Karnataka High Court
M/S Antrix Corporation Ltd vs The Asst Commr Of Commercial Taxes on 6 February, 2010
Author: B.V.Nagarathna
Bench: B.V.Nagarathna
IN THE HIGH COURT OF KARNATAKA AT EANGALORE
DATED THIS THEc>L"DAY OF rig ISROA RI/I , 2OV.I~IQI'I._V
PRESENT A'"R*'
THE HONBLE MR. JUSTICE V.GOPALA
AND , ._
THE HON'BLE MRS. JUSTICE,B.fJ.I§fA'f}.AI?AT4H'1\§A_V!
WRIT APPEAL NO.882 TO 885"QF"--2OO9»{-TARESII';
BETWEEN: A I A I
M/ S ANTRIX CORPORATION ILTE
REP BY ITS ACCOUNTSVQIWICIEIR, _ A .
SR1 M M SATHYANARATY.A_NA,'--_ "
AGED ABOUT .40 'Y_EAfRS_, A.NT4RIKSH' BHAVAN,
NEW BEL RC%AD;;-13ANGAI.OREI560123":
... APPELLANT
(By Sri:"V_ SRID'HA'I§m$§';«--._$RI.G SHIVADAS,
SRI.:-IARISH R, ADVI) TI
EEEEE
f LTIIE IASSISTANT COMMISSIONER
O'E"COI4IqiERcIAL TAXES
(Ev1\EFC{_R;CEMENT)~7, SOUTH ZONE,
BANGALORE - 560 047.
TIIE COMMISSIONER OF COMMERCIAL
_ ITAXES IN KARNATAKA,
I VANIJYA THERIGE KARYALAYA, I MAIN,
GANDHINAGAR, BANGALORE 560 009
5?
fa»
_ A following:
3 THE STATE OF' KARNATAKA,
REP BY ITS FINANCE SECRETARY,
VIDHANA SOUDHA,
BANGALORE 560 001
4 THE UNION OF INDIA, E-
REP BY ITS FINANCE SECRE'I'ARY,_--~--~.. A
MINISTRY OF' FINANCE, ~ A
DEPARTMENT OF REVENUE, ,3
NEW DELHI ,
(By Sri: ASHOK HARAQIAHAI;}';,t.,",_:I'\_]fI¥I_OCATE-~GE3NERAL,
SR1 T P SRINIVAS, --SR§VY"~-HARIPRASAD, CGSC
FOR R4)
WRIT APPEAL /,STr,a;rr.oI? THE KARNATAKA
HIGH COURT PR'A_YINGj-- ,1'oj'sET ASIDE THE
ORDER RAs,.g{:p;,DAA::§§,1i1 WRITAVPETITION NO2647 To
2650 /09 DATEDjo_5~,I,o3g2oo9.
Thfiaappealsa2h:avI'rI,gAbeen heard and reserved for
orders, this day, I-Na'"garathna J, pronounced the
JUDGMENT
appeals are filed against the order of 'V thekiearned single judge dated 6.3.2009 passed in AV"Ij~,.wI.*I2.,NoA.A2647 to 2650 of 2009 by which the Writ ' filed by the appellants are dismissed. By an '4"'.,HII'1terim order dated 30.3.2009 stay as sought in ii», RES,PC3,NDE'NTS ' A
4. The INSAT Satellites which belong to the Department of Space are placed in geo--stationary orbit around the earth contain slots called "transporidrerVs" which may be 20 to 30 on a single different frequency bands. According to;'tiieiiapplellantyll '* if the Department of Space entered'»iinto' a 5memorandi1m' understanding with it, with'lr'egardltollcontractgwaentered by the Department of __Spacey_with__vario1.is'* cr.1_stoiners for providing INSAT "Spaee.. Capacity" in the transponders atta_chedWto' r«s:a_teli1-iteyllbelonging to it. understanding, the appellant' providesi:Iniarltletirig and contract services for hiring of tran_spo.ridersl"o.f INSAT satellites by providing wilysers as per the eiéisting satellite communication policy 9' appellant is required to carry out cer"tainv___vactivities on behaif of the Department of Space :"inc1udi'n--g billing of customers' collection of service tax 'a_n'd--reI:r1ittance, realization of payments against invoice S ~~raised on customers and providing of service support for J/9-2"' marketing of INSAT/G--SAT Space Segment Capacity both in local and global markets.
5. According to the appellant, to agreements entered into by Depa:rtment__o1°. the customers pertaining to allotmentdof capacity in the transpoin-ders S7t_ermed.'"'i' "lease agreement", the customers have to obtain necessary licences from Governrri-ei:1ta1--_Department such statutory bodies and the customer'-is:'duly'=authorié:'ed to make use of traiiisplonederg allotted to it for a specific period to provcicléiA:f};1p¥lirii«:ir1g facility to the customer. According to by virtue of being Contract . for__ Department of Space and for providing for leasing of transponders of INSAT Satellites', registered as a service provider and also :"'registe1'*ed with the Central Excise Department under Head of Scientific and technical consultancy with '~ei'fect from 5.10.2001. The appellant is also engaged in % _y,,.2''.
7. The respondents filed the statement' of objections by stating that the Writ petitions v;7er*e.fl'not rnaintainable as the petitioner was it commercial activity in the sale goifspacep transponders, edu~sat equiprnent'.aridi.cartojsat and also engaged in proVidiiilgV"'--foreign._host.= for launching of space Iannching vehicles and also traclrp According to the responde*nt:si,Vg:eI"sinee is engaged in leasing of in INSAT satellites to upelink the INSAT transpolnriersl, and is registered under the provisions of the 'Act in View of the definition of sale . thelflappellant is liable to pay VAT tax on if .i'.i'Vt.ransponders. That the dealer received cha"1"ges.__"in.«lrespeet of leasing the facility to use the V 1ra:r;spo'nders, which were not declared in the returns That the first respondent visited the business T "premises of the petitioner/appellant on 12.3.2008 and % v_,.w"'.' -10- 25.8.2008 and had gone through the documents relating to satellite segment charges collected as as collection of access fee and royalty fee and in respect of leasing the facility to use That the customers had to approachethe':petiti.one'rsVfer.' obtaining the facilities provided practical practices; the petitioner has oinlyilthe privity of contract with the dc-u.s'toni_er;,sV the Senior Assistant of thevpetitionevreconipanfif'had;clarified certain terminologies.' in the haifacticeiiiisheet viz., foreign host charges, foreign access fee, royaltylfee; inlandA:.i;acce.s's'.fee and royalty, inland space segment charges' upon verification, it was found fithat xirfirespect ofmleasing out the facility to use the I a specific period and specified bandwidtlfin terms of the agreement entered in the ,V'S.tate Karnataka by using the "INSAT master control facility" at Hassan, Karnataka State was a sale. Hence,
-the activity of a dealer in leasing out the facility to the i3 a/"7 ..11_ customers of the appellant to use the transponder is 'sale' within the definition of Section 2 (29) Act, 2003 and the receipts are qualified as the purpose of section under Section' 2 of section 3 of the Act, theVturnAoV_e'r_taX vs}a_s"at but the petitioner had not"'~vde-clared"- taxable V turnovers to the theireturns filed for the months of April, Therefore, the tax on leasing of facility and also access fee and objections filed by the dealer light of the lease agreement which ..would ._co'ns'tituteTa sale under the provisions of "Act anidflitherefore, the proposition notices law. The respondents therefore, have sought _cEisné§issal of the writ petitions. ., 1. Learned single judge dismissed the said Jpetitions by observing that the petitioners should avail
-»ofialternative statutory remedy by pursuing their relief 3 X! i -15- the communication satellite. He has also stated__that since the agreement has been entered into witi1i.n=..the State of Karnataka, Section 6(4) of the * application. He has also adverted in it it support of his submission the"
authorities were justified in i.s_sU,ing the dernandnotices i' against the appellant. Ijle also atte'ntion to the order of the Apex coairtif/_I/S. Bharathi Airtel Limited that, the learned not interfering with the matter 'inlthe V 'V12. the learned counsel on both i agnd" on periising the material on record, the s..foJ.l_owirig.._points}~would arise for our consideration:
i) ~i:lFv"ihether the 1st and 21" respondents were it justified in concluding that, the allotment of "space segment capacity" in the transponders and bandwidth of a communication satellite having different M" ' -17- transactions described in sub»~c1ause(a) to (f) of Article 366 (29--A) of the Constitution was calied in questioniiin Builders Association of India V/s. Union of .
