Dipak Chakraborti, Technical Member

1. In this petition filed under Section 8 of the West Bengal Taxation Tribunal Act, 1987, the petitioners, (i) Bharti Airtel Limited (formerly known as " Bharati Tele-Ventures Limited), a limited company incorporated under the Companies Act, 1956 having its registered office at H-5/12, Qutab Ambience, Mehrauli Road, New Delhi 110 030 and principal office in West Bengal at Infinity Building, Sector V, Block-EPGP, 5th Floor, Salt Lake Electronic Complex, Kolkata 700 091 and (ii) Sri Tuhin Chatterjee, working for gain at the said address at Salt Lake Electronic Complex, have challenged the order dated June 26, 2007 passed by the Assistant Commissioner of Sales Tax, Salt Lake Charge (in short, "respondent No. 1") in relation to the assessment made under the West Bengal Sales Tax Act, 1994 (in short, "the 1994 Act") pertaining to the assessment period four quarters ending on March 31, 2005.

2. The petitioner-company, as claimed in this petition, is engaged in the business of providing cellular mobile telephone service (CMTS) to various subscribers in India including West Bengal. In the course of providing such CMTS, the petitioner-company during the year in question supplied or caused to be supplied subscriber identification module card (SIM card) and recharge coupon vouchers (also known as cash cards). As it appears from the order dated June 26, 2007, respondent No. 1 held that SIM cards were goods and supply of SIM cards by the petitioner-company to its distributors fell within the meaning of sales of taxable goods as per provision of the 1994 Act. Similarly, it was held by respondent No. 1 that supply of recharge coupon vouchers against consideration meant sale of goods.

3. The petitioners are represented by Sri R. N. Bajoria, senior advocate, Sri S. K. Bagaria, Sri Atish Ghosh and Sri Niladri Khanna, advocates, whereas Sri P. Basu, senior advocate along with Sri B. Bhattacharyya, advocate, represent the respondents. Both the sides have submitted written notes of arguments.

4. Initiating the arguments, Sri Bajoria, learned senior advocate, points out that the question of taxability of SIM cards had been agitated in several cases of telecom service providers. Ultimately, the honourable apex court in the case of Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 : [2006] 145 STC 91 [LQ/SC/2006/192 ;] held that full facts regarding the function and nature of SIM cards had to be ascertained before deciding whether the transaction relating to its transfer was one of sale of goods or rendering of telecom services. The learned senior advocate further submits that after the decision of the Kerala High Court in the case of Escotal Mobile Communications Ltd. v. Union of India [2002] 126 STC 475 [LQ/KerHC/2002/120] , the petitioner started collecting sales tax on transfer of such SIM cards to its distributors. The tax so collected was also deposited to the State exchequer. In view of the position, learned senior advocate categorically submits that the petitioners do not wish to agitate the issue in the present application only because of the fact that the tax so deposited cannot be refunded now even if it is held that the transfer of SIM cards does not tantamount to sale. The petitioners, as submitted by the learned senior advocate, however reserve the right to agitate this in respect of other years.

5. The only issue, thus, required to be decided by this Tribunal is justifiability of taxing recharge coupon vouchers.

6. It is explained by the learned senior advocate that recharge coupon vouchers provide access to the telephone services. He relies on the observation of the Andhra Pradesh Sales Tax Appellate Tribunal in the case of Sri Padmavati Venkataramana Traders, Kurnool v. State of Andhra Pradesh. In its judgment dated February 6, 2008 (unreported), the Tribunal observed as below:

As far recharge coupons are concerned, they provide access to the telephone service. The customers after purchasing the recharge coupon scratch the silver/black panel to view secret code and dial a particular number from their cell phone and enter the eighteen digit secret code to have access to the telephone service. As soon as the secret code is entered through their cell phone, the card becomes useless. Thus unless it is used for recharging their telephone service, it is useless. Thus ultimately the recharge coupon carries a number printed on it. It is used to have connection and extension with the telephone service. Except for this purpose and use, it has no other utility.

