matter of this proceedings, is factually incorrect. A reading of the judgment of the Apex Court makes ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the respondents in the statement of objections and as held by the Assessing Authority in the impugned order, it is only a carrier. It is also one of the forms of electro magnetic wave. It is intangible. In fact, the subscriber is not aware of the existence of such goods at all. The contract between the subscriber and the service provider only speaks about services and in the entire contract there is no indication of the subscriber either purchasing this ACLE or the service provider selling the same. The admitted expert opinion clearly demonstrates that when the subscriber makes a call he only desires transmission of his voice or data to a particular destination. In the network, the message gets embedded into the light energy and carried to the destination where on the same being deposited on photo detector, the ACLE gets dissipated drops out and message reaches the destination. Therefore, at no point of time, the subscriber ever comes in contact with this carrier. Thus, he contends that firstly, ACLE is not 'goods' and even if it is to be construed as 'goods', there is no sale of such goods. Except in the case of deemed sale, the law does not permit levying of tax o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lement of sale is involved in some portion of the service rendered by the service provider, is wholly illegal. He also pointed out that Assessing Authority has not read the said judgment in proper perspective. His understanding that the said judgment only deals with mobile telephones, that it was a case of only a deemed sale and further that the said judgment has no application to the facts of this case is patently perverse. He seems to have not looked into the judgment of Justice Laxmanan , which exclusively deals with Optic Fibre Cable, the nature of transaction. There is a categorical finding that electro magnetic waves in Optic Fibre Cable is only a carrier and there is no goods or transfer of goods involved in rendering such telecommunication service. He also pointed out that the Assessing Authority not only attempted to distinguish the judgment of the Supreme Court but also went on to point out how the Supreme Court is not correct and where the Judges went wrong, etc., which conduct cannot be countenanced. 39. He also pointed out that the said artificially created light energy does not have the characteristic of goods and it is not a marketable commodity. In the transmissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ves were abstractable or capable of delivery. As the said question was not gone into the same are raised here for consideration The BSNL judgment would not come in the way of the Assessing Authority independently assessing the cases of the appellants/petitioners. Therefore he has rightly embarked upon these respondent-assessment proceedings and demonstrated as to how the said judgment is distinguishable from the facts of these cases and based on technical opinion. The assessing authority has demonstrated that the ACLE which is the subject matter of these proceedings is 'goods' and there is sale of 'goods' and therefore the sales tax is leviable. According to the Assessing Authority, it is a case of simple sale and not a deemed sale as in the BSNL case: In so far as the nature of the contract is concerned, he contended that if it is to be held as a composite contract, it is indivisible and if the doctrine of dominant intention is adopted in interpreting the contract, it clearly demonstrates that it is a contract of pure and simple sale and not a contract of service. Alternatively, he contends that it is an indivisible contract of pure and simple sale , no service ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....availability of alternative remedy? CONSTITUTIONAL ISSUES "LIGHT ENERGY" - FALLS UNDER WHAT LEGISLATIVE ENTRY 42. The question is whether the activity involved in these transactions falls within Entry 97 of List-I or Entry 54 of List-II of the VII Schedule to the Constitution of India. Article 246 of the Constitution vests in the Parliament, the exclusive power to make laws with respect to any of the matters enumerated in List I in the VII Schedule, i.e., Union List. Similarly, the State legislature has exclusive power to make laws with respect to any of the matters enumerated in List 11 in the VII Schedule, i.e., State List. Both the Parliament as well as the State Legislature have power to make laws with respect to any of the matters enumerated in List 111 in VII Schedule, i.e. Concurrent List. In addition to the aforesaid power conferred on the Parliament under Article 246, residuary power of legislation is conferred on the Parliament under Article 248. Under Article 248 Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List. Such power shall include the power of making any law imposing tax not me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Finance Act, brought in 12 more services intro service tax net. Under the Finance Act passed annually more and more services were brought within the tax net. Thus, in all, as of today 120 services are brought within the tax net. By the Finance Act 2007 which came into force from 01.06.2007, telecommunication services was specifically inserted in the Finance Act, 1994. 45. Section 65 (109a) defines telecommunication services as under: Section 65 (109a)- "telecommunication service" means service of any description provided by means of any transmission, emission or reception of signs, signals, writing, images and sounds or intelligence or information of any nature, by wire, radio, optical, visual or other electromagnetic means or systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception by a person who has been granted a licence under the first proviso to sub-section (1) of Section 4 of the Indian Telegraph Act, 1885 (13 of 1885) and includes- (i) Voice mail, data services, aud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....105); and (c) any person in relation to internet telephone referred to in sub-clause (zzzu) of clause (105); Section 65(1 TO) defines telegram as under: "S. 55(110)- "telegraph" has the same meaning assigned to in clause (1) of Section 3 of the Indian Telegraph Act, 1885. 65(111)- defines "telegraph authority" as S.65 (111)- "telegraph authority" has the meaning assigned to it in clause (6) of S.3 of the Indian Telegraph Act, 1885 and includes a person who has been granted a licence under the first proviso to sub-section (1) of Section 4 of that Act." 46. By the Constitution (Eighty-eighth Amendment) Act, 2003 Article 268A was inserted for appropriation of the service tax levied by Union and collected and appropriated by the Union and the States. Article 269 provides for taxes levied and collected by the Union but assigned to the State....