M/S Sun Direct Tv. Pvt. Ltd. vs The State Of Tripura (Represented ...
2021 Latest Caselaw 17 Tri

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                      HIGH COURT OF TRIPURA
                            AGARTALA

                             CRP No.13/2020

M/S Sun Direct TV. Pvt. Ltd., C/o N.D. Paul, Town Pratapgarh, Master
Para, Agartala, Tripura (West), 799001, and its Registered office at Murasoli
Maran Towers, 73, MRC Nagar Main Road, MRC Nagar, Chennai, 600028
represented by its Authorized Signatory Shri Novojit Ghosh, Area Sales
Manager, North East.
                                                            ----Petitioner(s)

                                      Versus

1. The State of Tripura (represented by the Principal Secretary), Government
of Tripura, Finance Department, New Secretariat, New Capital Complex,
PO: Kunjaban, Agartala, District: West Tripura, 799010.

2. The Principal Secretary, Government of Tripura, Revenue Department,
New Secretariat, New Capital Complex, PO: Kunjaban, Agartala, District:
West Tripura, 799010.

3. The Commissioner of Taxes (Revisional Authority), Government of
Tripura, Gurkhabasti, PN Complex, P.S. Capital Complex, District: West
Tripura, PIN-799006.

4. The Asst. Commissioner of Taxes (Appellate Authority), Government of
Tripura, Gurkhabasti, Agartala, Tripura-799006.

5. The Superintendent of Taxes, Charge-VI, Agartala, Palace Compound,
Agartala, P.S. East Agartala, District: West Tripura, PIN-799001.
                                                           -----Respondent(s)

For Petitioner(s)               : Mr. T.K. Deb, Advocate,
                                  Mr. N.D. Pal, Advocate.
For Respondent(s)               : Mr. P.K. Dhar, Sr. G.A.,
                                  Mr. K. De, Addl. G.A.





        HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI
         HON'BLE MR. JUSTICE S.G. CHATTOPADHYAY

       Date of hearing and judgment : 5th January, 2021.

       Whether fit for reporting        : NO.

                       JUDGMENT & ORDER (ORAL)

(Akil Kureshi, C.J.)

Petitioner is a company registered under Companies Act and is

engaged in the business of providing Direct to Home broadcasting services

(DTH service, for short). It has operations in the State of Tripura. In order to

provide such services to the customers, the petitioner provides free of cost

certain equipments such as, Set Top Box, Smart Card, Low Noise Booster,

Antenna, Cable, Connector, Clip & tie etc. described under one umbrella

expression of "Customer Premises Equipments" (CPE, for short). Petitioner

contends that for providing such equipments no charge is collected from the

subscriber. The petitioner continues to be the owner of the goods. Under the

circumstances, according to the petitioner, the State authorities cannot

collect value added tax on such equipments.

2. The State authorities, however, hold a different belief.

According to the VAT authorities of the State Government the petitioner is

liable to pay VAT at the prescribed rates. On such basis, the Assessing

Officer issued notice to the petitioner for collecting unpaid VAT for the

period of years 2009-10 to 2013-14. After receiving response from the

petitioner, the Assessing Officer passed a common order of assessment on

23.03.2015 for the entire period noted above. He was of the opinion that the

dealer was liable to pay VAT at the appropriate rates of 4% or 6%, as the

case may be on the value of such goods. He also imposed penalty to the

extent of 10% of the duty which remained unpaid. The said order eventually

became the subject matter of a revision petition before the Commissioner of

Taxes as a revisional authority. By the impugned order dated 07.03.2019 the

revision petitions were dismissed. The revisional authority also confirmed

the imposition of penalty on the petitioner. He was of the opinion that

though there may not be sale of goods in question from the petitioner to the

subscribers, nevertheless right to use the goods was transferred in favour of

the subscribers. The revisional authority heavily relied on the decision of

this Court in case of Bharti Telemedia Ltd. vrs. The State of Tripura and

another dated 19.02.2015 in WP(C) No.563 of 2010 and connected

petitions. For confirming the penalty the revisional authority recorded that

the penalty was imposed after affording reasonable opportunity to the

petitioner.