7. Explaining the nature of recharge coupon vouchers, it is submitted by the learned senior advocate that the petitioner has two categories of its telecom services-(i) pre-paid and (ii) post-paid. Recharge coupon vouchers are not required for the subscribers who make payment towards telecom services availed of by them on receipt of the bills. But in respect of small consumers, such payments are collected in advance through selling of recharge coupon vouchers as it is not feasible and economical for the petitioners to raise so many individual small bills. But such claimant cannot also be ignored from the business point of view as growth of telecom services depends on connectivity and extensive use of such services. Had there been no presence of an agent in between the service provider (the petitioners) and the service user, the position would have been otherwise. In that event it could have been inferred that the consumer is making payment against purchase of recharge coupon vouchers for the intended service he would like to avail of.

8. The learned senior advocate refers to some proceedings initiated by the income-tax authorities against the petitioner-company contending that profit margin allowed to the distributors/agents was commission paid by the petitioner-company to them and hence, it was obligatory on the part of the petitioner-company to deduct tax at source on such commission. This finding of the income-tax authority was challenged by the petitioners before the Income-tax Tribunal and the decision in Assistant Commissioner of Income-tax v. Bharti Cellular Ltd. reported in [2007] 294 ITR 283 (Kolkata) went against the petitioner-company. Before the Income-tax Tribunal, it was contended by the petitioner-company that the transactions between the petitioner-company and its distributors/agents were sale transactions and hence the petitioner was not obliged to deduct tax at source on such profit margin. Against the said decision of the Tribunal, the petitioner has preferred an appeal before the honourable Calcutta High Court which is still pending. It is therefore, argued, by the learned senior advocate that ultimate determination as regards the taxability of recharge coupon voucher depends upon the decision of the honourable High Court or of the honourable apex court if the matter goes so far. Accordingly, we are not called upon to decide whether transactions between the petitioner and its distributors were sale transactions. However, prima facie it appears to us that recharge coupons are just receipts or acknowledgement of required payment made by a user for obtaining mobile telephone services. This prima facie view should not be taken as expression of final opinion.

9. Alternative argument of the learned senior advocate is that even if the transaction between the petitioner-company and its distributors/agents is treated as sale but no tax is leviable on recharge coupon vouchers as they do not fall within the meaning of "goods" as defined in Section 2(13) of the 1994 Act. Section 2(13) of the 1994 Act defines "goods" as "goods include all kinds of movable property other than actionable claims, stocks, shares or securities". It is claimed by the learned senior advocate that recharge coupon vouchers are nothing but actionable claims. He draws our attention, to the definition of "actionable claims" as given in Section 3 of the Transfer of Property Act, 1882. The said definition reads as below:

Actionable claim means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording ground for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.

10. The learned senior advocate relying on the definition as above argues that recharge coupon vouchers are the acknowledgement of advance receipt of money for rendering telecom services in future. The recharge coupon vouchers represent the right to get the services equal to the value they represent. They represent the beneficial interest in the contract for receiving telecom services which are movable property. Irrespective of whether such beneficial interest is existent or accruing or conditional or contingent it would be an actionable claim. It is, therefore, submitted by the learned senior advocate that recharge coupon vouchers are nothing but actionable claim and are not goods falling within the meaning of "goods" as defined in Section 2(13) of the 1994 Act and hence no tax can be levied on transfer of such recharge coupon vouchers. Transferability, contends the learned senior advocate, does not stand in the way of treating an asset of an actionable claim. In support of his submissions, he relies on a decision of the honourable apex court in the case of Sunrise Associates v. Government of NCT of Delhi [2006] 145 STC 576. [LQ/SC/2006/396] While answering the question as to what is the distinction between actionable claim and the goods, the honourable apex court observed as below (at pages 593 and 594 of STC):

38. The court in Vikas Sales : [1996] 102 STC 106 (SC) : [1996] 4 SCC 433 [LQ/SC/1996/915] said when these licences/scrips are being bought and sold freely in the market as goods and when they have a value of their own unrelated to the goods which can be imported thereunder, it is idle to contend that they are in the nature of actionable claims. It was assumed that actionable claims are not transferable for value and that that was the difference between actionable claims and those other goods which are covered by the definition of goods in the Sale of Goods Act, 1930, and the sales tax laws. The assumption was fallacious and the conclusion in so far as it was based on this erroneous perception, equally wrong.