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion service as such do not find an entry in any of the three Lists. Therefore, by virtue of Entry 97 of List I of VII Schedule read with Article 248 of the Constitution, the Parliament has the power to enact a law in respect of service and levy tax on such services. As this service aspect is not enumerated in the Concurrent List or State List, the Parliament has exclusive power to make the law and to impose tax. The stand of the State is that the contract in question is a composite but an indivisible contract. In other words, the element of service in the contract is admitted. Once the Parliament makes law in respect of the said service by virtue of the exclusive power conferred on it under Article 248, it would follow that the other fields in the legislative lists must be construed to exclude this field so that there is no possibility of legislative trespass. Thus, the power of the State Legislature to levy tax on service aspect is completely excluded. Both the parties contend that it is an indivisible contract- According to the petitioners, the contract in question is a contract of service simplicitor. There is no element of sale at all and, therefore, the State legislature has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... both the legislation is impermissible. Though the service providers have taken a consistent stand throughout, that the contract in question is an indivisible contract and not a composite contract, it is the State which has taken inconsistent stand. It contends, in one breadth that the agreement is a composite contract but in another breadth, they contend it is an indivisible contract of sale simplicitor. The service providers categorically contend that, even if it is a composite contract and indivisible, as it does not fall under Article 366 (29-A) the State Legislatures have no competence to levy tax. Therefore, the question is if it is a composite contract, what is the dominant nature of the contract. In so far as testing the dominant nature of the contract the law is well settled. 51. When once the contract is reduced into writing the intention of the parties is to be gathered from the terms used in the said contract. The words used in such written contract has to be given its ordinary meaning. It is by looking into such contract we have to find out what is the agreement entered into, what is the consideration paid, what for the said consideration is paid? In order to unders....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le care in providing its services, but it is not responsible for interruption in service due to power failures, equipment malfunctions, or acts of natural calamity. 2. BSNL is not responsible for subscriber's computer hardware and software or areas of the Internet not under its control. BSNL does riot warrant privacy, security, or efficiency or the Internet. 3. BSNL is not responsible for actions taken by its customers or others as a result of its services. 4. BSNL is not responsible for material any person (including household members of the subscriber) may receive or transmit via the Internet, or for anything bought or sold via. the Internet or for any other result of an action taken by anyone using its service" 52. If we look into the said contract, it is clear that there is no whisper about the word "sale of goods". On the contrary, the written words are explicit and -that the contract is one for rendition of telecommunication service. The consideration is paid for the services rendered to the subscriber. Therefore, it is clear from the recitals in the written contract that it is a service contract which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elecom contracts for data transfers are composite cum indivisible contract of sale. Even presuming for a moment that dominant intention is not sale of goods, the transfer of property in goods that is taking place in these telecom contracts for data transfers would take the shape of compulsory/involuntary transfer of property in goods for a consideration in which case too, these transactions would constitute a deemed sale, in term of Article 366 (29-A)(a) of the Constitution of India. 54. This takes us to the next question, what exactly is this "artificially created light energy (ALCE)", is it "Goods" as understood in law and is there a "sale of such goods", in telecommunication service. WHAT IS ARTIFICIALLY CREATED LIGHT ENERGY (ACLE)? 55. The assessing authority has relied on the opinion of the following experts to explain and understand what is artificially created light energy, to levy tax. (1) Centre for Development of Advanced Computing 56. According to them, mobile phones work on the principle of electromagnetic energy transmission in space -(wireless mode). Whereas OFC broadband uses artificially created light energy transmitted through an optic fibre line onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Government of India. Thus, the radio frequencies can be possessed or dispossessed. The radio frequencies can be abstracted, possessed, transferred and delivered. The modern day telecommunication and associated businesses like data transfer activity uses the radio frequencies extensively. Hence, the radio frequencies have got highly important and crucial role in the modern day telecommunications system. 59. The radio waves used by the mobile (Cellular) network and the light waves used in the optical network are both electromagnetic waves which are a part of the electromagnetic spectrum. They merely happen to occur at different frequencies. The electromagnetic spectrum spans a large number of frequencies starting with gamma rays, X-rays, ultra-violet rays, visible light, infrared, terahertz radiation, microwave radiation and radio waves. Light used in OFC network is typically in the infra-red portion of the electromagnetic spectrum while microwave and radio waves occupy the lower end. 60. Digital information from the customer in cellular networks is impressed onto the radio wave, and digital information in optical networks is impressed onto the light wave. Just as digital inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Ans. No. In OFC technology the electrical energy is converted into light energy and the term ACLE is used for common man's understanding." (e) In the case of M/s. Tata Tele services the questions and answers recorded in the Cross-examination are as under: "1. What is the speed of light? Ans : 1,86,000 miles per second. 2. Can you stop light? Ans : As a matter of fact no waves can be stopped. 3. Is it possible to purchase light? Ans : I have not seen or heard where light is purchased and sold. It may not be in existence in that nature. 4. Do you have an internet connection at, home or office? Ans : I have at both places. At home I have BSNL Broadband and at office we have other service providers. 6. Through this connection do you send or receive data? Ans : Yes. We send and receive data. 7. What do you have in mind when you get internet connection? Ans : Internet connection is obtained for communication. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2. Can you please tell us the difference between the mobile and landline? Ans : The purpose and the mechanism of both the phones are similar. However while in the case of mobile phone there is greater mobility, in case of landline there is no mobility. 