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2010 Supreme(Online)(TDSAT) 40
TELECOM DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL
S.B. Sinha, CJ, G.D. Gaiha, J
Bharti Airtel Limited & Anr. – Appellant
Versus
Department of Telecommunications (DoT) – Respondent
Petition No.244 of 2009 (M.A. No. 150 of 2009)
For the Appellants/Petitioners:Mr.Ramji Srinivasan, Sr.Advocate, Mr. Kaushik Mishra
For the Respondents:Mr. Vineet Malhotra, Advocate, Mr. Shankar Chabra, Advocate, Mr. Anurag Sharma, Advocate
The license fee for telecom services must be computed strictly on revenue accruing from licensed activities, excluding unrelated revenues.
Headnote:(A) Indian Telegraphs Act, 1885 - Section 4 - License fee assessment - Parties disputed the legality of a demand notice regarding license fees based on Adjusted Gross Revenue (AGR) for 2005-06. The Tribunal upheld earlier judgments restricting the scope of revenue included in AGR and held that inconsistent accounting practices by the respondent violated legal norms. The assessment should consider only income accrued from licensed activities. (Paras 1-11)
(B) Tribunal's earlier judgments recognized that revenue must be separated from items not generated by licensed activities, and including such revenue in license fees is impermissible. (Paras 12-31)
Facts of the case:
The petitioners contest an order by the Department of Telecommunications claiming excess license fees based on AGR, which includes revenues not validly accrued under the license agreement. The order followed multiple appeals and earlier Tribunal judgments affirming limits on what constitutes AGR, leading to disputes over what revenues and costs could be included.
Findings of Court:
Tribunal directs recalculation of license fees on an accrual basis, excluding invalid revenue items and holds that the Department must refund excess charges with interest. The inconsistent application of accounting standards by the Department resulted in financial losses for the petitioners.
Issues: The main issues involved the legality of the demand for license fees based on a flawed assessment methodology, including items outside licensed activity in AGR calculations, and whether prior judgments had finality against the respondent's inconsistent billing practices.
Ratio Decidendi: The Tribunal reiterated that revenue impacting AGR must strictly adhere to the terms of the license, affirming earlier decisions that restricted the definition of revenue genuinely traceable to the licensed activity.
Result: Petition allowed for the first applicant with a directive to reassess AGR on proper grounds, and the respondent was ordered to refund excess license fees.
JUDGMENT
S.B. Sinha
These two petitioners Bharti Airtel Limited and Bharti Hexacom Limited are before us questioning inter alia the legality of an order dated 17.9.2009 issued by the respondent herein and the reminders issued in relation thereto being dated 7.10.2009 and 29.10.2009.
The said Order dated 17.9.09 reads as under:-
“Sub: Re-assessment of annual License fee for the financial year 2005-06 in respect of your CMTS license for A.P., Chennai, Delhi, Gujrat, H.P., Haryana, Karnataka, Kerala, Kolkata, M.P., Maharashtra, Mumbai, Punjab, Tamil Nadu, UP (West), Rajasthan and N.E. licensed Service Areas.
Ref: This office letter of even no.dated 17.05.2008
1. This concerns re-assessment of annual License Fee for the financial year 2005-06 in respect of the CMTS License of M/s Bharti Airtel Ltd. for the license service areas of A.P., Chennai, Delhi, Gujrat, H.P., Haryana, Karnataka, Kerala, Kolkata, M.P., Maharashtra, Mumbai, Punjab, Tamil Nadu, UP(West), Rajasthan and N.E.
2. As per the extant license agreement, deductions from the Gross Revenue on account of (a) PSTN related call charges (Access charges) actually paid to other eligible/entitled telecom service providers within India and (b) Roaming charges actually paid to other operators, during the financial year are admissible.
3. You were directed to submit the duly audited quarter-wise operator-wise details of PSTN related call charges and Roaming charges actually paid to eligible/entitled telecom operators during the financial year 2005-06.
4. On submission of the requisite details by you, the re-assessment of annual License Fee for the financial year 2005-06 has been carried out after going through the Audited quarter-wise, operator-wise details of pass through charges and Roaming charges actually paid to other Telecom Services providers. The summary of the re-assessment is as under:
| Service Area | AGR | Revenue Share Due | Revenue Share Paid | Difference (C-D) | Interest on delayed payment calculated up to 30.09.2009 | Penalty and interest on penalty if any | Total dues |
| AP | 6363311647 | 509064932 | 507297002 | 1767930 | 1502876 | 0 | 3270806 |
| Chen. | 4883036567 | 488303657 | 479771258 | 8532399 | 6745475 | 0 | 15277874 |
| Delhi | 16125650624 | 1612565062 | 1546071590 | 66493472 | 41953225 | 0 | 108446697 |
| Guj | 2283446076 | 228344608 | 221059736 | 7284872 | 4439101 | 0 | 11723973 |
| Har. | 1370247685 | 109619815 | 110966080 | -1346365 | 12101 | 0 | -1334164 |
| HP | 1223407512 | 61170376 | 61767233 | -596857 | 61953 | 0 | -534904 |
| Ktka | 11525415321 | 922033226 | 948598655 | -26565429 | 240556 | 0 | -26324873 |
| Ker. | 1680892919 | 134471434 | 134854806 | -383372 | 48992 | 0 | -334380 |
| Kol. | 2559415852 | 255941585 | 253172646 | 2768939 | 2072949 | 0 | 4841888 |
| Mah. | 4019336042 | 401933604 | 402526999 | -593395 | 5547 | 0 | -587848 |
| MP | 3034634275 | 243699691 | 230832931 | 12866760 | 7958976 | 0 | 20825735 |
| Mum. | 5169708357 | 516970836 | 525685756 | -8714920 | 232380 | 0 | -8482540 |
| Punjab | 6615510082 | 396930605 | 399361720 | -2431115 | 41491 | 0 | -2389624 |
| T.N. | 2788265428 | 278826543 | 278811395 | 60115148 | 5142610 | 0 | 11157758 |
| UP(W) | 1684662404 | 134772992 | 134739393 | 33599 | 487356 | 0 | 520955 |
| Raj. | 3280897466 | 196853848 | 196991889 | -138041 | 737086 | 0 | 599045 |
| N.E. | 75074233 | 3753712 | 3874434 | -120722 | 4213 | 0 | -116509 |
E&OE Total amount payable: Rs.17,66,64,731/- (Rs.Seventeen Crores sixty six Lakhs sixty four thousand seven hundred thirty one only)
5. The above amount is due after calculating interest up to 30.09.2009. It may be noted that there is an excess of Rs.13,34,164/- 5,34,904/-, 2,63,24,873/-, 3,34,380/-, 5,87,848/- 84,82,540/-, 23,89,624/- and 1,16,509/- in respect of Haryana, H.P., Karnataka, Kerala, Mah, Mumbai, Punjab and North East licensed service areas respectively. The excess amounts so arrived at will be adjusted against the future dues in respect of the same Licensed service area, if not adjusted earlier.
6. The calculation sheets containing computation of the AGR and interest amount are annexed to this letter. You are directed to remit the sum of Rs.17,66,64,731/-. (Rs.Seventeen Crores sixty six Lakhs sixty four thousand seven hundred thirty one only) forthwith.
7. You are also directed to submit the auditor’s note stating that the deductions claimed on account of PSTN related call charges and Roaming charges include/do not include Port