SCC 645). In the said case an account ii the relevant constitutional and reference to judicial d€CiSiOI'1S_\'1I1E1Vi1'1"g .__a 'hearir1--g"'o11"'the "
said provisions were setout 'tro"'ai§_}§reciate the-.co~ri,tention of the parties, particuiiarlygl Article 286 of the Constitution,. 304 and entry 54 of the and entry 92A of iist--
1 of €hce\'/"Iii Artiele 259 and the 61$': report of the to levy of sales tax on certainswhich though strictly not sale . V. °'~had'-.toi.':;e "tconside"redV as sale and accordingly, it led to Etihe passingiofvthe 46th amendment incorporating a new definiti_on_o.i7sa1e. The Apex Court upheld the validity of jthe arnendrnent of the said definition. However, in the ii'eesaic1::decision, the Apex Court stated that Article 366 ~»v-{§:29--A) is a part of the definition clause which states that
- 2; ..
any goods will be a deemed sale in the case of Sub~»clause{d). Clause (29-A) cannot, in our view, be read as implying that the tax under Sub--clause(d) is to be imposed not on the transfer of the right to use goods but on the_..___ delivery of the goods for use. Nor, in view, can a transfer of the right to use g;oo'dsj_~.. in Sub~clause (d) of Clause (29A) be.Vec_iuated~ with the third sort of bailrn-e'n't"referrecjl "Bailment" by Palmer, 1 979 ' The third sort referred to «there is Vlurhenli lgojodsn are left with the bailee used him hire, which implies the'*l'transfeV"r*.of thegoods to 'the..bailee:.if:, In vSub»~clause(d), the go_od_s' areifnoti -C to be left with the tra'rii3feree.'V../{ll required is that there is _.n._ transfer cf.the".n'g'ht to use the goods. In our therefore," on a plain construction of __Su_b«e«ciause(d) of Clause (29%), the taxable transfer of the right to use the go_ods_v'regardless of when or whether the goods are delivered for us. What is required if that the goods should be in existence so ii "that they may be used. And further contract in respect thereof is also required to be ll»
-23..
soon as the contract is executed, the right vested in the lessee. Thus, the taxable event of such a tax would 1- transfer, which legally transfers use goods. In other wordS,""tf' t.he"..go.oci1s" a_re":7 available irrespective of the goods are located and-..__a writteln Vcon'trajct_..,,is entered into between 'taxable event on such a . .,deern'e'd'* = would V V lbw We execution of of right to use goodsuh. oral or irnpliedf' '"t'o"'use goods it may of the goods.
No this court has been shown onlbehalf that there would be _--n.o corhpileted transfer of right to use goods 'liunliessg the" 'goods are delivered. Thus, the A " ~ devlitzerijgfof goods cannot constitute a basis for on the transfer of right to use any 9'?._'3'C3Sl..3'l We are, therefore, of the view that where the goods are in existence, the taxable it «event on the transfer of the right to use goods "occurs when a contract is executed between the lessor and the lessee and situs of gale of :/V/'7 -25- sale in case of the transaction of transfer of-.__ right to use any goods would be the where the property in goods passesgr'i;e.}_',Vj---: ~'-~ where the written agreement transferring _ right to use is executed.
(c) Where the goods are transfer of right to us7e'«-the taxable the transfer of right to "on the transfer which results.vin"rightguse and the situs of sale ,oila.ce:"w.here the contract is. V executed» the goods are hhhh H
(d) In V ";jio't in existence or *§:is-- an_'oral lo'r"'iniplied transfer of the icofuse such transaction may behe&1j'ected»_hyV.gthe'*deiii2ery of the goods. In such the taxable event would be on the 'idel_i've__r_g of A __(ej): T.he.Vl:transaction of transfer of right to use goods clarinot be termed as contract of bailmegntl as it is deemed sale within the meaning of legal fiction engrafted in Clause '*~..[729V14)(d) of Article 366 of the Constitution it 'iuhere the location or delivery of goods to put to use is immaterial. ")
15. As far as the Karnataka Sales Tax Act__1"95'7, which came up for consideration is concerne«d,-.:.i;fithi1e referring to definition of 'sale' under * said Act which is in para materfiattwith of! it the KVAT Act and in the context.g0f':_eX't)lartati--o,n Section 2(t), the Apex Courti-i:n"..the 'held it it that the said explanation was"in'g_:eXcess the legislative power under Entry of schedule and accordingly t.hat'_jV._e-fcplfanation 3(d) to Section Act, 1957 shall be read down=to"this jivvould not be applicable to the trans.actiotns..:of of right to use any goods outside sale, (ii) sale in the goods into or export of the Cgoods ottttiof territory of India and (iii) an Inter--State -27-
16. In the case of Bharat Sanchar Nigam Ltd., <35 another V/s. Union of India and others (2006)145~,_STC 91 ), the question that came up for decision Apex Court, was with regard to the natiiireitecfiii transaction by which mobile p17£ones«co't1nec_tit§«1:s Were".
obtained, as to whether, it is a oifia serv'ice'vo'r In the said decision, after reitei:*ating.t}1ei_ of Article 366(29-A) of Co'irist:itt1ti.oi1..,¢. theivilipex Court held as follows:
"41.Sul::4ci:ta-se fa) =:co1)ers_.aT'situ.ation where ' element' lacking. This normally in an involuntary sale.
Sul9"~cla~:ise'*{l:ij cases relating to works is 'contractsii " This was the particular fact i':'sitt.:.ation, the court was faced with in Ifiunkerley, and which the court had a sale. The efiect in law of trslinsjer of property in goods involved in the stecution of the works contract was by this iihamendment deemed to be a sale. To that it extent the decision in Gannon Dnkerley was directly overcome. Sub-clause (C) deals with ?
_,, -28- hire~purchase where the title to the goods is not transferred. Yet by fiction of law, it is-"v. treated as a sale. Similarly the title to goods under sulrclause (d) remains -1- transferor who only transfers the right ._ the goods to the purchaser! Wlri'othe_r contrary to A. V.Meiyappan a lease of a negative print of a piicltare would .bei.aA Sub--clause{e) covers casesllwhichlin rnlay not have amounted _ 'because "the member of an would have in va.:lsense_"VlJeg-dire .as:fb_otl1 supplier and the supply ofégroods. Now sticlh "deehied sales. Sub-
clause to contracts, which had been__held"not.:to to sale in State of ;Pu._ri_jal§l llfllssocidted Hotels of India Ltd. 5iE?cisio'ri""Vhas by this clause been ll " = . efifectively . legislatively invalidated."
Court thus held that all the sub-
--l c1a1li4sc.s""Vof.Afrtic1e 366(29--A) serve to bring transactions V' 'fw"h'ere one or more of the essential ingredients of a sale defined in the Sale of Goods Act, 1930 are absent cw"
-29, within the ambit of purchase and sales for the purposes of levy of sales tax and the amendment especially"
specific composite contracts viz., Works cont:r;acts..,_' _ purchase contracts, catering contracts, _by'v£ega1"~fiction'4 W 'V to be divisible contracts where the sale ,.e1e1ne-nt'-conld be isolated and be subjected to'isa1_es V
18. The Apex vconrt'--u1ti1na'te13{'11,e1d that in the context of providing="'a~iiteiephonie .,..connection that eiectromagnetig; raidijo frecluencies are not goods fivfor 'Article 366(29--A) of the Constitntion _ and goods in teiecornmunication are ljitnited ditto. _ the h'andsets supplied by the service farwads the SIM cards are concerned, the Aiisstic for determination by the assessing authorities-..
""19. In the decision of Bhararh Sanchar Nigam "Ltd (BSNL), reference has been made to the case of ?