The Transfer of Property Act, 1882, deals with transfer of actionable claims in Chapter VIII of that Act. Section 130 of the Transfer of Property Act provides that an actionable claim may be assigned for value. A right on the fulfilment of certain conditions to call for delivery of goods mentioned in a contract is an actionable claim and assignable under Section 130. (see Jaffer Meher AH v. Budge-Budge Jute Mills Co. ILR [1906] Cal 702). There may also be assignments of an actionable claim de hors Section 130 (see Bharat Nidhi Ltd. v. Takhatmal : [1969] 39 Comp Cas 114 (SC) : [1969] 1 SCR 595 [LQ/SC/1968/201] ). Negotiable instruments, another species of actionable claim, are transferable under the Negotiable Instruments Act, 1881. Transferability is, therefore, not the point of distinction between actionable claims and other goods which can be sold. The distinction lies in the definition of actionable claim. Therefore, if a claim to the beneficial interest in movable property not in the vendees possession is transferred, it is not a sale of goods for the purposes of the sales tax laws.

11. It is, therefore, stressed further that recharge coupon vouchers are nothing but actionable claims and their transferability could not alter or change their character.

12. The learned senior advocate admits that these recharge coupon vouchers are not made available directly to the consumers (subscribers) who are availing of the services rendered by the service provider (petitioner) because of difficulty in reaching the large number of individual consumers but at the same time, it is argued that the mode of transfer of an asset does not change the nature and character of an asset. Transfer of such recharge coupon vouchers through distributors/agents only facilitates rendering of services to consumers/subscribers. The manner of transferring such recharge coupon vouchers is only incidental to the service being provided by the service providers/petitioner. Before concluding his submission that recharge coupon vouchers are not goods but actionable claims not exigible to sales tax on transfer, he draws a line of distinction between the facts of the case of Tamil Nadu Kalyana Mandapam Assn. v. Union of India : [2004] 135 STC 480 (SC) [LQ/SC/2004/532] relied upon by the respondents in the instant case. The issues raised in that case and in the present one are totally different and the said decision of the honourable apex court has no applicability in this case.

13. The learned senior advocate, Sri P. Basu appearing along with Sri B. Bhattacharyya, advocate, on behalf of the respondents admits that the dispute mainly relates to the taxability of sales of recharge coupon vouchers made by the petitioner-company to its distributors/agents. Since the petitioner has claimed that recharge coupon vouchers do not fall within the meaning of "goods" as defined under Section 2(13) of the 1994 Act but actionable claims, he tries to analyse the definition of "actionable claims" as given under Section 3 of the Transfer of Property Act, 1882. It is stressed by him that actionable claim has to be either (a) unsecured debt, (b) a beneficial interest in the movable property, when such movable property is not in the possession of the claimant. It is asserted by the learned senior advocate, that recharge coupon vouchers are neither in the nature of debt nor in the nature of a beneficial interest in a movable property, not in the possession of a claimant. To substantiate his argument, he places his reliance on the definition of debt as given under Clause (8) of article 366 of the Constitution of India wherein it has been provided that "debt" includes any liability in respect of any obligation to repay capital sums by way of annuity and any liability under guarantee. He dissects the definition in two parts and submits that firstly debt may be an obligation to repay a capital sum or secondly a debt may be any liability under any guarantee. He further analyses the expression, "capital sum" and "annuity". Relying on the definition of these expressions as given in Advance Law Lexicon by P. Ramanatha Iyer, third edition, volume I, reprint 2007 he submits that in order to qualify as a debt the obligation to repay must be related to any capital sum, which in simple terms means money.

14. It is submitted by the learned senior advocate appearing on behalf of the respondents that recharge coupon vouchers do not relate to money. Such recharge coupon vouchers relate to a period of time during which the consumer can talk over the telephone which is commonly known as talk time. Thus the concept of talk time can never be construed as an unsecured debt. Moreover, "any liability under any guarantee" as appearing in the definition of debt under Clause (8) of article 366 of the Constitution of India is not applicable in this case as actionable claim must be an unsecured debt. It is argued that concept of guarantee is akin to the concept of secured debt and, therefore, in order to qualify as unsecured debt, the said matter must relate to money and nothing else. It is further argued that concept of liability under a guarantee is never the same as the concept of liability under general contract. Recharge coupon vouchers are reaching to the ultimate consumers in two stages-first one from the service provider to the distributors/agent and thereafter from the distributor/agent to the ultimate consumer. In the instant case, the transfer of recharge coupon vouchers from the service providers to its distributors/agents against consideration is the issue under scrutiny. He, therefore, addresses the question as to whether such recharge coupon vouchers can be termed to be a beneficial interest in a movable property which is not in a possession of the claimant. It is admitted by him that honourable apex court in the case of Sunrise Associates [2006] 145 STC 576 [LQ/SC/2006/396] held lottery rickets to be actionable claim. But the same conclusion was arrived at after considering that "...on purchasing a lottery ticket, the purchaser would have a claim to a conditional interest in the prize money which is not in the purchasers possession. The right would fall squarely within the definition of an actionable claim and would, therefore, be excluded from the definition of goods under the Sale of Goods Act and the sales tax statutes...".

