TaxTMI 
TaxTMI 
2011 (1) TMI 1273
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.... the learned senior counsel appearing for M/s. Harish and Company for the petitioners (M/s. Bharti Airtel Limited) in W.P. Nos. 35223-34/2010 and other connected petitions has strenuously argued how and why these petitions are required to be considered and disposed of on the merits notwithstanding the availability of the alternative remedy. He submits that the ACLE is not goods. As it has no attributes of goods, the question of buying it and selling it would not arise at all. According to him, equating ACLE with electricity is tantamount to overlooking the subtle between ACLE and electricity. He submits that there cannot be any sale of property in goods, of whose existence the buyer is unaware. He submits that as the impugned reassessment orders are without the authority of law and without jurisdiction, the writ petitions are entertainable. He submits that the levy of tax on transactions falling outside the competence of the State Legislature is without jurisdiction. He would contend that the imposition of the sales tax is in sharp contrast to the considered view taken by the apex court in the case of Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006] 3 VST 95 (SC); [20....
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....re the writ petition seeks the enforcement of any of the fundamental rights, (ii) where there is violation of the principles of natural justice, (iii) where the order or the proceedings are wholly without jurisdiction or the vires of an Act is challenged. He read out paras 18 and 19 of the said judgment. The said paragraphs are extracted hereinbelow: "18. This proposition was considered by a Constitution Bench of this court in A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani [1961] AIR SC 1506; [1962] 1 SCR 753 and was affirmed and followed in the following words: 'The passages in the judgments of this court we have extracted would indicate (1) that the two exceptions which the learned Solicitor-General formulated to the normal rule as to the effect of the existence of an adequate alternative remedy were by no means exhaustive, and (2) that even beyond them a discretion vested in the High Court to have entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the court should act having been clearly laid down, thei....
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....y the High Court in exercise of its special jurisdiction under article 226 of the Constitution of India. The learned senior counsel submits that the petitioner cannot be relegated to the appeal remedy and thereby made to languish for years and years. Where the statutory remedy is not efficacious, the petition under article 226 of the Constitution of India may have to be allowed, so contends Sri Venkataraman. In this regard, he cites the decision of the apex court in the case of State of H.P. v. Gujarat Ambuja Cement Ltd. reported in [2005] 142 STC 1 (SC); [2005] 6 SCC 499. Just because the petitioner, Bharti Airtel, was relegated to the appeal remedy for the previous assessment years, it does not mean that for the subsequent assessment years also, it should be asked to file the appeals because the evidence and the fact-finding thereon are already available on the record of the appellate authority. That there is nothing like constructive res judicata in tax matters is the emphatic submission of Sri Venkataraman. In this regard, he relied on paras 11 to 13 of the honourable Supreme Court's judgment in the case of Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 ST....
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....l issue would not operate as res judicata against the assessee for a subsequent year. That, however, is a matter on which it is unnecessary for us to pronounce a definite opinion in the present case. In this connection, it would be relevant to add that even if a direct decision of this court on a point of law does not operate as res judicata in a dispute for a subsequent year, such a decision would, under article 141, have a binding effect not only on the parties to it, but also on all courts in India as a precedent in which the law is declared by this court. The question about the applicability of res judicata to such a decision would thus be a matter of merely academic significance.' 13. After refraining from expressing any final opinion on the applicability of res judicata to assessment orders for successive years, the court was quite unequivocal in expressing an opinion on the applicability of the principles of constructive res judicata (SCR page 189; AIR page 1020): 'In our opinion, constructive res judicata which is a special and artificial form of res judicata enacted by section 11 of the Civil Procedure Code should not generally be applied to writ petitions fi....