Mi" ' -30- H.Anraj V/s. Govt. of T.N. (28 (1986),? SCC 414) in which the question was whether the sale of lottery ticket was a sale of goods for the purpose of Entry 54 of List I--§'--..and Vikas Sales cerpn. V/s. cc?' (1 996)4 scc pp whether REP licences /EXIM Scripps were sale of which sales tax could be ., '}?he:
in the first of the above cases i4l1.eld..that'l,.'T£1fipe' lottery tickets confer on the aseri'two" (i) the right to participatein the 'draw (ii) right to claim a prize contingent._}1por:: successful in the draw! l_'1it'~§~fas _theWright to participate in a draw ""goo'd»s_'i" :_lthLe"'piurpose of levying sales tax. Simil;ar1y in 'V-ikas'l'Safes Corporation, REP licences were tb cjtgaujods" the purpose of sales tax. Both the "abo'y*ei deci.sior1s*"'were doubted in Sunrise Associates v/s. _ oozse o,f'1v"Cr of Delhi (2000) 10 scc 420). Since there novconcrete Vl€W taken at the time of rendering the .l decision in BSiVL's case, the Apex Court assumed that incorporeal right is also "goods" by placing reliance -31- on Associated Cement Companies Ltd. V/ s. Commr. Of Customs ((2001) 4 SCC 593) and Tata Consultancy Services V/s. Sate of A.P.((2005)1 SCC 308) in Wh_i.c_h it was held as follows: it i "A 'goods'may be a tangible property--fo'r intangible one. It would.....becorne""goods provided it has the attributes Zhaiuingi it regard to {a} its utilitV_z;;_4_(b) capable of-t.being bought and sold and"'-(c:)"-tcapab-le of it transmitted, transferred-,-- "gdeli.yered; ~ . ,,5tor'ed and possessed. jfa whether customised or nonecustomised'satisfies these a d _Vtcc§1§'%1z1?;»1ttit%i'Ousoftv$a§1i*(eO vgas held to be goods also approved the approach to t:;uestior1" Vacsgptoéwhat are goods for the purpose of »sa1'esta§<'«by.:accepting the above definition of goods.
"Prfo.ceeding on the basis that, an incorporeal righ~t__ isV__a1sol§goods' for the purpose of levy of sales tax, %' w»""'-' -32- Whether Electro Magnetic Waves by whichgdata generated by the subscriber was transferred:i:to:lfth'e desired destination, can fulfill the criteria Tata Consultancy as goods was referring to scientific explanations of "electrornagnetic"-- waves" in the context of definition of"thi_e'='.iiordRgoods"
under Article 366(12;',,ndg.s~s¢¢£ig§iiyi'gec2,(7)orlthatsaie of Goods Act, l93Q and in various sales tax held, that abstracted nor are they are not extinguished by their not delivered, stored or possessed. they marketable. They are merely, the 'r:1e;'c'lium'~.of communication. What is transmitted is A"not"__an"~le'leic'trornagnetic wave, but the signal through such rrgeiarrs and the signals are generated by the isubscribers themselves. On the said reasoning it was 1F;elti"that a subscriber to a telephone services couid not "reasonably be taken to have intended or purchase or $5' ,/''"')4 II -33- obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. However, in the said decision it was categorically stated that it would not be possible to anticipate achieved by scientific and technological advancerrient in i future. Therefore, it was held that or radio frequency do not fulfill by the Supreme Court for determining whether right use of which, would be_a sale_f0r_theiiptirpiosie'~;;j;f..;lrticle 366(29-
22. in the decision, by way of a concurring _ :13 « .__Lordship Dr.A. R. Lakshmanan J ., stated' a transaction that the transfer bright to'"use':the"igoocis the transaction must have the ,f_o'11ovJin**.eattributes: M"
§ -35- observed that delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use-.__any goods. It was further clarified that in situs, transfer of right to use the goods, court not say that the delivery of goodsfiivas' ine-«sse11.t,i_ail_ffor' purpose of complete transfer of rightto use.,f_; emphasised that actual deliveiryr of not necessary for effectingthe _'transfer_iof.rightltov use the goods, but the goods the time of transfer must'lbe"Vdel.iverable" .a_nVd'v---delivered at some state. _exe_cution of any agreement to transferlof the goods are available and de1iv;e'rable.4i "the" goods are such that, are not all, the question of right to use the 'goods' "w_o'-ild But if there are no deliverable goods in existence, 'there is no transfer of user at all. Therefore, .,,.:Wh:etheir" the goods are tangible or intangible, they must .l belidelliverable. While holding so, it was held in State of % j..
.37.
£1.15'. V/3. Union of India (200573) SOC 239) was not correctly decided.
24. In the very same decision, with SIM card, it was stated that a represented a means of access u'id'e.ntified..t__ the.' subscribers and it was held.__.that.yirhat represents is ultimately a question of fac't..,i: it
25. Thus, whiatfii emerges " the aforesaid decisions is thefact jftheAA4€3?-l5"v_atfte'tiidment to the constitVution:"*of 'i1:i.dia*'--.l.has 'enlarged the scope of the definition of __considering the same under Article--36l6<~.._V(29--A)~_ 6: constitution in 20th Century V. Cforpofa«ti..o_n.iLimited, it was held that in case of clause--29~A of Artic1e--366, "goods" are not.i'equire'd_ be left with the transferee but all that is i;_?required'g_is that there is a transfer of right to use the A and that the location of deemed sale be under clause (cl) the place where the right to use the goods is /5 .»e""' -33- transferred, but the place where the goods are situated is of no relevance to the location of deeme.d"».is'ale._ Therefore, transfer is sine qua non for the right. * any goods and when the contract isi-exectltedg".-the"right'., its is Vested in the lessee under taxable event on such a deeined .saie'w2sr:o3_,1licl--Tloe 'lithe i' execution of the contract foriiltranisfeernof righteitgjylse the goods. i V V is V i
26. In;~vtheVp:§:ase:i__iofi it 'stated that title to the goods of clause 29~A of Artic1efi3o(3~\.i. transferor who only transfers goods to purchaser, while noticingxthe thatiiunuder amended Artic1e--366 (29-A), i"'onei"01\:,,,""more of the essential ingredients of sale, as if of Goods Act are absent within the arniait rgfpfiirchase and sales for the purposes of levy of _isa?es after the 4-6"! amendment as the intention of if the Parliament is to enlarge the scope of the definition of i '"'sale' by a fiction. "'3"
3
-39..
27. As far as the definition of "goods' is concerned, in the case of BSNL, the Apex Court approved, the definition of 'goods' given Consultancy by holding that goods tangible or intangible one. In;__ Corporation, it was also clarifiedV"it_h'at, goods are tangible or intangible, rngust be deliverable for the pnrifii'osei._ even in the context of su.b~cl.ause:.(:l}-"ofA1*tieie:36i6"ielause (29--A) of the constitntion jtriartsifer of right to use wouldthe flagreements are executed and u that' in 20*" Century Finance Corporationiis observed that, delivery of goods basis for levy of tax but the right to use the goods is the basis for tax. Butwthe emphasised that actual delivery of the is not necessary for effecting the transfer of right 'toizse the goods, but the goods must be available at "the time of transfer that is at the time of execution of WM"
-40-
agreement of transfer of right to use the goods, the same must be available and deliverable and wheizlthey are not deliverable, question of right to use ;the_jg_otod,s' would not arise. Therefore, if there is,no,_A4_:de1iv.era'ble i goods in existence, there is no transfer} ofg0_od.s*I;er_tl:1e f user at all. Thus, whether -the goods or intangible, they must be deliverable. aforesaid premise, the Apex Co'Ltft held ;_in of State Uttar Pradesh --vs- Union of.Ir2di¢t,referred"v_to"isiipra, was not correctly - In ._ 'I{ee'ping'the~w_,a'eovel precedents in mind, it is necessary affidavits filed on behalf of the .»a§;ppe1lant '--the_instant case. A 29".; an affidavit dated 11.05.2009, the ll,i'.i3,tisiness development of the appellant J'{'f}I)QS"V'w--i'or short) is the owner of various satellites company' stated that, the Department of Space /'3 5?
age"
-41-
which are of two types, namely, 'communication satellites' and 'Remote Sensing Satellites'; communication satellite (SATCOM) is r. satellite stationed in space for telecommunication; that modern? A':con*lniL1nicati~ori1~i.:
satellites are launched in Geosationary orbits, l\.{lolniy'a elliptical orbits etc., and that geo the equator represents the oirlbital at a distance 36000 'that a geostationary the'._"e'arVth at a speed of 3.75 Kms per to be in synchronization with 5 the eairth's»wrotation so that the satellite would V"appearE"~to in a fiiied position over a certain longitude 'ear,th based observer; that the communication satellites' made up of many systems consisting of .,,'va,rious'*'complex equipment Various forces, such as the gravity, earth's gravity and that the temperature other factors are managed and controlled from the 4?
WW".