13. Is it possible to transfer data instead of voice through the above mechanism of BSNL. Arts: Yes. 14. Kindly explain whether the same line can be used for sending data as well as voice? Ans : Initially the same line used for sending voice was used for sending data. For eg . When we send a fax of some text, the textual content in the page is converted by a modern into a "VOICE FORM" for sending it in the same method in which the voice is sent. At the other end there is a modem which recognizes that this "VOICE FORM" actually represents data and converts it into a printable version. This was the same method followed for sending all types of data. But there was restriction on speed and the use of the line. For instance if a line is used for sending data, the same line cannot be used for sending voice. Only one use is possible....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... various equipments that would be employed for transfer of data? Ans : In a simplest form a leased line is a point to point dedicated line used for transferring data. In a leased line, connection already stands established unlike in a telephone connection where connection is established after dealing is done. However the quantum of data and speed at which it is to take place would decide and depend on the technology employed. In simplest form, the various equipments that would be used would be the following: a) computer of the sender, b) modern connected to the computer having a fibre port c) Fibre cable d) a modern containing a fibre port at recipient's end and e) computer at the receiver's end. In case the communication is for a longer distance, then the fibre cables would go to an exchange. Since there is a possibility of light energy getting attenuated, equipment called 'repeater' is available....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he receiver what happens to the electrical signals that carried the electrical signals representing the sound waves? Ans : The electrical waves present on the circuit are called as carrier waves. Once the carrier waves with the electrical waves representing sound reach the receiver end, the electrical waves representing sound are extracted and given to the receiver. The carrier current is lost or dropped at the receiver's end. 26. Kindly explain what is electromagnetic wave. Is optical signal that travel through optical fibre used for communication of voice and data also categorized as electromagnetic wave? Ans : Electromagnetic waves are those waves have two inseparable components viz., electrical waves and magnetic waves. Optical signals used in optical fibres are also electromagnetic waves. Electromagnetic waves could be of a lower range of frequency upto higher range of frequency. The waves of lower frequency are used for radio purposes while waves at the higher frequency are light rays. 27. Can you explain what happens in a Light Emitting Diode and how does light get emitted? &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C can be compared to the train. The diesel for the tram can be compared to the light and the passenger can be compared to the data. 30. You have shown us a diagram which indicates the source, the multiplexer, OFC, the multiplexer and the source. The same is reproduced herein below: I put it to you that in a typical data transmission network the various devices involved are: 1. Computer (sender/receiver) 2. Modem 3. Copper cable 4. Multiplexer 5. Optical Fibre cable 6. Multiplexer 7. Copper cable 8. Moder  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o processor in the multiplexer recognizes these electrical signals and sends instructions to the LED to beam the appropriate optical signals to transmit the data. The optical signals so generated will have a combination of synchronization signals and data signals (in the place of dummy bits). xi. This optical signal is received by the photodetector at the other end which recognizes the data contained in the optical signal. The photodetector thereafter coverts this optical signal containing the data into electrical signals and sends it to the modem through a copper cable. The modem in turn sends it to the computer at point B. Ans : I agree with the above steps excepting that the synchronization or dummy bits are control signals provided by the service provider and this is not provided by the subscriber/person other than the telecom provider. These control signals can originate either from the microprocessor or a computer of the telecom operator and is in the form of electrical signals which pass through the OFC as optical signals. 32. Kindly refer to your opinion dated 11.9.2006 where in questi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther and the data is delivered at the receiver's end, the energy that does not represent the data which is the carrier energy dissipates at the point of separation/demodulation. Ans : Yes. I agree that at the point of separation the carrier energy dissipate. This was in fact clarified by me in my clarificatory opinion dated 3.10.2006. (sic) The same witness was also cross-examined by the representative of Bharathi Airtel Limited." (2) OPINION OF DIRECTOR IIT, NEW DELHI 62. The data gets transmitted from point A to point B in the telecom network in one of two ways - as digital data (i.e. after getting convened to a series of equivalent ones and zeros) or as analog data (either as frequency modulated or amplitude-modulated waves). Modern computer networks use digital transmission. Information from the customer is impressed on the light traveling in the optical fibre medium if the optical fibre is a pipe, the flows of photons is the stream of water flowing through the pipe, the modulator is the tap which may be turned off and on to modulate the flow of water. The modulated optical wave carries the information ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the reason why modern networks use optical communication. It makes the transfer of information using light, fast, reliable and secure. 63. The carrier light may carry the information from the customer in one of two ways- (i) it may exist as a stream of photons whose magnitude is varied in response to information from the customer (externally modulated optical source) and (ii) it may come into existence expressly in response to the data transmitted by customer (an ook modulation). Which of these two methods is used is dependent on the technology adopted by the service provider. 64. Thus, the essence of these networks lies not in the energy transfer but in the transfer of information. Energy is simply a vehicle for all such information transmission systems, whether it is based on copper wires, wireless transmission, optical fibre based communication or free-space communication. (3) Dr.Reji Philips, Associate Professor, Light & Matter Physics Group, Raman Research Institute. 