Renting of Mobile Towers liable to VAT, not service tax

Essar Telecom Infrastructure (P.) Ltd. Vs Union Of India (Karnataka High Court)- Facility of providing mobile telephone towers for various service provider – Referring to various judgements of the Apex Court and other courts, petitioner’s counsel contended that petitioner has already remitted the entire service tax due to the Centre. Directing the petitioner to pay tax as per section 2(29)(d) of the VAT Act is impermissible and also it would be in the form of double jeopardy. As against the order of the assessing authority at Annexures C and CI, petitioner has come up before this Court to exercise efficacious remedy under Article 226 of the Constitution and praying not to insist upon for redressal before the appellate forum as the matter involves a Constitution stipulation and since it also involves substantial question of law of public importance, this has to be adjudicated by this Court exercising power under Article 226 of the Constitution.

Various decisions rendered and referred to by the petitioner’s counsel are in the context – what is movable and immovable. As a matter of fact finding, the reassessing authority having regard to the nature of the equipment used and its fixation to the earth i.e., civil foundation or on the roof of the building for proper functioning and the nature of the activity that is being transferred to the customers viz., telecom companies to use the equipment i.e., the tower raised and in consideration petitioner receives some amount which are in the form of rents, has proposed tax under the provision of VAT Act, treating it as lease of movable. Further, having regard to the nature of the agreement entered into and the nature of transaction, the effective control is with the petitioner and, the component of delivery is also involved and the maintenance and over all control is also with the petitioner, it could be specifically said that the right to use the goods has been transferred by the petitioner to the telecom companies and that very much falls within Article 366(29A)(d) of the Constitution.

So far as imposition of penalty is concerned, of course penalty or interest thereof cannot be imposed as, in the usual course petitioner having exercised his bona fides, having registered under the Service Tax, went on paying service tax. For the assessment years in question, the amount is paid by the petitioner to the 1st respondent and it is for the State to seek for recovery of the amount so paid by the petitioner to the 1st respondent in a separate proceedings based on the judgement rendered herein. Further, in future, it is for the petitioner to file returns/assessment under the provisions of sections 3 and 4(1b) of the VAT Act, 2003.