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....ated with chemicals. In other words, it is a pure contract for rendering services and no question of transfer of property in goods in any form is involved. Since the petitioner is not selling or supplying any material, commodities or articles, its job is purely to render a service in the form of treatment against pests which cannot even be classified as a works contract." The learned senior counsel would contend that the law laid down by the apex court is binding on all the courts. For urging these submissions, he relied on the honourable Supreme Court's judgment in the case of East India Commercial Co. Ltd., Culcutta v. Collector of Customs, Culcutta reported in [1963] 3 SCR 338. As the Supreme Court has held in the case of Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 that similar transaction does not amount to the sale of goods, the reassessment orders are unsupportable and unsustainable. He submits, with reference to the judgment in Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, that the electromagnetic waves are merely the medium of....
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....paragraphs of the Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 to buttress his submission that the electromagnetic waves do not constitute the goods. Therefore no element of sale is discernable in the transactions in question. The petitioner is a mere facilitator for the transmission of voice/ data. Nothing is transferred and nothing is delivered. Therefore the Deputy Commissioner of Commercial Tax has committed a fundamental error apparent on the face of the record by choosing to impose the sales tax on the radio frequencies or the electromagnetic waves. He relied on para 114 of the said judgment, which is extracted hereinbelow (page 137 in 3 VST): "114. The licence clearly manifests that it is one for providing telecommunication service and not for supply of any goods or transfer of right to use any goods. It expressly prohibits transfer or assignment. The integrity of licence cannot be broken into pieces nor can the telecommunication service rendered by them be so mutilated. Not only this position flows from the terms of contract, this also flows from section 4 of the Indian Telegraph Act which provide....
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....eans something done without lawful excuse. It is an act done wrongfully and wilfully without reasonable or probable cause, and not necessarily an act done from ill-feeling and spite. It is a deliberate act in disregard to the rights of others. Where malice is attributed to the State, it can never be a case of personal ill-will or spite on the part of the State. It is an act which is taken with an oblique or indirect object. It means exercise of statutory power for 'purposes foreign to those for which it is in law intended'. It means conscious violation of the law to the prejudice of another, a depraved inclination on the part of the authority to disregard the rights of others, which intent is manifested by its injurious acts. (Vide Addl. Distt. Magistrate, Jabalpur v. Shivakant Shukla AIR 1976 SC 1207, Smt. S.R. Venkataraman v. Union of India AIR 1979 SC 49, State of A.P. v. Goverdhanlal Pitti AIR 2003 SC 1941, Chairman and M.D., B.P.L. Ltd. v. S.P. Gururaja [2003] 8 SCC 567 and West Bengal State Electricity Board v. Dilip Kumar Ray AIR 2007 SC 976)." The learned senior counsel Sri Mohan Parasaran submits that there is yet another aspect of the matter, which makes it imp....
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.... the honourable Supreme Court has not approved of imposing the sales tax on electromagnetic waves, the passing of the impugned reassessment orders shocks the judicial conscience of the court. The reassessment orders are passed in total defiance of the honourable Supreme Court's order in the earlier Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1. He relies on the apex court's judgment in the case of Union of India v. Vicco Laboratories reported in [2007] 13 SCC 270, wherein it is held that if a case stands concluded by the decision of the honourable Supreme Court, the issue cannot be reopened; otherwise it would be an abuse of the process of law. The learned counsel would submit that the impugned reassessment orders are virtually in the nature of reopening the case concluded by the honourable Supreme Court in the earlier case of Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1. He submits that the optical fibre cables and optical fibres are one and the same. As the facts are not at all in dispute, these petitions involve the resolution of pu....
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....Commissioner, i.e., the Joint Commissioner of Commercial Taxes. For advancing this contention Sri Parasaran has relied on the second part of para 9 of the honourable Supreme Court's judgment in the case of Ram and Shyam Company v. State of Haryana reported in AIR 1985 SC 1147. The relevant paragraph is extracted hereinbelow: "9. . . . An appeal in all cases cannot be said to provide in all situations an alternative effective remedy keeping aside the nice distinction between jurisdiction and merits. Look at the fact-situation in this case. Power was exercised formally by the authority set up under the Rules to grant contract but effectively and for all practical purposes by the Chief Minister of the State. To whom do you appeal in a State administration against the decision of the Chief Minister? The clutch of appeal from Caesar to Caesar's wife can only be bettered by appeal from one's own order to oneself. Therefore this is a case in which the High Court was not at all justified in throwing out the petition on the untenable ground that the appellant had an effective alternative remedy. The High Court did not pose to itself the question, who would grant relief when t....