65. According to him, "there is no sale of "light Energy.'" Light is just a carrier of the data in a fibre. In the same way as electromagnetic radiation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; "1.14. Electromagnetic waves travel through free space from one point to another but can be channeled through waveguides which may be metallic cables, optical fibres or even simple lubes. All electromagnetic waves are susceptible to interference from one another and unrelated electrical energy can distort or destroy the information they carry. To reduce these problems they have been organized within, the spectrum into bands of frequencies or wavelengths for the transmission of particular types of services and information" 68. They have also set out the process of sending signals as under: 62. The process of sending a signal is as follows: "Data is superimposed on a carrier current or wave by means of a process called modulation. Signal modulation can be done in either of two main ways: analog and digital. In recent years, digital modulation has been getting more common, while analog modulation methods have been used less and less. There are still plenty of analog signals around, however, and they will probably never become totally extinct. Except for DC signals such as telegraph and baseband, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Diodes) are used in display systems, traffic lights, modern torches etc. While laser diodes are used as a bar code readers, printers etc. The data gets transmitted from point A to point B in the telecom network in one of two ways - as digital data or as analog data. Modern computer networks use digital transmission. It is the photon (or, equivalently, the optical wave) which propagates as a guided wave through the optical fibre. A certain minimum number of photons are transmitted corresponding to each digital one and the transmission of less than this minimum number of photons corresponds to a digital zero. (c) Information from the customer is impressed on the light traveling in the optical fibre medium. The subscriber's data from his computer is mixed (modulated) with the light carrier for the purpose of transmission in OFC media, At the receiver's end, this mixed light is separated (demodulated) and the separated data is delivered to the receiving subscriber. During this process, the carrier (here in this case light) gets dropped and only the data is let passed to the receiving subscriber. There is no part of the light received from the OFC is given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot worried about the manner in which the data is, transferred. it may be wireless communication or wired communication. He is not worried about method of communication so long as the communication happens without any disruption. The purpose and the mechanism of both the phones are similar. However while in the case of mobile phone there is greater mobility, in case of landline there is no mobility. This light energy cannot be used by the subscriber just like electricity which a subscriber can use it by converting into light or mechanical energy. 71. In the case of wireless communication electrical waves cannot travel, beyond the stage where there is no wire. The electrical waves have to be converted into electromagnetic waves which travel in space. The electromagnetic waves that so travel are received by the antenna at the recipient's end where the electromagnetic waves are converted into electrical waves for conversion thereafter' to sound waves. In She case of communication through optical fibre, the electrical signals are converted into optical signals so as to travel through optical fibres to other end where the optical signals at the other end are reconverted into e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods to be used in the fitting out, improvement or repair of movable property)] and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale" 76. In Karnataka Value Added Tax Act ,. 2003, Section 2 (15) defines the term "Goods" as under: "Goods" means all kinds of movable property (other than newspaper, actionable claims, stocks and shares and securities) and includes livestock, all materials, commodities and articles (including goods as goods or in some other form) involved in the execution of a works contract or those goods to be used in the fitting out, improvement or repair of movable property, and all growing corps, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale." 77. The Constitution Bench of the Apex Court in the case of STATE OF MADRAS VS. M/ S.GANNON DUNKERLEY & CO., (MADRAS) LTD. reported in AIR 1958 SC 550 dealing with the question as to how the word 'goods' has to be understood after coming into force of the Constitution has held that the "cardinal rule of interpr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he market or known in the market as goods." 81. In the case of MOTI LAMINATES PVT. LTD VS. COLLECTOR OF CENTRAL EX. AHMEDABAD reported in 1995 (76) ELT 241(S.C.), the Apex Court held as under: "9. Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc , is linked with marketability. An article does not become goods in the common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. Therefore, any goods to attract excise duty must satisfy the test ' of marketability The tariff schedule by placing the goods in specific and general category does not alter the basic character of leviability. The duty is attracted not because an article is covered in any of the items or it falls in residuary category but it must further have been produced or manufactured and it is capable of being bought and sold." 82. Following this judgment, yet another Constitution Bench of the Apex Court in the case of TATA CONSULTANCY SERVICES VS. STATE OF A.P . reported in (2005) 1 SCC 308 at Para 9 held as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y which fell within the meaning of the expression 'goods' in the two Acts viz , Madhya Pradesh General Sales Tax Act and Central Sales Tax Act- The definition of goods is very wide and includes all Kinds of movable property. "What has essentially to be seen is whether electric energy is goods within the meaning of the relevant provisions of the two Ads. The definition in terms is very wide according to which "goods" means all kinds of movable property Then certain items are specifically excluded or included and electric energy or electricity is not one of them. The term "movable property" when considered with reference to "goods" as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property. It is needless to repeat that it is capable of abstraction, consumption and use which , if done dishonestly, would attract punishment under s. 39 of the Indian Electricity Act, 1910. It can be transmitted, transferred, delivered, stored, poss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oneous or by oversight. The science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored." 84. Another significant characteristic of electrical energy is that its generation or production coincides almost instantaneously with its consumption. In the case of INDIAN ALUMINUM COMPANY VS. STATE OF KERALA AND OTHERS reported in AIR 1996 SC 1431 at Para 25, it is held as under: "Continuity of supply and consumption starts from the moment the electrical energy passes through the meters and sale simultaneously takes place as soon as meter reading is recorded. All the three steps or phases take place without any Hiatus. It is true trial from the place of generating electricity, the electricity is supplied to the sub-station installed at the units of the consumers through electrical higher-tension transformers and from there electricity is supplied to the meter. But the moment electricity is supplied through the meter, consumption and sate simultaneously take place. As soon as the electrical energy is supplied to the consumers and is transmitted through the meter, consumpti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....structions. A person who wants a programme or instructions, embedded in that software, can put the floppy into the computer and abstract that programme or instructions which he requires. Therefore, the Apex Court has held that both in the case of electricity as well as in the case of software it is abstractable. 