-43- earth in order to ensure the smooth functioning or operation of the satellite for its life span of ro1:ghl_'y_i'l--6 years. The same is done by the ' sending coded signals whic}r;--_ are 'es'sent.i:a11'y,, instructions to the satellite to perform certain_actio11>,s';'V._ the satellite and the specilisegfgroundtstiationyiised for if its monitoring are owned, ,cor1tii_fclled._ and"ope'rated by the Department of Space each of the satellites will§.vb~e«.g:Vh'aviI:ig tolfiandle a specified range of 'department of Space and Aintriix"e{afppell'ant_iherein) "enter into contracts with customerg wl1o"a_reiiinte»rested in using this on board capacity sei'1dingl":their signals, getting them i and receiiirling the signals back for use in The available range of frequency in sateliitei is allotted to different customers without Vlghicausing--ll technical difficulties to each other while 'sending and receiving the signal; that after entering ~-into agreements and on obtaining requisite permission 2';
5% -43- from various authorities, the customer sends the signals to the sateliite at particular frequency-«jallhottedu to him and the same is called '11p»linking--jo'f The signals so beamed from customer's--'_grouliid stati.onv., are amplified and sent back lidesiglnatedi' called as 'foot print' at the 'allotted lhreceiveii lli'reE:;'uency it and the same is cal1ec1.,.r'%_1's l"tha"t the set on board equipment and gives out the 'transponders'.
The possession of the satellite and it cannot be handled who do not have the high level. of _technical expertise; that the term 'leasing' of il"'tra'nspe'r1ders in the agreement with the customers is I the allotment of a specific, fixed or dedi..cat__ecii -,l:fc'andwidth or range of frequencies for that Jipasrticiilar customer at ail times within the contractual 'period so as ensure that there is an uninterrupted "receipt of signals amplification and sending log/the -44- amplified signals to the customer. The control of transponder is always with the Department of Space and it should not be given to the customers;_...._thatésiéthe V. available bandwidth cannot be accommod.ated:.toVi_i.all K it customers and that the arrange with foreign satellite owners- for theta requisite frequency which 'v'Vi'>cnot1ld to the customers in India; --'_Vat§.tiir"ries,:"the appellant also allots the excess._bandw.i.dtl:t t'ofpr<$ign'cus'tomers. reiirriotersensiriglvsatellites are used for acquisition of infor1natio'n.of an object or area and the data, -sogcollecteds.7'is."used for various applications such a"a,sV"water resourcelllllmonitoring, coastal studies, crop A'---related.lsVtudi'es.?and mineral resource monitoring; that the'«4..appe'll.a§i1ts allows various government departments, d.efer1c'e~-department and foreign companies to access the sent by the satellite and download such data or "imagery and such customers including the foreign -45- customers are required to pay access fees and royalty fee when it is given for use to others. Even remote sensing satellite, the appellant"
customers enter into an agreementand.' the'"ci,rstorr_rers._V it have only access to the required.' d'»..ata;/ satellite and no control andfiosseslsion .of''.th'eTsa'tejllite '' is given to the customers. A
31. By another'T-alfidVi§§y.it."'--fdatied 15.06.2009, functioning of Vsatellites has been explainedllin V i}.._' -. l"'i.ck=f-up sent in a range of it the ground.
_.ii_}g lliirriplifjr received faint level signals 1 A. ».electro'rrica11y.
ii.i)_'« 'gétiransrriit them back to earth on a different it frequencies and in the direction _ ' oldesired.
i1r)V__Al1~ The signals thus retransmitted illuminates wide area on the surface of earth, a feature A '.2' -46- that can be exploited for broadcast or wide area communication purposes.
V) The signal coverage area is called footprint of the satellite and depending on of satellite, the foot printing if different national boundaries.
vi) The operational range'-.Vof printing are agreed upon and in.te?1*nation;allythey well coordinated an1o'n.g memb'er_"'eountries of United Nations" "p_:throfL1gh " ~...,£nt'entional Telecornrmii:icatio_n{.,Un£oit1 ) in Geneva.
32. It" 'ié::::V~.:v:.f11r£he3j that launching of satellitesiiii orbits approximately 36000 xKlV\/ls is a very complicated and complex pr"ocessF which is monitored on second to 00"'isceconclfrbasis frorrimlthe Master Control Facility, at 'j 'V Karn.ataka; that receiving and re- bro'adca'stin~gi of signals is facilitated by a set of jeqguipimeint on board a satellite that receives, amplifies gives out the amplified signals are called "v-'Transponders' in the satellite and each transponder is -47- allotted a specific frequency range of operation and satellite is equipped with around 20 to 30 or;i1"1.ore transponders along with suitably shaped recci*.ring_'_'iand transmitting antennas; that each of the. can be individually made activeI__ sent range of signal frequencies.v.iwi.thin»"'V'the'_p'overall allocation of frequency ndifferent' 'i type of communication methods; ca11ea;ii.m'o_du'lation schemes to implement the .communication tor "information content delivery it user and the total number of"transp3jnd_e1*s;"represents the communication capacity of" a V sateiliijteii.i ' ' --~ .. " « H{'33--3=. "l"1That'il""'atV present, more than 300 have been placed in orbit and operated' for different communication purposes by VV"'i1arious..-countries across the world. The affidavit states 'details with regard to major systems of communication satellite such as orbit injection and position € -48- maintenance system, electrical power system, altitude and orbit control system, communication subsystem; that the above subsystems are operated and by the department of space from Master Control. it on continuous basis throughou,t,_life .;tirrIc_ of"-the"; satellite, right from its launch until, end,;of'its'~ the satellite.
34. That in so__far thc."i--if'Rernote Sensing Satellite" is cor1E;erried., ith'e c'u,sto'm.er:s are required to enter in u_re'spect of remote sensing sate1liteuas~per-- therequirerrient of all the cameras in the satellite avretused only for collection of l V. ll'-dpatac/imageries satellite and that the access fee
-iscalciiilated'-.ba,sed on the number of cameras used and tiljrregjfor which it is used for the particular c1.zstoiners. Apart form this, the appellant also collects it 'royalty from the foreign customers who give the data so ~»-dlownloaded by them to the others for use and such "ya"
-49- customers will have exclusive right to use the date and give it to others for use within the customer's boundaries and the royalty so collected is ~ declaration made by such customerps .'forvit'n--e of 2 copyright of the appellant;
sensing satellite, the appellaifipphasi' entirpév-.go1fitr'0l i' possession and the .custorners- only download the required data and imageryini-{lie satellite and no control and possession'«o_fjtheIsatel1ite«.is*vgivVento the customers. inlianotlier affidavit dated 15.06.2009 filed of the appellant company, reference V_:ima.dei"'toi"':the proposition notice dated it i. 39 of the Act calling upon the cause as to why the turn over relating to "r__eceiptsj3~'of space segment charges, access fee and charges collected by the appellant company it not be taxed under the provisions of the KVA Act constituting a transfer of the right to use goods. In 5'?
.3» -50- response to the said notice, a reply dated 19.1 1.208 was filed and additional objections statement 13.12.2008 also filed contending that, the,A,seotnzity-[0ii>.._f _ the appellant does not involve anyesale of right to use and, therefore, subjected to tax, as stated in 't.1ifie..,notice, ' . it
36. At this necessary to refer to the 16.10.2008 produced petition wherein it has * opponent used the transponders and ieased out the facility to use ppthed's.eid»..v'transponders in the Space Segment for whichiiivpurpose the appellant received '~consiici'eration~,,irom the customers and hence, the faci;1ity,.__'to.,i'?;ise the transponders is a property and is con_imercia1 in nature and it is goods and therefore, it "should be termed as 'turnover' for the purpose of 0 'Section 2(36) of the KVAT Act and that the transaction
-5}-
of iease of 'facility to use the transponders' is a 'deetned sale' for the purpose of Section 2 (29) of the
37. In response to the said notice, 09.11.2008 was given wherein is thet'-_the '* transponder is nothing but space_in;jsz1te1iit:e'itfisp tet:
out in mega hertz, say 32 'rnega hertz to 'c_Lisit'o-mperis in u L' teiecornmunications or television_sate31ites..__ vAIi3eferring to the decisions in t1?i'e'icase_ Ispat Nigam Ltd., --vs-- Cofiflirifircifitliii Iffontpany Circle, Visakzriapfittagtmiiitem.tjisrrc 132;; Lakshmi Audio Visual Inc. and "r;not}j.Le.A*4:.'A'-;f»4I)~.s:§:"'<Assistant Commissioner of Comlmerjcialui Tcmother (124 STC- 426); ISRO "Sqte1tite'i:'Cent1fe, Department of Space, Bangalore ~vs~ the Inerime Tax, by the Authority for Advance Rulii'ngs«._" 'gmeome Tax) AAR No.765 of 2007 dated .it"_'2.2V.i0.200s (2008 ~ TIOL--17~ARA~IT) and Vikas Sales Corporation reported in 102 STC 106, it is stated that "the same are not appiicable, as the transfer does not £0 42/!"
