ESSAR TELECOM INFRASTRUCTURE PVT. LTD. BY NAGARAJU NARA - FINANCE AND ACCOUNTS EXECUTIVE Vs. UNION OF INDIA (UOI) - BY ITS SECRETARY MINISTRY OF FINANCE, DEPT. OF REVENUE GOVERNMENT OF INDIA, STATE OF KARNATAKA - BY ITS FINANCE SECRETARY AND DEP

JUDGEMENT

(1.) PETITIONER is a company registered under the Companies Act, 1956 engaged in providing infrastructure service in relation to cellular telephones. He having entered into contract with various telecom/cellular operators is required to render service in relation to passive telecom network including operating and maintenance.

(2.) PETITIONER is also registered under Finance Act, 1994 and the transactions are subject to service tax in terms of Section 65(19) of the Finance Act. Acting under Section 39 of the Karnataka Value Added Tax Act, 2003, the Respondent authority proceeded to levy tax on the premise that there is a transfer of right to use the telecom network towers which according to the Petitioner, is overlooking the fact that the transactions which are in the nature of service contract and also according to him, as per Section 65(11) of the Finance Act, 1994 it is only a service contract.

(3.) ACTING under Section 39 of the VAT Act, 2003, the 3rd Respondent has issued notice for the assessment years 2007 -08 and 2008 -09 proposing to impose VAT on providing of cellular telephony towers on rent to various service providers stating that the transaction falls under the definition of 'deemed sale' under Section 2(29)(d) of the Act r/w Section 3 and 4(1)(b) of the VAT Act, 2003 and also proposition notices were issued for those periods as at annexures A and A1 on 20.10.2010. Petitioner relied to the said notices stating that the activity is considered as 'service' as per the definition provided under the Finance Act, 1994 and that activity cannot be considered as sale within the meaning of Section 2(29)(d) of the Act. It is also stated, cellular telephony towers are pat of immovable property. This reply at annexure B is dated 29.10.2010. Later, the impugned orders came to be passed as at annexures C and C1 for the assessment years 2007 -08 and 2008 -09 stating that the equipment is fixed on earth on the top of roof of a building just to enable it for functioning. Just fixing the equipment on the building or on earth does not lose its form of equipment.