89. In the case of ACLE, it is not something which is manufactured or generated by the service provider. It is derived from electricity. For abstraction, the light energy must be available in abundance and if the service provider is making use of a portion of it, he abstracts a portion of it. However, by a technology called LED and LD. the service provider converts electricity into light energy. Therefore, the ACLE is not in existence in abundance in the form of ACLE. It comes into existence when electrical energy is converted into light energy. Therefore, there is no abstraction of light energy. It is a case of conversion and not abstraction. Therefore, the said test is not fulfilled. The Assessing Authority on an erroneous understanding has held that it is capable of abstraction. Consumption:- Yet another test prescribed by the Apex Court is that of consumption. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt receives only the voice or data and not any portion of ACLE. Neither the subscriber nor the recipient of the message or data ever comes in contact with the light energy. In fact both of them are completely ignorant of the existence of the light energy. 91. In BSNL case, the Supreme Court has held as under: "63. It is clear, electromagnetic waves are neither abstracted nor are they consumed in the sense that they ore not extinguished by 'their user, they are not delivered, stored or possessed. Nor are they marketable. They are merely the medium of communication. What is transmitted is not an electromagnetic wave hut the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of telegraph No part of the telegraph itself is transferable or deliverable to the subscribers. 71. For the reasons slated by us earlier we hold that the electromagnetic waves are not 'goods' within the meaning of the word either in Art. 366 (12) or in the State Legislations. It is not in the circumstances necessary for us to determine whether the telephone sy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....merx) for consideration. In the earlier stages of its development, the law was unsettled whether the consideration for sale should he money or anything valuable. By a rescript of the Emperors Diocietian and Maximum of the year 294 A.D., it was finally decided that it should be money, and this law is embodied in the Institutes of Justinian , vide Title 23. Emptio Venditio is, it may be noted, what is known in Roman law as a consensual contract. Trial is to say, the contract is complete when the parties agree to it, even without delivery as in contracts re or the observance of any formalities as in contracts verbis and litteris. The common law of England relating to sales developed very much on the lines of the Roman law in insisting on agreement between parties and price as essential elements of a contract of sale of goods. In his work on sale, Benjamin observes: "Hence it follows that, to constitute a valid sale, there must be a concurrence of the following elements viz. (1) Parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property which is transferred f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n any right to use electromagnetic waves or radio frequencies when a telephone connection is given. Nor does the subscriber intend to use any portion of the wiring, the cable, the satellite, the telephone exchange, etc. At the most the concept of the sale in a subscriber's mind would be limited to the handset that may have been purchased for the purposes of getting a telephone connection. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection. 78. But if there are no deliverable goods in existence as in this case, there is no transfer of user at all. Providing access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate . Of course the toll payer will use the road or bridge in one sense. But the distinction with a sale of goods is that the user would be of the thing or goods delivered. The delivery may not be simultaneous with the transfer of the right to use. But the goods must ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in which eventually property passes. 97. To sum up, the expression "sale of goods" in Entry 48 is a nomen juris , its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. A customer approaches the service provider to transmit voice" or a data and the agreement he enters into with the service provider is for transmission of voice or data. He is not concerned with the technology adopted by the service provider to transmit the said voice or data. In the instant case, ACLE is used for transmitting the said voice/data as is clear from the technical information as well as the reasoning of the assessing authority. ACLE is only a carrier. The subscriber has not entered into an agreement to purchase ACLE or any portion thereof. The consideration paid by him is for the service rendered and transmitting the voice/data to its destination. He does not come in contact with this carrier at all. Therefore none of the conditions prescribed to constitute the sale of goods exists in the instant ease. Therefore, there is no sale of goods, which empower the State to levy sales tax/Vat. 98. This aspect has yet another dimen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... telegraphs within any part of India. (2) The Central Government may, by notification in the Official Gazette, delegate to the telegraph authority all or any of its powers under the first proviso to sub- section (1). The exercise by the telegraph authority of any power so delegated shall be subject to such restrictions and conditions as the Central Government may, by the notification, think to impose" 100. interpreting these provisions, the Apex Court in BSNL case held as under: "60. Section 4 of the 1885 Act gives exclusive privilege in respect of telecommunication and the power to grant licences to the Central Government. Pursuant to such power, licences have been granted to service providers. According to the service providers, in terms of their licence no further transfer of the rights to use the telegraph could be affected by them. Therefore, what was provided was a service by the utilisation of the telegraph licensed to the service providers for the. benefit of the subscribers.'' Again at paras 112, 113, 115 and 116 it held as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is not possible to interpret the contract between the service provider and the subscriber that the consensus was to mutilate the integrity of contract as a transfer of right to use goods and rendering service. Such a mutilation is not possible except in the case of deemed sale falling under sub clause (b). Nor can the service element be disregarded and the entirety of the transaction be treated as a sale of goods (even when it is assumed that there are any goods at all involved) except when it falls under sub clause (f). This will also result in an anomaly of the entire payment by the subscriber to the service provider being for alleged transfer of a right to use goods and no payment at all for service. The licence granted by the Central Government fixes the tariff rates and all are for services." 