TaxTMI 
TaxTMI 
2025 (2) TMI 883
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....: (By Sri. Aditya Vikram Bhat., AGA). CAV ORDER (PER: HON'BLE MR JUSTICE KRISHNA S DIXIT) All these Petitions by the Assessees call in question orders made by the Karnataka Appellate Tribunal at Bengaluru whereby their Appeals filed under Section 62 (6) of the Karnataka Value Added Tax Act, 2003 have been negatived essentially holding that the Assessees have transferred to the subscribers the right to use Set Top Boxes for consideration and therefore, the same amounts to sale within the definition of Section 2 (29) (d) of the Act and as a consequence, levy of sales tax is unassailable. II. Since common questions of law & facts are involved, there is consensus at the Bar to hear & dispose off these cases by a common order and therefore, they are taken up accordingly. Learned Sr. Advocate Mr. T. Suryanarayana and other advocates appearing for the Assessees succinctly submit as under: (1) After the 46th Amendment, Article 366 (29A) has been introduced to the Constitution of India providing for tax on the sale or purchase of goods in an inclusive way; clause (d) of this Article enables the State to levy tax even on the transfer of the right to use any goods for....
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....d question of law & fact, if not a pure question of fact; none of the questions raised in these Petitions or argued by the Assessees is a question of law. (2) The definition of sale enacted in Section 2 (29) (d) of 2003 Act is a means & inclusive definition; a transaction that would not conventionally amount to sale is deemed to be a sale by virtue of inclusive part of the definition; the transfer of right to use goods for consideration without anything more constitutes a sale and therefore, attracts levy. (3) Admittedly, STBs are provided to the subscribers in terms of statutory obligation and they have to be of a prescribed standard; they have to be installed by the Cable Network Operators at the place of subscribers who make use of them in choosing channels of display on TVs or such other devices; the so-called activation charges are nothing but a consideration for the transfer of right to use. (4) The decisions cited on behalf of the Assessees do not support their case; a Division Bench of Hon'ble Tripura High Court in BHARTI TELEMEDIA LTD. vs. STATE OF TRIPURA (2015) 79 VST 561, having considered all aspects of the matter has ruled against Assessees ....
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....nificance. Ordinarily, appellate jurisdiction involves a rehearing while it is not so in the case of revisional jurisdiction when the same statute provides the remedy by way of an "appeal" and so also of a "revision". B. CHAPTER VII OF 2003 ACT: This chapter contains the provisions for Appeals & Revisions. Appeal to the Appellate Tribunal is provided by section 63 which has as many as twelve sub-sections that fairly indicate the scope, grounds, limitation & procedure. On the other hand, Section 65 provides for Revision by High Court 'in certain cases'. Section 65 has as many as twelve elaborate provisions. The entire section is reproduced for ease of understanding: "65. Revision by High Court in certain cases.- (1) Within [one hundred and Eighty days] from the date on which an order under sub-section (5) or (8) or (9) of Section 63 was communicated to him, the appellant or the respondent may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either failed to decide or decided erroneously any question of law: (2) The High Court may admit a petition preferred after the period of [one hundred and Eighty ....
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....y to the petition, review any order passed by it under sub-section (6) on the basis of facts which were not before it when it passed the order. (b) The application for review shall be preferred within such time and in such manner as may be prescribed, and shall where it is preferred by any person other than an officer empowered by the Government under sub-section (1) of Section 63 be accompanied by a fee of one hundred rupees. (11) (a) With a view to rectifying any mistake apparent from the record, the High Court may, at any time within five years from the date of the order passed by it under sub-section (6), amend such order. (b) The High Court shall not pass an order under this sub-section without giving both parties affected by the order a reasonable opportunity of being heard. (12) In respect of every petition preferred under sub-section (1) or (10), the costs shall be in the discretion of the High Court." C. A THUMB NAIL DESCRIPTION OF SECTION 65: (1) It specifically states that Revision is available 'in certain cases'. Such an expression is not employed in section 63A and section 64 which too provide for revision respectively by the J....
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....e sought for at any time within five years; before effecting rectification, stakeholders need to be heard. Sub-section (12) provides for discretionary levy of cost while making orders on Revision. D. AS TO WHAT IS A QUESTION OF LAW WITHIN THE MEANING OF SECTION 65: (1) Now, let us come to the substantive provision of Revision to High Court, namely sub-section (1) of Sec. 65. Textually, it requires a question of law that was raised but the Tribunal has 'failed to decide' or 'decided erroneously'. Therefore, we have to examine as to what is meant by 'question of law'. Salmond's Jurisprudence [12th Edition by P J Fitzgerald, pages 65 to 70], says that all questions that arise before court are broadly of four types: (i) questions of law, (ii) questions of fact, (iii) questions of opinion & (iv) questions of discretion. We are not much concerned with item Nos.(ii), (iii) & iv). Salmond further says that ordinarily, a question assumes the character of law, if answer to that has to be found by turning the pages of statute book. However, that would be too restrictive an approach when it comes to the realm of adjudication process like this, in th....
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....nvolved 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 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." Textually, the definition is too wide. Its building blocks would make it wider than what conventionally a "means & includes" definition would import. The expression "all kinds of movable property" employed by the legislature lends support to this view. What is significant is the choice of term namely "all kinds of" and not "all types of". It is intended to be all pervasive, barring the specified exclusions in the definition. Apparently, STB does not fall into any of these exclusions. Whether it would fit into the substantive part of the definition, can be ascertained by a deeper examination of the commodity. (2) What the learned Author Mr. W. Fischer writes [Digital Video and Audio Broadcasting Technology, A Practical Engineering Guide] can be a prelude to our discussion in this regard: 'In the case of digital television, it is advisable to use an RGB (SCART) connection or a Y/C conn....