15. The learned senior advocate draws an inference that the apex court held lottery tickets to be an actionable claim because of (i) prize money had been considered to be a movable property which is not in possession of the claimant and (ii) chance to win part of the said prize money has been considered as a beneficial interest in such movable property.

16. The learned senior advocate raises a question as to whether "talk time" can be regarded as a movable property and/or goods or alternatively a special property. It is contended that if guided by the definition of Clause (11) of Section 2 of the Sale of Goods Act, 1930 then it qualifies as a property and not goods and hence "talk time" cannot be considered as a movable property. It is, therefore, argued that if the talk time is not considered as a movable property, the recharge coupon vouchers also cannot be considered as a beneficial interest in the movable property and accordingly will not fall within the meaning of actionable claims. The learned senior advocate, therefore, contends that recharge coupon vouchers are not actionable claims, and sales thereof are taxable.

17. We have heard the rival contentions and also perused the records. Recharge coupon vouchers, as it appears to us, allow the subscriber to avail of the telephone services guaranteed by the service provider for the equivalent amount of money paid by the subscriber to the distributor/agent of the service provider at the time of purchase of such vouchers. They cannot be utilized by the subscriber for any other purposes other than enjoying the telephone services. A specific period of talk time is fixed according to the value of the recharge coupon vouchers. Though subscribers purchase the recharge coupon vouchers from distributors/agents, the telephone service is guaranteed by the service provider. Since the subscriber has no direct access to the service provider and the sales of such recharge coupon vouchers are made in two stages, the character of the transaction between the service provider and its distributors is required to be determined. It has already been discussed hereinbefore that subject to the determination by the honourable Calcutta High Court, where a petition of this petitioner is lying pending, the petitioner for the time being accepts the transaction made with its distributors/agents as sale transaction. But it disputes the taxability of recharge coupon vouchers claiming such vouchers as actionable claims. In support of the submission, learned senior advocate, Sri Bajoria, relied on a decision of the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576. [LQ/SC/2006/396] The honourable apex court in that case was considering whether lottery tickets were goods and were liable to sales tax. The honourable apex court concluded that "...there was no sale of goods within the meaning of the Sales Tax Acts of the different States but at the highest a transfer of an actionable claim...". The honourable apex court also drew a line of distinction between actionable claims and other goods on the sale of which tax may be levied, and observed, "the distinction lies in the definition of actionable claim. Therefore, if a claim to the beneficial interest in movable property not in the vendees possession is transferred, it is not a sale of goods for the purposes of sales tax laws".

18. The respondents on the other hand have asserted that the expression "debt" as appearing in the definition of "actionable claims" given under Section 3 of the Transfer of Property Act, 1882 only encompasses monetary debt and nothing else. But debt also may be "a non-monetary thing that one person owes another, such as goods or services" (Blacks Law Dictionary, eighth edition, page 432). We do not, therefore, like to subscribe to the view that debt means only monetary debt. The next dispute is whether recharge coupon vouchers can be considered as a beneficial interest in the movable property.

19. The respondents have contested the claim that recharge coupon vouchers are actionable claims. They have not, however, denied that by purchasing recharge coupons a consumer acquires a beneficial interest to receive telecom services from the service provider. The contention of the respondents appears to be that the telecom services are not movable properties and, therefore, the purchasers of recharge coupons do not derive any beneficial interest in movable property to come within the definition of "actionable claim". Recharge coupon vouchers are acknowledgement of receipt of money in advance for rendering telecom services in future. As the money has been received in advance it constitutes a debt for the service provider. Upon purchase of recharge coupon vouchers, the consumer or user gets two rights. First the consumer gets a right to enjoy mobile services and secondly, he also gets a right to receive back the amount if the required telecom services cannot be provided.