101. Therefore, it is clear the licence granted under the Telegraph Act is for providing telecommunication services and not for supply of any goods or transfer of right to use any goods. It expressly prohibits transfer or assignment. The licence clearly interdicts the licencee and prohibits the licencee from assigning or transferring his rights in any manner whatsoever under the licen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... normally takes place in an involuntary sale. Sub-clause (b) covers cases relating to works contracts. This was the particular fact situation which the Court was faced with in Gannon Dunkerley (State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353) and which the Court had held was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley was directly overcome. Sub-clause (c) deals with hire-purchase where the title to the goods is not transferred. Yet by fiction of law, it is treated as a sale. Similarly the title to the goods under sub-clause (d) remains with the transferor who only transfers the right to use the goods to the purchaser. In other words, contrary to A.V . Meiyappan decision (AM. Meiyappan v. CCT . (1967) 20 STC 115 (Mad) a lease of a negative print of a picture would be a sale Sub-clause (e) covers cases which in law may not have amounted to sale because the member of an incorporated association would have in a sense begun as both the supplier and the recipient of the supply of goods. Now such transacti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the, service and supply has been constitutionally permitted in sub-clauses (b) and (f) of clause (29-A) of Article 366, there is no other service which has been permitted to be so split. For example, the sub-clauses of Article 366(29-A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital he or she is given a pill, can the Sales Tax Authorities tax the transaction as a sale ? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases. "4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the State sales tax laws: We have given the reasons earlier we have reached this conclusion ". Ultimately the Supreme Court has declared as under: "91. As far as the question whether providing of a telephone connection involves inter-State sales, now that it has been clarified that electromagnetic waves or radio frequencies are not goods, the issue is really academic. 92. For the reasons aforesaid, we answer the questions formulated by us earlier in the following manner. (A) Goods do not include electromagnetic waves or radio frequencies for the purpose of Article 369(29-A)(d). The goods in telecommunication are limited to the handsets supplied by the service provider. As far as the SIM cards are concerned, the issue is left for determination by the assessing authorities" . 104. Therefore from the aforesaid discussion and the law declared by the Supreme Court, it follows that: The Forty-sixth Amendment does not give a licence, for example, to assume that a transaction is a sale and then to look around for what could be the go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this proceedings is the very same BSNL Limited and the Stale of Karnataka was a party to the aforesaid judgment and party to the present proceedings. In spite of the binding decision, there is a calculated attempt on the part of the respondents to defy the judgment of the Supreme Court. By ignoring the binding precedent they have levied sales lax on these appellants/petitioners. 107. Therefore it is necessary to find out what was the issue involved in the said case, what are the finding recorded by the Court and then find out whether those issues are involved in this case and whether the said judgment covers the issues raised in this case. The said judgment was rendered by three Judges of the Supreme Court, though one of the Judges has written a separate judgment, but is a concurrent judgment. 108. The principle question which arose for decision in those matters is the nature of transaction with regard to mobile phone connections, is it a sale or service or both? If it is a sale, are the Stale Legislature competent to levy sales tax on the transaction under Entry 54 List 2 of the VII Schedule of the Constitution? If it is a service, then the Central Government alone can levy ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oviding of a telephone connection involves sale, is such sale an inter-State one? (E) Would the "aspect theory" be applicable to the transaction enabling the States to levy sales tax on the same transaction in respect of which the Union Government levies service tax? 111. A perusal of the aforesaid issues makes it clear that it was not the mobile connection alone which was under consideration by the Apex Court. The question for consideration was, (a) " what are goods in telecommunication?", (b) is there any transfer of any right to use such goods? (c) what is the nature of transaction involved in providing of telephone connection? (d) is it a composite contract of service and sale? 112. In deciding the aforesaid issues, the Hon'ble Supreme Court has categorically held that in telecommunication, the electromagnetic waves are used for transmission of data generated' by the subscriber to the desired destination. The electromagnetic waves travel through free space from one point to another but can be channelled through wave guise which can be transmitted through optic fibres or even simple tubes. These electromagnetic waves are neither ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the subscriber and the agreement was merely to receive, transmit and deliver messages of the subscriber through a complex system of fibre optics and cables. Thus, the petitioner - service provider only carry messages. They are only carriers and have neither property in the message nor affected any transfer to the subscriber. The license clearly manifests that it is one for providing telecommunication service and not for supply of any goods or transfer of any right and expressly prohibits any transfer. The integrity of license cannot be broken into pieces nor the telecommunication service rendered by them be so modulated. Not only this is the position which flows from the terms of contract, but also the intent of Section 4 of the Telegraph Act which provides for grant of license issue on such conditions and in consideration of such payment as prescribed to any person to establish, maintain or work a telegraph. The integrity of establishing, maintaining or working is not to be modulated. It is not possible to interpret the contract between the service provider and the subscriber to mean that the assessee was to modulate the integrity of contract as a transfer of right to use goods....