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The State respondents have raised a preliminary objection and contended that the plea of BSNL and the other petitioners including the Union of India is barred by res judicata because the issue has been decided by this Court inter partes in State of U.P. vs. Union of India :

(2003) 3 SCC 239 .

The plea has been resisted by the petitioners on three grounds viz., (i) that the issue of the legislative competence of States to impose sales tax under Entry 54 of List II on transactions which are purely rendition of services, was not raised in that case. (ii) that the decision was without jurisdiction because of Article 131 of the Constitution, and

As we have noted earlier, the Union of India has supported the service providers and contended that the transaction in question was only "service".

It has been argued on behalf of the State of Uttar Pradesh that the writ petition had been filed by BSNL challenging Sections 2(h) and 3F of the U.P. Trade Tax Act, 1948. The challenge was expressly given up and therefore the petition was not maintainable. It was also submitted that there were different factual scenarios as a result of which the possible outcome of a particular assessment could not be predicted and it was not appropriate to intervene under Article 32. According to the State, no fundamental right was allegedly infringed. It is contended that the Central Government has the exclusive monopoly over "telegraphs" under the Telegraph Act, 1985. A "telegraph" as defined in that Act would cover the transactions in question. In granting permission to the service providers by the issue of licence, there was transfer of the right to use the telegraph which right was further given to the subscribers in a transaction which would be covered by Article 366(29A)(d). On the interpretation of Article 366(29A) it has been submitted that prior to the introduction of 92C in List I, the residuary entry could not be relied upon in view of the specific entry in Entry 54 of List II. It has been submitted inter alia that delivery of the goods was not necessary for the purpose of transferring the right to use and this had been held in the decision of this Court in 20th Century Finance Corporation Ltd. and Anr. v. State of Maharashtra (2000) 6 SCC 12. It is submitted that in any event different aspects of a given transaction can fall within the legislative competence of two legislatures and both would have the power to tax that aspect. It is submitted that the question whether the goods were moveable or immoveable property as well as the question whether the tax was being levied on inter state sales or not were all matters of assessment and that the judgment in State of U.P. vs. Union of India should be affirmed. In addition, it has been submitted for the respondents that the expression "telephone" and "telephony" do not necessarily include the factor of service. A subscriber makes use of the telephone system as a matter of right and is capable of asserting that right even against the Government. The subscriber's right to use his telephone line is to the exclusion of every other person and to that extent the right of the Government/service providers stands denuded. The right is based on contract and is in addition to the right to the service provided by the service providers. The SIM Card operates as key for access to the telephone system or network and symbolizes the right of participation by a subscriber in the telephone system. These are two distinct transactions, one as the transferree of the legal right to use the telephone and the other of a contract of service. These are two different aspects, each attracting a different tax. Service is only one of the purposes for which the transfer or deemed sale is made by the Government. The Government may among other rights also allow the licencee to give telephone connection as its agent or act as a service provider for the establishment, maintenance and working of the telephone system. The use of the words "any goods" in sub-clause (d) of (29A) of Article 366 according to the respondents showed that the goods need not necessarily have been transferred by the transferor. No delivery was in fact required under sub-clause (d). It is further emphasised that sub-clause (d) also use the words "for any purpose". This could include the purpose of service. In any event, it is submitted, the meaning and scope of sub-clause (d) in Article 366 (29A) cannot be limited on account of the fact that a transaction may have been described as a service in any legislative enactment or contract or licence. Similarly, the expression "goods" had a very wide and comprehensive meaning and assuming delivery is necessary would include the entire telephone system as well as telephone appliances, instruments, materials, towers, exchanges, etc. The means, namely the electrical or electro magnetic means of energy will also form parts of the goods. It is further submitted that whether in any particular case the telephone system included machines or apparatus fixed to the ground was a question of fact to be decided in an individual case during the assessment proceedings. Countering the submission that the sales would be inter state sales, it is submitted that the situs of the taxable event under the Sales Tax Act would be where the transfer of the right takes place between the service providers and the subscribers. This was also a question which would vary from case to case and would have to be ultimately factually decided by an assessment authority. According to the respondents, apart from the transfer aspect of the transaction being isolated as an independent taxable event from the aspect of service, ultimately the question whether there was any splitting up of a composite transaction was also to be determined during assessment proceedings.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1404 OF 2006 (Arising out of SLP(C) No. 6301 of 2004) Asstt. Commissioner, Trade Tax & Ors. .Appellants Versus General Manager, B.S.N.L. .Respondent WITH CA Nos.1403/06,1405/06,1406/06,1407/06,1408-1418/2006, CA.No.1420/06,1421/06,1422-1424/06,1425/06 @ SLP Nos.5447/2003 15442-44/05, 15451-62/05,15464/05,17281/05,17286-88/05,22569/05 With Contempt Petn.No.365/04 in WP(C) No.183/03, O R D E R Ruma Pal , Dr. AR Lakshmanan & Dalveer Bhandari Leave granted in the special leave petitions.

Civil Appeals are disposed of in terms of the judgment delivered by us today in W.P. (C) No. 183/2003 etc. etc. titled  Bharat Sanchar Nigam Ltd. & Anr. v. Union of India & Ors.

Contempt Petn.No.365/04 in WP(C) No.183/03, Contempt petition is dismissed.