-53-
INSAT Space Segment Capacity for VSAT operations (Extended C--Band) executed between the Department of Space and the Stock Exchange, considered and it is concluded that leased out the facility to use the. ,transpo'r1d.eril"in'_"they uh' space segment capacity for which has received consideration 'fr_om_the"customvers..;a;nd "that " 0 the space segment and INSA-'1'--- systems rlemained as the property of the dealer the is provided with the facility tofguse for an agreed considyeratilonij'_.,andV her.r'ce,_ -the facility to use the transponderis'apropei it is commercial in nature and fgoods'l4foripu'rpose of section 2 (15) of the KVAT the Haareement for a specified period and was entered into in the State of Kar"natakarin respect of leasing out the facility to use ._.i'tIner_. transponders, using the INSAT master control facility at Hassan, Karnataka and therefore, the 0 "proposition notice dated 16.10.2008 was justified. The -54- Royalty and access fees are paid by the customers by entering into an agreement to access or down linlfi " data consisting of imageries. Further, referringto Judgment of the Supreme Court _it~was t;'r.:atii.i"S_ales,_V iii Tax' was leviable and aecordinglsf, was issued to the appellant:
39. The relevant decisiovnsVVrefe'r1ted' to} in the proposition notice aridfireplfiy considered at this stage, in the light-of..the in the Case of Vikas another --vs-- Commissioner of Commercial 'T(ixé3sia~r;fci'«.a;'nother, reported in (1996) 4 SCCA33, before the Apex Court was .i"whie"tli1eri,:' the of import license called REP
-S:-eripps by the holder to another person con'stituted«ii"a 'sale of goods' within the meaning of the Jisales enactment for the purpose of levy of sales tax thereunder. The object behind issue of such license "Was to provide to the registered exporters the facility of -56- of Bharat Fritz Werner Ltd., --vs-- Commissioner of Commercial Taxes (1992) 86 STC. 1'70 transfer of REP. licenses are 'goods' V' meaning of the Sales Tax Act arid-«preimiiiliriiioriiprice; received by the transferor thereof thereunder. The Madras Court; a it similar view. On appeai, it was contended that, such come within the definitiorr enactment and therefore, Sales tax. The Apex of 'goods' in Variousiisfiales General Clauses Act 1892, -vSAaie'u"oi"Govods- Aer 1930, Black Law Dictionary ,,¢.,¢ziti.1V'ii theiiieiiipression of property and on going of R.E3.P., licenses and by p1acing..__'reliance on the decision in the case of H. Anraj ]--A:1J.sf Government of Tamii Nada which dealt with regard "sale of lottery tickets coming within the definition of T '"'goods', upheid the decision of this court by holding that XX -57- R.E.P. licenses/exim Scripps constitute goods therefore, on their transfer, sales tax is Ieviablefl "
40. In Laxmi Audio Visual Inc. and Assistant Commissioner of Cofiimerci.:;l "-and another, reported in (2001,) it Court, while considering the'-n:§'ueStiori--- to a person engaged in the~servic'e',ot'prozzipdinigi audio visual services for any deliver any equipment to, to the site of the operates them and then dismatitles back after the period of hiringiand circumstances, no deemed sale attracting ta): under sales Act was considered and i i 'in, that context heldmthusz procedure adopted by each assessee petitionvertfobr conductin their business was stated to ._ g 3 , he as follows:
i) A customer contacts the petitioner for providing audio/Visual service for his ,5/v
iii) 13f fj31.1ge5t',' ' "i»f;sta11.ed'g "and V _pettitione_rs..'_' te'chnj._ci_ans/operators to meet -53- program or event. After assessing the_.-need and availability of the equipment7__ and suitable operator / technician to operate"-them on the specified dates, the petitione'r'afee_ep-ts H The engagement is for, "short_' the order.
duration ranging from few hotirs» .to'~feW.:d«aysVg_.' The stores department of Apetitioineriireieasesi the necessary equipmentiunder'_--a'gate passg showing the name~.._of the, techni,vCElj/»Qpperator , * who will be in~chgar'ge of *--s.u'eh_.'_=equipment, the mode of transp_o'rt_an_d the time, date and venue of th'e.._progran': ,/ event. The equipment to the venue of the _progra:1ime.fundre'rthe supervision of the pe*'tit'io_n'er's._ em"p1oyee.i».._.....-- At site the __ai1die1;[.V~i§ua1__' _V.equ;.p'1nents are handled, operated by the_requi1'em.ents of the program / event. At '-- no »a,the_""---equipment is given to the "possession"or"control of the customer, nor t «.operated'AbyVr1;}';e customer. _pAfte'r"«c_o_n.c1usion of the programme/ event, V the dismantles tenchnician / operator equipment / system and petitioner's the them back to the petitioner's stores. ' »'i"he entire risk: in regard to the equipment during transit as well as during the programme remains with the petitioner. Petitioner takes out insurance of all its equipments to cover transit and the programme periods.
M w' -59-
vi) The billing is done by the petitioner either in advance or after the programme, as per the agreed rates for all the services, Without any bifurcation.
41. The assessee therein had contended..«jth:atihe is not a dealer Within the meaning/ex;oressi'on' of: ' Karnataka Sales Tax Act 1957 arvidh-e. ,fi1e4§1i§;,'pé:i£ioziisto1:_, i it quashing the notice issued of and seeking a direction to the.i,i,:a11thoriti_esriot tojjroceed ii further in pursuance ofthe,.Asai'd_:'no'tice issued*to them. In the said decision it :.s'tai.ted:'th_at'--tIat1'sfer of right to use argy gooidsas iqzia nonwiare leviable to tax under the sale'.-9VVVti;u; "It is further held that, "The transferof to the goods", which may be by iioffecisirig, or hiring, involves the transferor Ai'*pez'mittirtg_ithe~transferee (lessee/hirer) to use his goods. To"'con.s;jtiii1iteAsuch transfer, there should be delivery of Jpossession of the goods by the transferor to the 'transferee, that is transfer of the effective and general i "control of the goods from the transferor to the transferee. 4' 4%"
4.4' -50- But such transfer need not be a 'legal transfer the goods' nor have all trappings of a 'lease'. The whether there is such transfer or not is it question of fact which has to '-uiithrg reference to the terms of the transfer of the right to use goods, Tttehvrtomxencjtature of it the agreement may, "not if the agreement used the but the terms providect':««\for of control to the customer, be a transfer of the right i'V'4deemed sale".
reference was made to the des:ision"1'étndered-iniithe case of Aggarwal Brothers - i "of Ha}y;if1a (1999) 113 s'1'c 317, and Nigam Ltd., --vs-- Commrcial Tax Oflicer, Cornpanh cm Visakhapatnam (1990) 77 src 182 and :_"'o.ther deeisions. In the first of the aforesaid decisions, Apex Court held that transfer of possession of .. I ,2 ft J -61- shuttering material by the assessee to its customers for use during the construction of buildings was "transfe.r of the right to use goods", as the custom_er:wiWas'*--- effective control of the shuttering ..material"'dti_1jing the period it remained in his possessionji" ~ In~_the' secio-ndTi.c_' decision, a distinction wasiirriade of possession and mercy 1.3iO'Si'~:i*3.SS1i:'~§>T1 arid while stating that whenith_ere' of possession, the effective cor.s;tro1_ and whereas in the latter' 4cas"e,g"i't*i_sg1aci;ing."'4_
43. ._ InViB't.m.1_t'of';InEiiq ---z)s-- Commercial T ax Officer, Central section c:.:tz¢:tgttct"(iii'i9é§7) 67 src 199 (Cai) and in the. of Si't¢:t.te: Bank of India -~vs-- State of Andhra »pjrattesitsA«.mtixtu/AP/0163/1988, the Calcutta High Pradesh High Court considered the as to whether leasing of a bank locker A to transfer of the right to use the locker and i thus fell within the extended definition of "sale" and it"
If
-52..