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce of the States to levy sales tax on telecommunication service and not on mobile service only." Then, their Lordships have discussed about what are electromagnetic waves and what is involved in telecommunication service and the electromagnetic waves generated by the subscriber through which voice/data was transmitted to the desired destination. They have referred to the definition of Telegraph., Radio Waves, Message, Telegraph Line found in the Telegraph Act, 1885 and then, approved the description of electromagnetic waves given by David Gilles and Roger Marshal where they have described it as "electromagnetic waves travel through free space from one point to another but can be channeled through wave guides which may be metallic cables, optical fibres or even simple tubes". 118. Then, they have held that these electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user." They held that it is not marketable and it is only a medium of communication and in telecommunication. In telecommunication, what is transmitted is the message by means of the telegraph. In such electromagnetic waves, there are no deliverable-good....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lear case of Assessing Authority misreading the judgment of BSNL. The said judgment involves transmission of messages through optic fibre and it is in the optical fibre, the ACLE is used for transmission of voice and data. 123. The next ground made out is that the Supreme Court has observed that it cannot anticipate what may be achieved by scientific and technological advances in future and therefore the said judgment is open ended. From the day, the judgment of the Supreme Court was delivered, till today, no body has pointed out as to what is the scientific and technological advances made if any which has a substantial effect in the telecommunication technology. On the contrary, in more than one place, the Assessing Authority has held that this case of artificially created light energy in optic fibre being used was not argued before the Apex Court in the said BSNL case. Thereby, this technology was very much available on the day, the judgment of BSNL case was pronounced. It is also not the case of the State that, on that day, they were not in the know of this technology. This technology was very much in existence and every one knew how the messages are sent through optic fibre ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the nation's Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and. administrative action on vital issues deterred by the brooding threat of forensic blow up. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake up. It is wise to remember that fatal flaws silenced by earlier rulings cannot survive after death because a decision does not lose its authority "merely because it was badly argued, inadequately considered and fallaciously reasoned". And none of these misfortunes can be imputed to Bharti case. For these reasons, we proceed to consider the contention of counsel on the clear assumption that Article 31 -A is good." 126. The Supreme Court in the case of FUZLUNBI Vs. K.KHADER VALI reported in 1980(4) SCC 124 was considering the case where both the Sessions Court and the High Court recorded a finding contrary to the law declared by....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... our judicial system it is open to a court of superior jurisdiction or strength before which a decision of a Bench of lower strength is cited as an authority, to overrule it. This overruling would not operate to upset the binding nature of the decision on the parties to an earlier lis in that Us , for whom the principle of res judicata would continue to operate. But in tax cases relating to a subsequent year involving the same issue as an earlier year, the court can differ from the view expressed if the case is distinguishable or per incuriam . The decision in State of U.P . v. Union of India related to the year 1988, Admittedly, the present dispute relates to a subsequent period. Here a coordinate Bench has referred, the matter to a larger Bench. This Bench being of superior strength, we can if we so find, declare that the earlier decision does not represent the law." 129. The Supreme Court is not only the constitutional Court, but it is also the highest court in the country, the final court of appeal. By virtue of Article 141 of the Constitution, what the Supreme Court lays down is the law of the land. Its decision are binding on all courts. its main role is to interpret the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Kalyani Packaging Industry Vs. Union of India reported in (2004) 6 SCC 719has held that: " it must be remembered that the law laid down by this Court is law of the land. The law so laid down is binding on all courts/tribunals and bodies. It is clear that circulars of the Board cannot prevail over the law down by this Court". 131. Again the Apex Court in the case of Brahmo Samaj Education Society and others Vs. State of West Bengal and Others reported in AIR 2004 SC 3358 , has held that, " a larger Bench consisting of 11 Judges of this Court in T.M.A.Pai , has declared what the law on the matter is, we do not want to dilute the effect of the same by analysing various statements made therein or indulge in any dissection of the principles underlying it. We would rather state that the State Government shall take note of the declarations of law made by this court in this regard and make suitable amendments to their laws, rules and regulations to bring them in conformity with the principles setout therein". 132. Thus, it is clear that once the Apex Court declares the law, not only the High Court and other Courts in the country are bound by the same, but ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etition on merits. Aggrieved by the same, the petitioner preferred a special leave petition before the Apex Court in special leave to appeal in Civil Appeal No.4481 /09 wherein by order dated 2.3.2009, the said order of the Division Bench was set aside on the ground that the learned Single Judge was right in directing the assessee to exhaust statutory alternative remedy and looking into the nature of issues involved in those matters in which those matters in which technical evidence needs to be looked into they were of the opinion that the said issues have to be decided by the first appellate authority. Therefore, the order of the Division Bench was set aside and the entire matter was remanded to the first appellate Authority for disposal on merits. Therefore, he contends in the light of the aforesaid judgment of the Apex Court it is not appropriate for this Court to again go into the very same issues, which are involved in these appeals, and it is left to be decided by the appellate Authority. 