BHARAT SANCHAR NIGAM LTD. AND ANR. versus UNION OF INDIA AND ORS.

Citation: [2006] 2 S.C.R. 823 · Decided: 02-03-2006 · Supreme Court of India · Bench: RUMA PAL · Disposal: Disposed off

Cited by 12 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

·~·. 
BHARAT SANCHAR NIGAM LTD. AND ANR. 
v. 
UNION OF INDIA AND ORS. 
MARCH 2, 2006 
[RUMA PAL, DR. AR. LAKSHMANAN AND 
DALVEER BHANDARI, JJ.) 
Constitution of India 1950-Articles 286, 366, (12) and (29A) and 
Schedule VII, List I Entry 92-C and List II Entry 54-Sale of Goods Act, 
A 
B 
1930-Sections 2(7) and 4-Telegraph Act, 1885-Section 4. 
C 
Telephone Services-Sale Tax, Levy of by States-Nature of 
Transaction-Whether constitute sale of goods or service contract or a 
composite contract of service and sale-Meaning and scope of 'Goods' in 
telecommunication-Service providers are licensees under the Telegraph Act 
and provide telephone services to the subscribers-They filed writ petitions D 
challenging imposition of sales tax by states on telephone services alleging 
that there is no sale of goods involved-States claim that transaction involve 
transfer of right to use goods and is a deemed sale under Articles 366 
(29A)(d)-Allowing the petitions, held, a telephone service is nothing but a 
service-electromagnetic waves or radio frequency involved in E 
telecommunication are not goods for the purpose of Article 366(29A)(d)-
Goods in telecommunication are limited to the handsets supplied by the service 
provider-There may be transfer of right to use the goods by giving a telephone 
connection-Nature of transaction involved in providing the telephone 
connection may be a composite contract of service and sale-It is possible for 
the state to tax the sale element provided there is a discernible sale and only F 
to the extent relatable to such sale-The aspect theory would not apply to 
enable the value of the services to be included in the sale of goods or the price 
of goods in the value of service-Question whether SIM Card is 'goods' is left 
to be determined by the hsessing Authority. 
Sale of Goods-Deemed Sale-Levy of Sales Tax-Composite sale-service 
--; 
contracts divisible by Article 366(29A)-Scope of-Held, there are only three 
composite service-sale transactions named under clauses (b) (c) and (/) of 
Article 366(29A) where splitting of sale and service is specifically permitted 
and sale element can be isolated and subjected to sales tax-Apart from these, 
G 
823 
H 
824 
SUPREME COURT REPORTS 
[2006) 2 S.C.R. 
A there is no other service which has been permitted to be so split, unless it 
satisfies the dominant intention test. 
Sale of Goods-'Sale and Goods '--Deemed Sale-Meaning and Scope-
Effect of insertion of Article 366(29A) by the 46th Amendment-Held, 
transactions which are deemed sales are limited to various sub-clauses of 
B Article 366(29AJ-Al/ other transactions would have to qualijj; as 'sales' for 
the purposes of levy of sales tax-Article 366(29A) did not alter meaning of 
the word 'goods '-What are 'goods' in a sale transaction is a matter of 
contract and intention of the parties. 
Telecommunication Services--Nature of-Service, Sale or of sale and 
C service-Levy of sales tax and service tax·-Dominant intention test-
Application of Article 366(29A)(d)-Held, a transaction for providing telephone 
services is not covered by Article 366(29A)(d) as there is no transfer of right 
to use goods by the service provider to the subscriber-Reasons, object and 
scope of introduction of clauses (a) tot (f) to Article 366(29A) by the 46th 
D Amendment discussed-Nature of transaction involved in providing a telephone 
connection may be a composite contract of sen·ice and sale--Sales tax can be 
imposed on such transaction if it in truth represents two distinct and separate 
contracts and is discernible-Dominant nature test applicable to all transactions 
not specifically covered under Article 366(29AJ(A) to (/). 
E 
Telecommunication Services---Levy of Sales Tax by State-"Goods', 
Meaning and scope of-What constitute 'goods ' in telecommunication for the 
purpose of imposition of sales tax--Held, 'goods' for the purpose of sales tax 
may be tangible or intangible provided it has the three attributes specified in 
Tata Consultancy case i.e. (i) its utility, (ii) capable of being bought and sold 
F and (iii) capable of being transmitted, transferred, delivered, stored and 
possessed-Goods must be deliverable-The electromagnetic waves or radio 
frequency do not faljil/ these attributes and are not goods for the purpose of 
Article 366(29A)(d)--Question whether the telephone system including the 
telephone exchange was goods or immovable property not determined-
Question whether SIM cards supplied by service

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