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....64 in 35 VST): ". . . Today with the technological advancement there is a very thin line which divides a 'sale' from 'service'. . ." Based on the above referred judgments, Sri Bhaskar would submit that each transaction needs to be examined in the light of the principles laid down by the honourable Supreme Court. It is the nature of transaction that will determine the taxability in each case. He brings to my notice that there is no challenge in these petitions either to the legislative competence of the Union Legislature or the validity of any Union legislation providing for the levy of service tax. Sri K.G. Raghavan, the learned senior counsel appearing for Sri K.J. Kamath, the Special Government Advocate for the respondents submits that in the case of United Bank of India v. Satyawati Tondon reported in [2010] 8 SCC 110, the apex court has held that there can be no reason as to why the High Court should entertain a writ petition, when a particular legislation contains a detailed mechanism for the redressal of an aggrieved party's grievance. This applies with greater vigour in matters involving public money. He submits the ACLE is the data carrier. I....
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....mposite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and the 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 clauses (b) and (f) of clause (29A) of article 366, there is no other service which has been permitted to be so split. For example the clauses of article 366(29A) 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. 45. The reason why these services do not involve a s....
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.... Division Bench's order, restored the learned single judge's order by directing the assessee (Bharti Airtel) to file the statutory appeals in Bharti Airtel Ltd. v. State of Karnataka [2010] 32 VST 432 (SC). Nextly, Sri Raghavan brought to my notice, the learned single judge's order in the case of Sap India Private Limited v. State of Karnataka reported in [2009] 23 VST 276 (Karn). The paragraphs read out by him are extracted hereinbelow (pages 280-282 in 23 VST) : "11. While it may be true that all these writ petitions may involve even complicated questions of law for a satisfactory resolve of all such questions of law, factual matrix of the cases will have to be examined whether by this court or by the authorities. Particularly, the law on this aspect being in a formative stage and in respect of new activities, as a result of advancement and developments in science and technology and their applications in the commercial field, for resolving questions of law arising in such context and even questions arising in the context of taxation statute, it will be very (sic) to avail the appeal remedies and necessary all aspects of their development in the field of science ....
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....itioners the assigning of the appeal, if the petitioners file the appeal, would be to an officer who has not associated himself with the resolution of a issue involving the taxability of ACLE. He makes this submission without prejudice to his submission that the Deputy Commissioner has passed the objective and correct order. He poses a question, if the Legislature or the top executive has expressed some opinion, then no officer of the Department can be assigned with the reassessment work. He submits that the vice of bias is raised only to cross over the first hurdle. Sri Raghavan submits that if an assessee is asked to file the statutory appeal for some years and to file the writ petitions for some years on the same issue, it creates an anomalous situation. In the matter of the levy of the tax on the transaction involving the ACLE, the apex court has relegated the assessee to the statutory remedy. The reassessment orders are not without jurisdiction. He denies that these petitions involve only pure and simple questions of law; on the other hand, they involve pure question of facts. Whether the electromagnetic waves are goods, whether the data transfer has the attributes of sa....
