State Of Orissa Represented By The Commissioner Of Commercial Taxes, Orissa, Cuttack vs M/s. Executive Engineer, GRIDCO, Bhanjanagar

Dr. S. Muralidhar, CJ

The short question that arises for determination in the present revision petition is whether the rent collected by the dealer i.e. GRIDCO for installation of electricity meters will amount to a sale as defined under Section 2(g) of the Orissa Sales Tax Act, 1947 (OST Act).

Learned Additional Standing Counsel for the Department submitted that the definition of ‘Sale’ as contained in Section 2(g)(iv) of the OST Act is wide and it includes “transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration.” According to him, the right to use the electricity meter has been transferred by GRIDCO to its customer for which it collects rent and, therefore, the rent so collected must be treated as the ‘sale price’.

Reliance is placed on the decision of the Supreme Court of India in Bharat Sanchar Nigam Ltd. v. Union of India (2006) 3 SCC 1. The relevant portion of the said decision on which reliance is placed by the Petitioner reads as under:

“92. xxx

A) Goods do not include electromagnetic waves or radio frequencies for the purpose of Article 366(29A)(d). The goods in telecommunication are limited to the handsets supplied by the service provider. As far as the SIM cards are concerned, the issue is left for determination by the Assessing Authorities.

B) There may be a transfer of right to use goods as defined in answer to the previous question by giving a telephone connection.

C) The nature of the 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 to the extent relatable to such sale.

D) The issue is left unanswered.

E) 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 the service.”

In the present case, there is no machinery provision in the OST Act which enables the Assessing Officer to determine the sale element separately from the ‘service element’ in the transaction of renting out of electricity meters. In the absence of such a machinery provision, the collection of sales tax on the entire rent would obviously be unsustainable in law.

Consequently, the question framed by this Court by its order dated 10th July, 2015 is answered in favour of the Assessee and against the Department by holding that the collection of meter rent by GRIDCO from its consumers is not ‘sale’ as defined under Section 2 (g) of the OST Act and the meter rent so collected is therefore not exigible to sales tax.

The revision petition is accordingly disposed of.

Issue urgent certified copy of this order as per rules.

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