3. We have heard learned counsel for the parties. We notice that

the issues involved in the present petition are squarely covered by the

decision of Division Bench of this Court in case of Bharti Telemedia Ltd.

(supra). The question involved in the said petition was with respect to

inviting value added tax on the goods provided by a DTH provider to its

customer so that the customer could enjoy such service. It is also a case

where concededly there was no sale of goods. Nevertheless the High Court

referring to the decision of Supreme Court in case of Bharat Sanchar

Nigam Ltd. and another vrs. Union of India and others reported in (2006)

3 SCC 1 invoked the principle of transfer of right to use the goods. In a

detailed judgment it was observed as under:

"[28] True it is that the petitioner companies have not sold the STBs to the customers. There can however be no manner of doubt that the right to use these goods i.e. the STBs has been transferred to the customers. In today's world, nothing is given free of cost. The cost of the STB is obviously included in the activation charges and/or the monthly subscription. Under the TVAT Act even where payment of the goods is made by way of deferred payment the goods can be subjected to tax. The main issue is whether the contract can be easily divided and the value of the goods can be ascertained with exactitude.

[29] One of the most important elements of determining whether the right to use goods has been transferred or not is

by ascertaining who has effective control over the goods. As far as STBs are concerned they are in total control of the customer. Under his effective control the STBs are installed in the house of the customer. He can use the STB when he wants to. He can use the STB to view whichever channel he wants to view. He may or may not use the STB. The company does not even have the power of entering the premises of the customer. Most importantly as per the terms of the agreement, the companies are responsible for the functioning of the STBs only for a period of 6(six) months. The warranty is valid only for six months and thereafter there is no warranty. Therefore, if STB of a customer is spoiled after six months he will have to pay for repair or replacement of the same. We are of the considered view that this amounts to transfer of the right to use goods."

4. The issue involved in the present petition is thus covered by the

judgment in case of Bharti Telemedia Ltd. (supra). We have, therefore, no

hesitation in confirming the revisional order insofar as it pertains to the

liability of the petitioner to pay tax with interest. However, in relation to

penalty we find that the authorities have committed a serious error. Firstly,

contrary to what the revisional authority has recorded in the impugned order,

sufficient opportunity of hearing was not granted to the petitioner before

imposing penalty by the Assessing Officer. We say so because in the

assessment order itself the Assessing Officer has recorded that he was

inclined to issue notice for penalty, however, the accountant of the petitioner

company stated that issuance of penalty notice would further delay the

proceedings. The Assessing Officer, therefore, issued an oral notice to the

accountant who was present, thereafter kept the further hearing of the

assessments and penalty proceedings and recently orally instituted penalty

proceedings in the afternoon on the same day, heard the accountant on

penalty as well and concluded that the assessee was deliberately in default.

5. For several reasons, such order of penalty cannot be upheld.

Firstly, there was gross violation of principles of natural justice. Even if the

accountant did not insist on a written notice for penalty, it is questionable

whether the Assessing Officer could dispense with the same. More

importantly, the penalty proceedings could not have been completed in a

summary fashion after giving time from morning to afternoon to the

accountant of the company to make his submissions. The penalty

proceedings being quasi criminal in nature, strict requirement of procedural

adherence is always insisted upon. Further even on merits, we do not find

that the petitioner carried any mala fide intention in not offering the said

transaction to tax. The decision of this Court in case of Bharti Telemedia

Ltd. (supra) was rendered on 19.02.2015. The entire period in question with

which we are concerned was prior to the decision of this Court. It was

otherwise an arguable issue. The petitioner can be stated to have carried a

bona fide belief that the transaction in question is not exigible to tax.

6. In the result, the orders passed by the Assessing Officer and

revisional authority confirming penalty against the petitioner are set aside.

The petition succeeds only to this extent. Petition is dismissed.

7. Pending application(s), if any, also stands disposed of.

 (S.G. CHATTOPADHYAY), J                           (AKIL KURESHI), CJ




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