1998 Supreme(AP) 921

Andhra Pradesh High Court
Judges : BILAL NAZKI, P.VENKATRAMA REDDY
Union of India, Dept.of Telecommunications, New Delhi - Appellant
Versus
Secretary, Revenue Dept., (CTII), Government Of A.P. - Respondent
Decided On : 12-18-98

Headnote:

A. P. General Sales Tax Act, 1957 – Sections 2 (e) and 5-E - Indian Telegraph Rules – Rules 2,414,434, and 434(I) – Constitution of India,1950 - Article 285 and 289 – challenge - Demand notice - Constitutional Bench of nine Judges in Re Sea Customs Act - Section 20 (2 ) - State Governments treated the Telecommunications department as a dealer and started charging them with Sales tax for use of Telephones by subscribers. Various High Courts dismissed the writ petitions. This High Court entertained the writ petitions but stayed the recovery of demands subject to certain conditions. The matters went to the Supreme Court. hie petitioners in WP No. 25864 of 1997 also approached the Supreme Court. The Supreme Court took various similar matters from different States together and passed an order in Civil Appeal No. 4253 of 1998 on 25th August, 1998. The order which pertains to the petitions in this Court reads as under: "leave granted. Here in these matters the respective I high Courts have kept pending before them the writ petitions, but by interim directions had ordered the appellants to pay 50% of the demand before the disposal of the writ petitions. - Central Government or the State Government which, whether or not in the course of business, buys, sells, supplies or distributes goods, directly or otherwise, for cash or for deterred payment or for commission, remuneration or other valuable consideration shall be deemed to be dealer for the purposes of this Act. " whether the rentals received by the Telecommunications Department from its subscribers on use of a facility of telephone is taxable in terms of the provisions of A. P. General Sales Tax Act - . Whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration - whether written or oral for such transfer of right is made. - whether written or oral for such transfer of right is made. - question raised was pristinely legal which required determination as to whether provision of telephone connections and instruments amounted to sale and even so why was the Union of India not exempt from payment of sales-tax under the respective statutes – Held, we are of the view that, in view of the law laid down by the Supreme Court in Re Sea Customs Act (supra), Article 285 does not create an exemption with regard to the payment of sales tax by Union of India towards the State Government, as such the first argument made by the learned Counsel for the petitioners must fail. Let it be noted that although it was not argued with force by the learned Counsel for the petitioners, but we have dealt with it keeping in view the observations made by the Supreme Court while remanding these cases when it stated; "having heard learned Counsel for the parties at length, we are of the view that these are the matters which should not have been dismissed by the respective High Courts in suggesting an alternative remedy. The question raised was pristinely legal which required determination as to whether provision of telephone connections and instruments amounted to sale and even so why was the Union of India not exempt from payment of sales-tax under the respective statutes. - This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast sales-tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales tax arc levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale. In neither case therefore can it be said that the excise duty or sales tax is a lax directly on the goods for in that event they will really become the same tax - Supreme Court that the two provisions Article 285 and 289 of the Constitution of India are a result of a same form of inter governmental immunity, therefore these provisions have to be understood in that context. The provisions of Article 285 is a successor provision to Section 154 of the Government of India Act, 1935, whereas Article 289 is a successor provision to Section 155 of the Government of india Act. - . We think the question raised was fundamental in character and need not have been put through the mill of statutory appeals in the hierarchy. " - we find that by installing a telephone there is no transfer of goods from the Telephones Department to the consumer for any consideration whatsoever and also we find that the rentals are not charged for the telephone instrument as such, therefore the rentals are not subject to Sales fax within the meaning of provisions of A. P. General Sales Tax Act. - petitions are allowed