TaxTMI 
TaxTMI 
2016 (5) TMI 297
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.... an order dated 13th February, 2014 passed by the Special Commissioner (VAT) directing a deposit of Rs. 3,14,00,000/- - being 20% of the disputed demand of VAT and interest for the period 2011-12 - as a pre-condition for hearing the objections filed by the Petitioner in respect of demand raised for the financial year 2011-12. In addition, the Petitioner also impugns a ruling dated 6th April, 2011 made by the Commissioner (VAT) under Section 85 of the Delhi Value Added Tax Act, 2004 (hereafter 'the DVAT Act') whereby the Commissioner has held that advertisement hoardings, panels, display boards, kiosks etc. are "goods" as defined under Section 2(m) of the Act and the advertisers are liable to pay VAT on the revenue received on account of deemed sale resulting from transfer of the right to use the said hoardings, panels, display boards, kiosks etc. A further challenge is also laid to the notices under Section 59 of the DVAT Act dated 8th May 2013 and 21st October 2013 requiring the Petitioner to produce the documents stated therein for the period of 2012-13. 2. The principal controversy involved in this petition is whether the Petitioner, who is a licensee in respect of ce....
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.... by the advertiser. The Petitioner then prints and mounts the advertisement at the Sites and is remunerated for the same. 5. DIAL has also entered into a Sponsorship Agreement dated 17th August, 2010 and a supplementary agreement dated 18th August, 2011 with the Petitioner whereby, the Petitioner has been granted a nonexclusive licence for procuring, acquiring, installing, managing, maintaining and upgrading 318 nos. MATVs at designated locations at Indira Gandhi International Airport, New Delhi. The Petitioner is licensed to display brand logos on the said screens. The Petitioner states that pursuant to the aforesaid agreement, the Petitioner has entered into an agreement with M/s LG Electronics India Pvt. Ltd. (hereafter 'LG') for installation of 318 MATVs at various display sites at Terminal-3 of the Indira Gandhi International Airport at New Delhi. 6. According to the Petitioner, it is rendering a service which falls within the taxable services of "sale of space or time for advertisement" as defined under Section 65(105) (zzzm) of the Finance Act, 1994. The Petitioner was also duly registered with the Service Tax Department and regularly filed its returns of servi....
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....nt dated 5th August, 2013 in respect of the financial years 2010-11 and 2011-12 imposing VAT of Rs. 6,46,29,253/- along with interest of Rs. 2,20,18,213/- and a penalty of Rs. 7,62,62,456/- for the year 2010-11; and VAT of Rs. 13,21,99,660/- along with interest of Rs. 2,51,54,154/- and a penalty of Rs. 8,72,51,736/- for the year 2011-12. 11. The Petitioner filed its objections against the aforementioned notices for default assessment before the Special Commissioner (VAT) on 7th October, 2013. The Petitioner also filed an application seeking complete waiver of pre-deposit for hearing the objections. Whilst, the matter relating to the financial years 2010-11 and 2011-12 was pending, the VATO issued another notice under Section 59 of the DVAT Act on 21st October, 2013 calling upon the Petitioner to submit the details for the financial year 2012-13. The Petitioner filed its detailed response to the aforesaid notice on 18th November, 2013 and was also afforded a hearing on 16th December, 2013. We have been informed that the matter relating to the year 2012-13 is still pending before the VATO. 12. Thereafter, on 7th February, 2014, the Special Commissioner (VAT) took up the objecti....
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....les tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366(29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales Tax." 18. Insofar as the legislative competence of Parliament or State to make a particular legislation is concerned, the same has to be considered in the context of the subject of the legislation. In Union of India v. Shri Harbhajan Singh Dhillon: (1971) 2 SCC 779, a Constitution Bench of the Supreme Court applied the doctrine of pith and substance in order to examine whether imposition of wealth tax on agricultural lands, by virtue of an amendment to the definition of 'net wealth' under the Wealth Tax Act brought about by the Finance Act, 1969 fell within the legislative competence of the Parliament or the States. The Supreme Court has also in several cases ....
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.... to sales tax, the Supreme Court, in Bharat Sanchar Nigam Limited (supra) held that: "if the SIM card is not sold by the assessee to the subscribers but is merely part of the services rendered by the service providers, then a SIM card cannot be charged separately to sales tax. It would depend ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon." 23. In view of the above, if a transaction has been held to be one of providing services then the same would not be chargeable to VAT. The dominant object of the transaction (other than those deemed to be divisible under Article 366 (29-A) of the Constitution of India) would be determinative of the nature of the transaction and consequently, dispositive of the question whether the same could be assessed as a 'sale' within the meaning of Section 2(1)(zc) of the DVAT Act. 24. The question whether a transaction would fall within the parameters of a deemed sale or a service is essentially a question of fact and would have to be determined in appropriate proceedings. The fact that the Asses....
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....ment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;"." 27. C....
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....ficult to accept that the Petitioner acquired any right to transfer any right to use the Sites in question. The licence granted to the Petitioner is defined in the Licence Agreement, as under: "License" shall mean the license for designing, setting up, developing, managing, operating and maintaining the Sites for display of the Advertisements thereat pursuant to the execution of the License Agreement awarded to the Selected Bidder for the License Term." 31. On a plain reading of the aforementioned definition, it is doubtful whether the Petitioner would have any right to transfer any right to use the Sites in question. It is also important to examine the Petitioner"s contention that the Sites were being used by the Petitioner for rendering services and no right to use the Sites had in fact been transferred by the Petitioner. Merely, because the advertisements of the advertisers were displayed on the Sites would not necessarily lead to the conclusion that they had acquired the right to use the Sites. 32. In Indus Towers Ltd. v. Commissioner of Income Tax & Ors.: (2014) 364 ITR 114 (Delhi), a co-ordinate bench of this Court considered the question whether agreement ente....
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....ervice providers to the subscribers, the question of the right to use those goods, would not arise." In the present case, it is not disputed that the Sites in question are located in a restricted area and none of the advertisers have an unmitigated access to those Sites; the Petitioner affirms that possession of the Sites is retained by DIAL. In the circumstances, it would be difficult to accept the view that the transactions entered into by the Petitioner with the advertisers constituted transfer of the right to use the Sites in question. 34. Insofar as the challenge to the order dated 6th April, 2011 passed by the Commissioner under Section 85 of the DVAT Act is concerned, it is obvious that the aforesaid order must be applied keeping in view the facts of each case. The said order cannot be read to mean that in every case where advertisements are displayed on hoardings, panels, display boards, kiosks, etc., the advertisers would be liable to pay VAT on the amount received for display of such advertisements. The said decision has limited application and would be applicable only in cases where it is found as a matter of fact that there has been a transfer of right to use hoar....