answered it in the negative. Similarly, in Modern Decorators ---~vs~ Commercial tax Officer (1990) 77 STC. 470 (WBTT) , it was heid that business carried decorator who constructed/erected pandals,__ijarricajd-es», . rostrums etc., and dismantled them by r_ner1V h' and Eabour and taken back to fiiodvovtiz chairs, tables and furnitui'e__""was '1"1e}d' .to'-._b'e""'se14vice " ' rendered by the decorators,in far as thev-.ere:ction of pandais etc., was cons'ic{ere.d..;¥" B_'u.tv"»ch3jrs and other furniture used dAt11<ic.ng§;thed 'oftrade was held to be 'goodsfvtwithintthc of West Bengal Taxation Act anddit was 'st_atedddt11a't'«they are the goods within the definition of 'was amended. On the basis of 'theV'«_decisto'n, it was held as follows:
' if the transaction is one of A leO£Sttt;t;'/dV;}'Li?'iflg/ letting simpliciter under which ' t1fte';_possession of the goods, i.e., effective and AA general control of the goods is to be given to the customer and the customer has the freedom and choice of selecting the manner, %
-..«= 4"
sale' eiigibie to tax under the Sales Tax Act. ..53- time and nature of use and enjoyment, though within the frame work of the agreement, then it would be a transfer of right to use the goods and fall under extended definition of "Sale". On hand, if the customer entmsts.V__t"o~..,.th_e~ assessee the work of ach.i'eii)ing.A xa pertain in desired result and that irii='olz§$es goods belonging to'_ the assessetej rendering of several othe.ri'serviees:arid goods used bythe asselssseje Vto._achie"z)e"the desired result contin'ue.to' j?Je_in.v'*tVhe-.effective and general_contro'l"ofthegzssessgee; then the will 'Q-v.t..roinsfer of the right iuithin the extended definition of ~saze>ae "
44%. weer;-egard "to hiring of audio ~ visual and aequipthent, in the light of the aforesaid itj'V~xz§*'as held that the transaction was not a train-sfetfh the use of the goods to mean "a deemed i» -65- customer and thereby agreed to Eease of 36 MHZ equivalent units of extended C--band capacity as per ArticIe-- 1 .1 With the foliowing satellites:
Satellite No. Bandwidth (MHz) * iNsA'r--3A - . --
INSAT--3B 36 V Ni§;'%-er10:it3p iNSA'I'--3C -- A 1NSAT--3E Yet to" be a1iAotté:i'j< _
47. ArtiCEeLf'1 e__oi1tract/ agreement furtheso state'Siv:',th§t3i,.VVithe"eustorner shall have the option of augmenting the during the service term by giving 3 oA(three}v_n1o'nths brior notice to DOS. DOS shall 'azdditioinal bandwidth to the Customer only "frrmi quarter on furnishing the necessary clearaniiie the competent authorities as per Article upon payment of quarteriy charges as per B to this agreement.
-E -56-
48. The technical performance and other specifications are defined in Exhibit--A to this hereinafter "leased ca acit " . Further P Y _ pg "
that "1eased capacity" shall be a""p'rempt.ib1.e" in the event of any unforeseen teclfinical conti'ng'er1cies,"~.
the Department of Space to provide alternate capacity ;Article~2, which deals with the thus:
"(a) available 24 hours, sevenxdayi forlwtvhe period of lease set i fovrtliplinv':eabgpa.ragraph (b) and (c) belo ("Period s..0f'L.ea.s;e2"j.._V " » __§p'('b)z Therperiodi of lease shall commence on July 1 it »v4Tl'"rae'_period of lease shall terminate on March ' i 2006.
"Artic1e--3 deals with interruption in the '' pr ovipsion of leased capacity during the duration of lease. ArticIie--6 deals with termination or surrender by the 511» ..a« -67- customers or by the Department of Space, C1a_use-A and C1ause»~D of Articie--6 reads thus:
"A. Termination or surrender by cit-"'_??'s':'$.»:i1..1i¢i?3'if.'.',j"' . 1') The customer may ,ter1?1_ifiate--Al'_';V.for,'_V.yits_ K"
convenience, the leased capacity"
after the date of this agreement,vE:_y,.vgiivirigiat least three (3) months written'n,o'tice,ito"DOS. V In the notice, theA,.€,71visto'fner slhallspecify the effective da'te:7of te,rr:jiina'tiori"(l'5ETD"). The _Customei'_ part of the afifer the date of gthisy 'giiziiig at least three _ notice to DOS. In the notice, V' "the specify the effective date of ».V.'acaVtiori"" ' of L "surrencie1*={"ES ").
Leased Capacity upon V' " «. , Te_i'm.ination.
of this agreement either by'tfief"'customer or DOS or surrender of a part oflease capacity by the customer or at the Ihfend of the period of the lease, the use of the 2'?
5.» -53- leased capacity so terminated shall revert to DOS unconditionally."
Article~10, which speaks about operational requirements of the ieased capacity, reads as ,, bl "ARTICLE-10. Operational Requfiremenlzsi it i The INSAT system shall rernain of DOS and DOS is the orbital location on"uiohich",:lth§e....,lea3sed --. "
capacity is beiny'ili"'»inade to the customer.Wl it it Prior to the the date of 'lease iind_4l'a,l'so, required subsequently, ll DOS and'.t_he,,:"customer shall discuss and "'--_gl.e;zelop l'.l_rnu:'t.ually agree able operating it j ».t"r'arisponder interference. constraints for operation in the transponders "filylcing account the potential for adjacent Interference to V A satellite systems, with which DOS may "have concluded coordination arrangements or the coordinating Of arrangements, shall be kept at an acceptable is in process level.
5., -69-
d) The customer shall be responsible for obtaining all the requisite clearances for operating the earth stations, which useqthe leased capacity. These earth stations' be operated and maintained with the applicable provisions,~"Cllhe:releigant"
copies of requisite cle_aran'ees' forwarded to ANTHRD{l.:__
e) For the purpos.e°'~»..of the " it transmission by the-.,:c_ustonie'r'«-.is within the acceptable '.__le.vels of qperating parameters, DOS may monitor'the,~..tra';;.sfnission of the leasetlv-eapa'cit_t},"V',:
ArtioEe--l1¥'.-",'whi,ch,§£eais with assignment, reads as under:
it Cliistorlner shall not assign any of its rights or or delegatelany of its obligations, liabilities or 'ciiitie,s_ without the prior written consent of i l 50;" ~.t:l{rtic1e~15, which pertains to sub--1ease, ' it " ' reads as under:
-79- "The Customer shall not sub--lease the leased capacity under this agreement without the prior written consent of D08".
51. On careful considerat.ion"~of the and7..
conditions of the agreement, Whatbecomes' ::lear«.is.::th.e"~ subject matter of agreement*~.4t,{§..iin respect of it "space segment capaciityf' iciapacity" in various satellites with an option of augmenting term of lease by giving of Space. The specifievatiof1g.:.fQ,f is given in Ex.A to the agreement} capacity is to be made available. to the icustorneirs on a 24 hours or 7 days week *._the period of lease. If there is any the provision of leased capacity, then su'oject..':to'vi5lrticles~3 and 9, the Department of Space uhasfl toviimake good the said interruption. Article-6 uspealis of termination or surrender of leased capacity. it m"iiI'he fact that a customer may surrender a part of the X X -71- leased capacity at any time clearly implies that vvhen the leased capacity is given to the customer, it isthve customers control. But by such contro1,--,,':vver.ido:l" "
mean that it is technical control o"f"t.he f1ea_sedv in the satellite, but we mean M, En"
sub-clause-D of Arti,c1e~6 stipulates it termination of agreement cnstorner or by the Department of Space surrender of part of the or at the end of it leased capacity so revert back to the Department of l.lv$l.p.ace'tiiicvonditionally. T his again implies that dur'ing currency of agreement, the lleaseid *7c'a3:5'acity be transferred to any other 'ia.r;y,l.:~*other customer. Further, Article-10 Ina1~:es,__\i't' that, INSAT system shall remain the jprolpertyiof Department of Space, but only the leased sltzapacity is made available to customer and that the
-cttstomer has to obtain all requisite clearances and
-72..
permissions for operating the earth station in order to use the leased capacity and that, in order to ensLire_"'th'at transmission by the customer is Within V' levels of the operating parameters"'(as per technical requirement) and thei'i'De'partme'nt'~of«. can monitor the transmissi0ig~..¢_Qf Further, Artic1e»14 states that:iithgéf-»_9ustomer"is cannot assign any right or any of its rights, obiigaptiiilggo without prior written conseiiit of Space and he cannot subfleaseUivftheii:7fV1easec{ capacity without prior consent of Space.