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....twork for taking the delivery of the data carrier energy. He reads out the decisions in the case of Maradugula Venkataratnam v. Kotala Ramanna, reported in [1911] 21 MLJR 413, wherein it is held that a law does not require any particular mode or form of appropriation. He submits that the consumption-cum-transfer of ACLE is digitally measurable. There is transfer of property in goods, i.e., the light energy for a consideration in the course of business pursuant to the contracts entered into between the petitioners and their customers. The data transfers carried out by the petitioners satisfy all the tests of a sale. The transactions are purely of commercial nature done with a profit-motive. The transfer of property in goods is invariably taking place in the data carrying transactions. He submits that the reply filed by the petitioners to the proposition notice is adequately considered. If the petitioners think that their reply is not considered properly or that an illegal order is passed by the reassessing authority, the petitioners' remedy is only to file the statutory appeals. He submits that the petitioners' contention that the issue is covered by the honourable Suprem....
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....f the case can be inferred. 36. As we have noted, every preference does not vitiate an action. If it is rational and unaccompanied by considerations of personal interest, pecuniary or otherwise, it would not vitiate a decision. For example, if a senior officer expresses appreciation of the work of a junior in the confidential report, it would not amount to bias nor would it preclude that senior officer from being part of the Departmental Promotion Committee to consider such junior officer along with others for promotion." Sri Raghavan submits that the petitioners cannot skip the appeal and revision layers and directly come to this court under article 226 of the Constitution with the expression of the apprehension that they are not likely to get justice at the hands of the appellate authority. They have approached this court with an absolutely baseless apprehension. He read out para 8 of the Supreme Court's judgment in the case of State of Punjab v. V.K. Khanna reported in AIR 2001 SC 343, which reads as follows: "8. The test, therefore, is as to whether there is a mere apprehension of bias or there is a real danger of bias and it is on this score that the surrounding c....
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....ons urged on behalf of the petitioners that the issue in question is squarely covered by the honourable Supreme Court's judgment in the case of Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1. The verdict in Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 is indeed open-ended. In para 65 of the said judgment, the honourable Supreme Court has held that what may be achieved by scientific and technological advances in future cannot be anticipated. It has further said that no one at present has argued that the electromagnetic waves are abstracted or are capable of being delivered. Now it is being argued whether or not the ACLE carrying the data to the customers' desired destinations in the network could be held as goods: this is to be established. It involves phenomenal scientific investigation and research. I am afraid, the courts are not well-equipped to go into the scientific and technological aspects of the matter. It is therefore desirable that the petitioners file the statutory appeals. The appellate authority has to consider the case of ....
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....ant statute. 18. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the Rules of self-imposed restraint evolved by this court, which every High Court is bound to keep in view while exercising power under article 226 of the Constitution. . ." In the case of Thansingh Nathmal v. Superintendent of Taxes, Dhurbi reported in [1964] 15 STC 468 (SC); AIR 1964 SC 1419, the Supreme Court has observed that the High Court would not act as the court of appeal against the decision of a court or Tribunal to correct the errors of facts and does not by assuming the jurisdiction under article 226 of the Constitution trench upon an alternative remedy provided by statute for obtaining the relief. Under article 226 the High Court does not generally enter ....
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....ourable Supreme Court in the case of Serai Kella Glass Works Pvt. Ltd. v. Collector of Central Excise, Patra reported in [1997] 91 ELT 497 (SC) (para 1), in tax matters it is not desirable that the High Courts exercise jurisdiction under articles 226 and 227 at the threshold but allow the assessee to go through the normal remedies provided under the Act. 11. Just because the assessee feels it has a very good case on the merits, that by itself is not a justification for this court to entertain a writ petition by-passing the appellate remedies. If that were to be so, then all merited matters should be examined under articles 226 and 227 and not by way of appeals and can lead to unnecessary burdening of the High Court." I am nextly left with the bias aspect of the matter. That the Deputy Commissioner has taken part in the proceedings of the committee on the subordinate legislation or is instrumental in filing the review petition are no grounds for alleging the bias. In the instant case, the Deputy Commis sioner has passed the similar reassessment orders for different assessment periods on July 31, 2006 and January 12, 2007 long before the meeting of the committee on subordinate ....