Union of India (UOI) and Another vs State of Punjab and Another

M.M. Kumar, J.—This is an appeal by the Union of India under clause X of the Letters Patent challenging the order dated November 4, 2004 passed by the learned single judge of this Court in Civil Writ Petition No. 8256 of 1998 dismissing their writ petition. It is appropriate to mention that in the writ petition, the Union of India has sought a declaration for declaring Section 2(h)(iv) of the Punjab General Sales Tax Act, 1948 as amended by the Act No. 8 of 1987 as ultra vires and a mandamus to the respondent-State and its officers not to act upon the same. A further prayer was made for quashing order dated May 7, 1998 passed by the Assessing Authority, Hoshiarpur imposing sales tax as well as penalty, etc. The fundamental basis for seeking the aforementioned relief was that article 285(1) provides for exemption of property of the Union from State taxation. The other basis was that Clause (29A) of article 366 was added with effect from February 2, 1983 in the Constitution by the Forty-sixth Amendment and consequential amendment made by the State of Punjab in the Punjab General Sales Tax Act would not include the transmission and activation of telephone provided by Bharat Sanchar Nigam Limited.

On the aforesaid issue, a number of writ petitions were filed before this Court by the Union of India, which included Civil Writ Petition Nos. 9032, 1154 and 5860 of 1997 and many others. A Division Bench of this Court took the view that the Union of India have been charging rent for connecting telephone instrument placed in the premises of the subscriber with the telephone exchange by way of telegraphic lines and till the instrument is connected with the telegraph lines to the telephone exchange, the instrument placed in the premises of the subscriber is useless. It is through the telegraphic line that the apparatus is activated. Therefore, mere charge of the rent or fee as per measured rate system or message rate system cannot be equated with the "sale of goods" within the meaning of the Punjab General Sales Tax Act, 1973.

Against the view taken by a Division Bench of this Court, a number of appeals were filed before the honourable Supreme Court, which included Civil Writ Petition Nos. 4278-4288 of 2002. The honourable Supreme Court has taken the same view and the judgment is now reported as Bharat Sanchar Nigam Ltd. and Another Vs. Union of India (UOI) and Others, . Therefore, it has to be concluded that the view taken by the learned single judge cannot be sustained. The judgment of the honourable Supreme Court in an earlier case of State of Uttar Pradesh and Another Vs. Union of India (UOI) and Another, on which reliance has been placed by the learned single judge has been overruled on the issue in question as would be evident from the reading of paras 78 and 79 of the judgment in Bharat Sanchar Nigam Ltd. and Another Vs. Union of India (UOI) and Others, . It has, accordingly, been held that if there are no deliverable goods in existence, as is the position in this case, then there is no transfer of user at all. The provision for access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate. To that extent, the view taken in State of Uttar Pradesh and Another Vs. Union of India (UOI) and Another, has been overruled.

In view of the above, the order dated November 4, 2004 passed by the learned single judge is set aside in terms of the judgment of the honourable Supreme Court rendered in Bharat Sanchar Nigam Ltd. and Another Vs. Union of India (UOI) and Others, . The Letters Patent appeal filed by the appellants is allowed to that extent. Consequently, the impugned order dated May 7, 1998 (annexure P3) passed by the Assessing Authority is quashed.