52,,,._%gThce% terms of the agreement therefore, _rna'ke'$«v__ery clear that there is a transfer of :7*__right capacity" under the contract of iflfigreiement eiiecnted by the Department of Space with iefustoiners and that the leased capacity which is the 'V_'jsu__bj'ect;matter of the agreement in a satellite which is a %
- 73 _ space segment capacity in a transponder 0!" a satellite is. in , our considered view. "goods" within the meaning 0|" Articlew
-"""/386 {I2} of ihe Constitution and therefore. the transaction in question is one which comes wiihin the S(30_§)'€'~Q§j.'SLil),f"
clause {cl} 0|' Section-29-A oi'A.rt.iclew366 oi"
inasmuch as. there is a delivery ol7Vposse'ssi'o_n 'ioi7t.l"1'cugoociVs by the tr"ar1st'e.ror {Depa1't.ment.,ol' Sp'acej--._ to ctr:-,1i1sfe.Eee V tcusigomerl and in law. thel"iifaI1.sl'e1"ee"-has:.t.he".%ef'ileCtive control over the goods 1' "SpVace"$:egaient Capaci't"y" in the transponder of satellite. ltlxougl-1. 5lit;,'s _t._e(:--lifaica_l operation is handled by the lacts In Lakshmi Audio V1'.su.aI_ }n2.;--; are ci*iift';e*rent_ froiii the present, case and therefo1*eAlth__e"saiCl applicable.
553. in thisVcv-3nt.ext;--"t.he alTi<:iavit filed on behalf of the tl1ell'l<:o--n--t«e'xt, of "communication Satellite" is purpose of taking iriiio consicieration l cusiomer send signals to the particular frequency allotted to him which ..fi.scaiE.ed "'Up~lir1liing ol'Signals" and the said signals are not é -74- just sent back but, the set on board equipment which receives the signals from the transponder of amplifies the said signals electronically and ~ transmit them back to earth ion -a of, it frequencies and in the direction operation of the satellite under .¢§ntr=ol""of"jthe S' Department of Space; yet the' capacity" in the transponder of the satellite to a particular customer, day on any day of the capacity" is given to a a._nd'Vi:the same cannot be handedluolverl to any other customer. Therefore, it canri-oti"bei"said that there is no delivery of i V. "'--posse'ss.icon"l'of thei'"'leavsed capacity" to the customer and S-hence', v"i.sl_}no "transfer of right to use the goods". Further,' ' satellite, in the instant case, are H."S"-L'""Cornmuiiication Satellite" unlike "Remote Sensing ,._ilS_a"te.ilite" which are used for acquisition of date
-hiformation or irnageries, which would be downloaded ,.i= -73- Department of Space clarified that Transponder did not perform any operation with reference to the data up» linked and doWn~linked and there is no "on boardidata storage". It was also contended that _ equipment i.e., transponder by the applica.rirt.:therei11; '» he did not operate the same had?noicion-troifoverti the equipment and use of th'e«-..equi--p-rnent conriotes that the grant of right has posses_sio.n and over the equipment and the» av-irtually at its disposal, but there is" part of the agreement "ciléiilicldicculd:leadireasonable inference that possession = or'control'-.hadV~"been given to the applicant under the .Fof"'-the: agreement, in the course of 'V V. 'operating facility. i iiiii M iv ._57_."~r'9y1acing reliance on its previous Ruling rendered' Dell International Pvt. Limited's case, T_wherein:'7a two way telecom bandwidth was provided to it iV~:ifthVei"applicant DEL by means of dedicated private line ,;"?» -79- circuit through net Work of service provider, it_._was noticed that the case under consideration, --«e"xi:stifxg space segment capacity of the navigation ' which enabled the transmission it the entire foot print of satellite that the appiicant thereinfiidb not it it conferred with the right to use --Atheii"transpoI'1der: of IGL, UK. It was further iiincorrie received by IGL did not conie '_within definitiponiipj-:3?' 'royalty'.
our considered view, not at iapp1icah1:e._to.. facts of the present case, as, taking intoi"'consi.o1--eration the nature of operations, in Riilingiilithe Authority held that navigation fwvh.ich only up--1inks and down--iinks the data is v_a~"pfassive transponder" unlike "communication "transponder". In the instant case, we are concerned " , ivvith..i"'comm.unication transponder". Therefore, on a ..,»// -31- customer and the said capacity will be utilised thirough the data command issued from the pursuant to which, the transponder htheg it signais or data so received fromiiithe 7.grour_1.d--_VVstation from geostationary orbit. >Accordi.n:g- to the--".Authori:t}7,< a'§ navigation transponder, which:;upf1inksV_ de§wn--1inks data is a passive the coinniunication transponder. V the substance to to customers for capacity of the _' augmented data as to the position' air or water so that the end user can'-have access to it through Satellite Based System (SEAS) receiver. In fact, the 'AV.of"'Space has clarified in the said Ruling that, "navigation" transponder does not perform any V. .::oAp.er'atiVon with reference to the data up-link and down- .' 311.n'k":and "there is no on board data storage". The data " "sent by the customers does not undergo any change or Q WM?"
improvement through the transponder. Thus',"--._ the "navigation transponder" is unlike "Communicatio-n Transponder" not an active transponder iniithe jsenss; V' does not respond in any WayWto the 7date--i,up_f1.iVnked', though the customer does not operate the."i1fanspo--n.deir'=.L data, but it gets access to"'th§§.navigation'-transponder through his own netvvork/~-and therefore, the date received by him change or imp1"ovemen's_.siiithrotizghjh of transponder, and send back to the ahotted receiver frequency which _'H_owever, in a "communication transponder", signals from the ground station at one"'-freduency, it transmits them to another ground H sta1:ioni""at another frequency. For the operation, there .i 'isia"need of particular data to reach the transponder. "In such circumstances, the use of transponder is ii -33- ensured when its responds to the direction sent through the ground station and the exclusive capacit*j,:rl:lV'Gf:"»the specific transponder is kept entirely at the customer.
62. The 'communicationf transpond'e.r'«. '' therefore, an active transpon-deittas it data, if whereas, the 'navigation pvsltranisponder' passive transponder and in such.lc-ase; :th_e_re .AA_1*'.:+'_I-Vii1'll_'_!_') usage of the equipment (_;'ar1pspont1er} But in a 'Communi{éati_o'nll"l"I'ran'sp-ondergli-._ since the date is amplified " hi it __a" change or improvement through l'.ll'i£?piiinéldlai3Qlf*.il'aI'lSpO1'1Cl(i'I' and thereafter rem bp_ackiil"to..,..the earth. Therefore, there is ;i'e:f:fe-ctive and general control of the SEAS given to customers who has the freedom of choice l<._of selecting the manner, time and nature of use of the "ll-lequiipment, though Within the frame work of the agreement of lease and hence, the right to use "space :§ M _,..
-34- segment capacity" falls within the extended definition of "Sale", inasmuch as, there is delivery of posuseissioiiz in the said lease and there is a clear identificaitiojniof "space segment capacity" Been' ' to " 'the customer and the customeris given the right to" use-.it'*in'=.p any manner as he deems to terms of the lease the appellant herein or if.-space has no right to use the' either for its own or to: __trd_n§3_feri" th._e7s~afirf1el' tog any other customers. Therefore, the tra_nsactio_n_ involved in this case is a ' "deemed .__saJre"i the definition of "Sale"
U/s2 _(29} (dyiofiithe KVAT Act. Accordingly, point isiiiaizswered against the appellant. Point No. (ii): As far as point No (ii) is i<._concernie.:l, the contention of the learned counsel for ":i:i'appie'lA1ant is, Section--6 of the Karnataka Value Added Act 2003, speaks about the place of sale of goods /2 -35- and that, in the instant case, where the "right to use the goods" and "transfer of right to use the goo_ds_"-- purpose has taken place outside the State,""then:_,~..if such goods are used within thefisitate'iri*espe--c:tive.,o"fi'the« place shown in the contract of transfer of,.'1'ight' tot iusefl the goods is made, then be covered under the sejope instant case, since the goods has not taken piacé the goods are not used of Karnataka, the Act is {not appiicahrle tofithe transaction in question.