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....text, could mean any or all of video, audio, Internet web pages, interactive video games or other possibilities. Satellite & Microwave based services also require specific external receiver hardware. Set Top Boxes can also enhance source signal quality. (4) A Set Top Box is an appliance between cable outlet and a subscriber's receiver, cannot be disputed. Regulation 2(z) of the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012 defines "Set Top Box" means a device, which is connected to, or is part of a television and which allows a subscriber to receive in unencrypted and descrambled form subscribed channels through an addressable system. For ease of ocular understanding, prototype images are reproduced below: (5) It is not out of place to refer to a Central Government Office Memorandam dated 13.08.2014 which says that STBs fall within the definition of goods for the purpose of Central Sales Tax Act, 1956 and therefore, Form-C facility to be extended to them. The said OM reads as under: "F.No.32011/2/2014-SO(ST) Government of India Ministry of Finance Departm....
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....s apart. It hardly needs to be stated that a case is an authority for the proposition that is actually laid down in a given fact matrix and not for all that which would follow from what has been so laid down vide QUINN vs. LEATHEM (1901) UKHL 2. (ii) The second decision pressed into service on behalf of the Asessees was THE COMMISSIONER COMMERCIAL TAX U.P, supra. A learned Single Judge of Allahabad High Court vide order dated 16.10.2019 at paragraphs 5 & 6 observed as under: "5. During the assessment year in question, the assessee was engaged in providing cable television network to its subscribers against value. It had been subjected to service tax as a service provider. The Tribunal has set aside the assessment order under the UP VAT Act, 2008 (hereinafter referred to as the 'Act') on the reasoning that the assessee was only a service provider. 6. Learned Standing Counsel has contended that there was some element of sale of goods namely, set top box in the value Rs.1,200/- received by the assessee from each subscriber. The argument so advanced, even if found to be factually correct, to any extent, may not itself lead to an assessment of tax liability ....
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.... clause (29A) came to be introduced to the definition clause enacted in Article 366. This Amendment expands the concept of sale and thereby, enlarges the power of State Legislatures to tax the transactions simulating sales but not conforming to the conventional meaning of sale under the Sale of Goods Act, 1930. Clause (29A) (d) being relevant, is reproduced below: "tax on the sale or purchase of goods" includes- (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;" In STATE OF MADRAS vs. GANNON DUNKERLEY & CO. AIR 1958 SC 560, the Supreme Court had held that the expression "sale of goods" used in the Constitution involves an existence of any agreement between the parties for the sale of goods in which eventually property passes. To a great extent, the substratum of this decision is altered by introducing a fiction by which six instances of transactions are treated as sale, one of them being the transfer of the right to use any goods for any purpose for consideration. Incidentally, the validity of this Amendment came to be upheld in BUILDERS ASS....
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....of right to use goods, it should be inter alia to the exclusion of transferor since it is not just merely a license to use. In the light of that, the Bench after perusing various terms of the contract, observed at para 64 as under: "It is well settled that, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole to determine the nature of the transfer. From a close reading of all the clauses in the agreement it appears to us that under the terms of the contract there is no transfer of right to use the passive infrastructure conferred on the sharing operator/mobile operator. What is permitted under the contract is, a permission in the nature of a licence to have access to the passive Infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorized representatives of the mobile operator... in the facts of this case- if we look into the various terms of the agreement it is clear under the contract, the assessee has not transferred any right in ....
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....ny does not even have the power of entering the premises of the customer. Most importantly as per the terms of the agreement, the companies are responsible for the functioning of the STBs only for a period of 6(six) months. The warranty is valid only for six months and thereafter there is no warranty. Therefore, if STB of a customer is spoiled after six months he will have to pay for repair or replacement of the same. We are of the considered view that this amounts to transfer of the right to use goods." We are in complete agreement with this view, there being nothing to substantiate pervasive control of the Assessee over the STBs, merely because they have license to gain entry to the premises of the subscriber for periodic inspection/repair. G. AS TO CONSIDERATION FOR TRANSFER OF RIGHT TO USE STBs: (1) In Cable Networks of the kind, almost invariably STBs are employed and that they are installed in the house of the subscribers, is not in dispute. The submission of the Assessees that even if the subscribers are held to be using the STBs, unless the same is for consideration, the requirement of section 2 (29) (d) of the 2003 Act read with Article 366 (29A) (d) of the Consti....
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....e may be transfer of a right to use goods as in the case of a telephone connection, which would also include service. It is competent for the State to tax the sale element provided there is a discernable sale and only to the extent relatable to such a sale. True it is, that in IMAGIC CREATIVE PRIVATE LIMITED vs. COMMISSIONER OF COMMERCIAL TAXES (2008) 2 SCC 614 has said that the payment of service tax and remittance of VAT are mutually exclusive, the nature of levies being different. However, different aspects of a single transaction can be taxed under different statutes. (2) There can be levy of more than one tax on a subject matter, if incidence of each of the taxes is different from the other and such taxes may be imposed under different statutes. A tax on the sale of goods is envisaged under Entry 54 of List II (Sales Tax) of Schedule 7 of the Constitution and the taxable event is transfer of goods including fictional sale envisaged under Article 366 (29A). In the case at hand, sales tax is levied under the State Enactment. There the State is not levying tax on service aspect of the transaction, since that exclusively belongs to the domain of the Parliament, which has enacte....
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....as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the repealed Acts; or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so repealed; ..." A perusal of these clauses shows that there is a limited deeming of non-repeal of the Act, at least in effect. This is as of necessity. (3) Now let us examine the text & context of Sub- section (2) of Sec. 174 which reads as under: "(2) Not withstanding anything contained in section 173, for....