135. Per contra, the learned Additional Solicitor General of India pointed out that insofar as BSNL is concerned, the said judgment has no application as they were not parties to the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he said report, it has been specifically stated that there is a big legal impediment, on account of the Hon'ble Supreme Court holding, in the BSNL Case, that for the sole reason of lack of APD properties, the Radio Frequencies or the Electromagnetic Waves do not constitute goods. The Commercial Taxes Department has informed that the only reason that led to culmination of the above conclusion by the Hon'ble Supreme Court, was that the glaring scientific truths regarding the properties of the Radio Frequencies, which are so widely used in the telecom industry, were not brought to the notice of the Hon'ble Supreme Court. Had these ever-existing scientific truths regarding the Radio Frequencies had been brought to the notice of the Hon'ble Supreme Court, the verdict would have been the reverse favoring the States and would have fetched enormous revenues to the States. Since thousands of crores of the State revenues are involved in this matter, and since there are irrefutable documentary evidences in support of the State cause, it is the firm opinion of the Department that a Review Petition be filed in the Supreme Court, with a prayer to review its verdict in the BSNL ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....country. It was urged an prayed in the review petition that in the interest of natural justice, the error in the verdict, which has happened on account of non-submission of the scientific facts, needs to be rectified in the light of scientific facts. The person who has filed the affidavit in support of the review petition is one Sri. A.K.Chitaguppi , the Assessing Officer in this case. The said review petition came up for consideration before the Apex Court before a Bench consisting of three judges, who passed the following order: "The review petition is dismissed on the ground of delay and merits." 138. Relying on these proceedings, it was contended that departmental officials who are involved at every stage of these proceedings have already made up their mind not to obey the judgment of the Apex Court in BSNL case on the premise that judgment was rendered without considering the case which is now sought to be put forth and in their view the light energy is 'goods' which is liable to tax under VAT Act. The learned ASG further contended that for the above reasons there is no point in going before the very same authorities who have made up their mind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rary exercise of power by the State authorities in violation of Article 14, but also it would constitute an unreasonable restriction upon the right of the service providers to carry on trade under Article 19(1)(g) of the Constitution of India. The constitutional issues have to be decided exclusively by the High Court. These questions cannot be decided by a statutory authority and the appellate authorities constituted either under the Karnataka Sales Tax Act or the Karnataka Value Added Tax Act. Therefore, this is not a case where the matter could be relegated to an appellate authority under a statute. (ii) Secondly, if the issues involved in these proceedings are already covered by a judgment of the Apex Court, which is binding on all the Courts and the authorities in India and if the Assessing Authority has held that the said judgment of the Supreme Court is not applicable and made an attempt to distinguish the same and the facts of the case, the matter cannot be relegated to an appellate authority. As held herein above, the sub-ordinate committee of the legislature found that the judgment of the Supreme Court covers the issue and therefore, it requires revie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fresh enquiry, perhaps by taking the assistance of the technical persons and technical bodies in the matter. If the issues involved are to be decided by the Assessing Authority or the Appellate Authority or this Court based on technical opinion, the technical opinion is already on record. All the parties to the dispute do not dispute the said technical report. Both appellants and the State have put forth contention based on the State have put forth contention based on the said technical report, which the Assessing Authority claims as scientific truth. 141. From the aforesaid technical report it emerges that the service providers who are using optical fibre cables for transmitting the messages or data are using light energy and the same is on record. This data or messages could be transmitted by a service provider either through copper wire or optical fibre cable or in the space through allotted spectrum using micro wave towers. In so far as optical fibre cable is concerned, the technology adopted is to convert electrical energy into light energy and use the light energy as a carrier for carrying message or the data to its desired destinations. The Assessing Authority has given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egal issues on the basis of admitted, undisputed, proved technical facts available on record. 143. The learned Single Judge has not applied has mind to these materials, which was very much available on record and which is extensively referred to by the Assessing Authority at length in the impugned order. Therefore, we do not see any justification to remit the matter to the appellate authority on that score. 144. Under these circumstances, consciously we have entertained these matters, decided these constitutional issues, interpreted the statutory provisions and tried to follow the judgment of the Supreme Court. We want to send a message to the authorities that, this attempt on their part under the guise of distinguishing the Supreme Court judgment, in reality they are showing disobedience and disrespect to the Supreme Court judgment and the same would not be countenanced and would be viewed seriously. SUGGESTION 145. Service constitutes heterogeneous spectrum of economic activities Service sector is today occupying center stage of the Indian economy. Development of service sector has become synonymous with the advancement of the economy. Economists hold the view that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the activity. Now they have opened their eyes and without examining as to whether they are eligible or not, have made an attempt to levy tax. As in the most of the cases, the goods, which are to be taxed, may not be easily identifiable. Therefore, scientific investigation and technical information is required to decide whether a particular property is 'goods' and it satisfies the requirement of 'goods' as held by various pronouncement of the Apex Court. The adjudicating authorities may or may not be well versed in tax but certainly they are not well versed in scientific matters and they need the assistance of experts. In these circumstances, as this scientific advancement has not limit and end, it is desirable that when such a dispute arises between two statutory authorities, these disputes are first decided by an expert body in the field, who have necessary technical know-how, and well versed in the relevant scientific aspects. Though we have a federal structure and VII schedule which clearly demarcates the field or legislation and the power of the Parliament and State Legislature to legislate, it is not uncommon that there is an over lapping while exercising thes....