64.ih-sirr. vi'A.shr.)k«...'i~*Harnaha11i, learned Advocate has stated" that the agreement, namely, the '1ease,pag;4eerr;,¢1;: has been executed in Karnataka State the restriction section--6(4) of the KVAT i*._Act is not applicable to the facts of the present case, as 'said section applies to those transactions which are Wéntered into outside the State, subject to terms and é ,../'I -35- conditions mentioned in the said Section and.» the intention of the Legislature is to enlarge sale by means of a fiction. Therefore, he the contention of the learned for that in the instant case, althoughgthe agregc-rrneiati been entered into in the are not within the State, the goods is "use of space of the transponder thousands of KMS as the said section wouldgivbegi the transaction is not entereclinto of Karnataka. Since in the instant theltransfer of "right to use the goods"
"place within the State of Karnataka, no placed on Section~6(4) of the Act is the submisv-sio11':i"ion behalf of the State. He has further dsubrnitited that in View of advancement Science and S Technology, a purposeful interpretation has to be given " Section-6 and at any rate, in the instant case, as the £3 M w -37- agreements are entered into within the State,-'"-._ the restriction in Section--6 (4) is not applicable, gas"
section proceeds on the premise that 'tithe, V' agreement of sale is entered into ibetweeri' the_p_a'rties« outside the State but have nexuséto the Stat'e,'A'inasn1u'eh as, the goods are within theegfstate at.,thneV-itirne of the agreement or they ,_used State,ir1 which situation by a Vfiction,_V_t'he t'1'-ans'ac--tion would be subject to
65.-----. ansi}ve.ring"*-vthi's contention it is just and necessary; Section--6 of the KVAT Act which readspias fo,Iioxi%s:
of sale of goods:
or purchase of goods, other than in v_'.~thVe}course of interwstate trade or commerce or " Liiin the course of import or export, shall be "deemed, for the purposes of this Act, to have taken place in the State irrespective of the place ¥ -89- other party is prior or subsequent tofisuch transfer.
(4) Notwithstanding anything containediin . V» of Goods Act, 1930 (Central Acts.o'f.VVI9l§'3O), £p'r--.
the purpose of this Act,:V'tMliel'ti'arisfez"
to use any goods for not for a specifiecil_period)A"shall too' have taken place in theytfitate, if goods are for use withinthe Statet"ir._reis'pectiVe the place Where the contract' of the right to use the'goodsllislrnladgeff--__ V it
66. to be read in the context ofSo¢ti_ori:3-kiangd.Section«-7 of the KVAT Act which ..charging deals with time and sale of gc;ods_resper:tiVely the same reads as follows:
"Levy of Tax: (1) The tax shall be A. "-.l'leyie'tl-.og'n"every sale of goods in the State by a registelred dealer or a dealer liable to be registered, in accordance with the provisions this Act.
(2) The tax shall be levied and paid by every registered dealer or a dealer liable é ,/"7 -90- to be registered, on the saie of taxable goods.» to him, for use in the course of his businejssgf-«.V""._ by a person who is not registered .;.
Act.
7 . Time of sale".V_c;£.iA. {:1} Notwithstanding anything containedinftrhe Sale of Goods Act, Centra1._ of 1930), for thenpurpeolsieivi sf Act; and subject to Sub--Secti'ont~v-Q}; of goods shail be g;ieemecf1"to'have'«.ta,ken 'Vfiace at the time ,orVV:'p'ossession or incorporatioin'"'of the course of anj**»vvorks_'ucontract whether or not 'there is:'i=eceip"t.__of payment:
Provided that Where a dealer issues a "tax invoice Viniirespect of such sale within 'days from the date of the sale, the be deemed to have taken place at th.e.tirf1e the invoice is issued. (2) Where, before the time V.rfl"v.«app1icable in subsection (1), the dealer seiiing the goods issues a tax invoice in respect of such sale or receives payment in é 4,.-//1 -91- respect of such sale, the saie shall, to the extent that it is covered by the invoice payment, be deemed to have taken time the invoice is issued or the received.
(3) The Commissioner..,may .'o.'r1=.
application of any _.d_ea1ei*,..e"exempt.".i_si;1ch dealer subject to su.ch'--vc:o'nditioI1s. specify, from the tim.e:*specified sab-
section (1}". V it ,
67. Sub§Sectioti_('i }__oif the KVAT Act is fit a deerri1ngj,.,proV1's1o1f1' and it 'st'ates that if the goods are Within irrespective of the place where the contract, of 'sate"oi9""p'iii'chase is made, it would be a deei:§1ed,..sa1e,'~pi9oi}ide'=:1 that, the said sale is not in the of_4inter~State trade or commerce or in the "'coti.rse"'of,_im,port or export (a) in case of specific or asc"ertair1.es:1"; goods at the time the contract of sake or purchase is made and (b) in the case of unwascertained xoriiifiiture goods at the time of their appropriation -92- through the contract of sale or purchase by the seller or by the purchaser whether the assent of the other-party is prior or subsequent to such appropriation.'Ti"-Sub- Section (1) of Section-6 of the Act, therefore, situation where the sale or tra'fis1'er ofthge take place outside the State bu4t.__\iifhere within the State. SubeSec"tio1'1. (2)o£_s'eet1oih¢e'i'ef the it KVAT Act clarifies that..veveri'if single contract of sale or purchase of the goods~lsituated_-alt' more place, then they woulolfibe se;p'e{rate::"cor3tr.acts in respect of I goods:'ofleach{5.of 68'.'--t4'_'Sub§E3e.ctio'n:l:l_"{3} and (4) of Section-6 of the _ pnonwobstante clause. According to »Ser:tion as far as execution of works contract is .coAn'cernec§.;pj-: notwithstanding anything contained under the Goods Act 1930, if the goods are within the V' lf_*Sxtate, at the time of transfer, the transaction would be af 'deemed sale' and even if the place where the g .,.,y»"''' 5 -93- agreement for works contract is made. Similarly, Section--6(-4) of the KVAT Act with regard to transfer of right to use any goods for any notwithstanding anything contained in the . Act 1930, and irrespective of __the pl_ac§.. S"
contract of the right to use the transaction would be a 'deem-end sale', if_s'nc1*i_'godsl are r i' used within the State. Se_c;tio_r1'~._6 of' 'the is an enabling provision of enlarging the scope of the.__defi:nitior; of-§Sa1el" «iaivithin the State irrespective'o'f.__tise.';7_Vplace__iwherelgthe» contract of sale or purchase._ right to use any goods for any purp'os_e" taliesllfjlace-_.»sVoutside the State. In the pre..sientt'~ case, 'we are concerned with only transfer of theuse any goods for any purpose as Scofiternp:é:te¢it::"i}/ s. 6(4) of the Act. V» «.69. After giving our anxious consideration to the S above submissions, we see considerable force in the é' -95- taken place outside the State, such a transaction cannot be a subject matter of imposition of Sales.
70. In the case of C-§;>ii1'ti"1.lf9_.i,i.';v.iiFiri::;neei"
Corporation Limited & another r:'eferred'ii toVsufira?u heid that, by an appropriate_V.1'egis1ation can fix situs of sale, 'goods "are Vravailable irrespective of the are located and a written contr:act_ is the parties, transferring' executed, it was held o:%igaeeer of right to use the goods zcaniaot contract of paramount as it is "d,eernedu"saie"- Within the meaning of legal fiction as ii.i""eonu'rrierateVd~__ unc1VerHiArtic1e--366 (2%) (d) of the taxable event on the transfer of right to usev.'_'a:1y§7goods is on the transfer which results in i:o~ use and the situs of sale would be the place v.}h'ere the contract is executed and not where the goods "are located for use.
5' m_w,_,.ge»?'
-95"
71. Keeping in View the above dictum fiction which has been created in Section--6 .-oi' ' Act and the facts of the preser1t..case,i_Vi4ii ii agreement has been entered into Karnataka and at the time ."agreernent--,._ii:;ve.ii;i*--:V'*tr'ansfer ii of right to use the good s" was iiz'rth'e instant case, the goods na1'ne1$zi,i of the transponder? for transfer of right, hit the transaction in qu_estiosr;.: that, the said provision of 'transaction to be brought within, the ii4scope.ofithe'" "KVAT Act and in our view, the i cianniot curtéilithe present transaction from being the purview of the KVAT Act.
it i it 4" ' -. appeliant.
Accordi_11g1j;' iiwe answer point No. (ii) also against the fa VR/cnfif -97-
72. The respondent was therefore, fuiiy justified in issuing the impugned proposition noticesflw'toflwthe appellant who is iiable to pay the tax sale' in terms of KVAT, Act.
73. For the foregoing re;s;sons,V'the"z*Jri't are disposed of in the above terms V Parties"to bear their own costs.
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