20. In H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 [LQ/SC/1985/321] , the Supreme Court has held that the right to participate in the draw of a lottery is a beneficial right in movable property and an actionable claim. When the right to participate in a draw of lottery is an actionable claim the right to get telecom services also qualifies as a beneficial right in movable property and an actionable claim. However, the purchaser has also a right to get back the money if the telecom service is not available.

21. It is now a settled position that an actionable claim is transferable and transferability of a right or interest does not change the nature and character of an actionable claim.

22. The respondents further rely on the definition of "goods" and "property" as given under Clause (7) and Clause (11), respectively of Section 2 of the Sale of Goods Act, 1930 and contend that "talk time does not contain the general property in goods which on the other hand can at best be treated as a special property".

23. As regards this contention of the respondents, we would like to refer to the observation made by the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576. [LQ/SC/2006/396] Paragraphs 34, 35 and 36 of the said judgment are reproduced hereinbelow:

34. The word goods for the purposes of imposition of sales tax has been uniformly defined in the various sales tax laws as meaning all kinds of movable property. The word property may denote the nature of the interest in goods and when used in this sense means title or ownership in a thing. The word may also be used to describe the thing itself. The two concepts are distinct, a distinction which must be kept in mind when considering the use of the word in connection with the sale of goods. In the Dictionary of Commercial law by A. H. Hudson (1983 edition) the difference is clearly brought out. The definition reads thus:

"Property"-In commercial law this may carry its ordinary meaning of the subject-matter of ownership. But elsewhere, as in the sale of goods it may be used as a synonym for ownership and lesser rights in goods.

Hence, when used in the definition of goods in the different sales tax statutes, the word property means the subject-matter of ownership. The same word in the context of a sale means the transfer of the ownership in goods.

35. We have noted earlier that all the statutory definitions of the word goods in the State sales tax laws have uniformly excluded, inter alia, actionable claims from the definition for the purposes of the. Were actionable claims, etc., not otherwise includible in the definition of goods there was no need for excluding them. In other words, actionable claims are goods but not for the purposes of the Sales Tax Acts and but for this statutory exclusion, an actionable claim would be goods or the subject-matter of ownership. Consequently an actionable claim is movable property and goods in the wider sense of the term but a sale of an actionable claim would not be subject to the sales tax laws.

36. Distinct elements are deducible from the definition of actionable claim in Section 3 of the Transfer of Property Act. An actionable claim is of course as its nomenclature suggests, only a claim. A claim might connote a demand, but in the context of the definition it is a right, albeit an incorporeal one. Every claim is not an actionable claim. It must be a claim either to a debt or to a beneficial interest in movable property. The beneficial interest is not the movable property itself, and may be existent, accruing, conditional or contingent. The movable property in which such beneficial interest is claimed, must not be in the possession of the claimant. An actionable claim is, therefore, an incorporeal right. That goods for the purposes of sales tax may be intangible and incorporeal has been held in Tata Consultancy Services v. State of Andhra Pradesh : [2004] 137 STC 620 (SC) : [2004] 271 ETR 401 (SC) : [2005] 1 SCC 308 [LQ/SC/2004/1282 ;] .

24. We have already discussed that distributors/agents of the service providers on receipt of the consideration money, fixed by the service provider, transfer these recharge coupon vouchers to subscribers for availing of the telephone services provided by the service providers. Distributors/agents cannot transfer these recharge coupon vouchers for any other purposes except for accessing telephone services provided and guaranteed by the service provider. On the strength of such recharge coupon vouchers, the subscriber cannot even avail of the services offered by other service providers. The interest of the subscriber is restricted only to the use of the services offered by the service provider for a pre-determined fixed period of time, obviously against monetary consideration equivalent to the telephone services one intends to avail of.

25. Keeping in mind the facts of this case and the principle as laid down by the honourable apex court in the case of Sunrise Associates [2006] 145 STC 576 [LQ/SC/2006/396] , we are of the view that the recharge coupon vouchers fall within the meaning of "actionable claims" and hence are not taxable. The assessment order dated June 26, 2007, therefore, stands set aside. The matter is remanded back to the assessing authority for a fresh assessment keeping in view the observation made hereinbefore. We, however, do not like to make any observation with regard to other issues raised in this petition.

26. The petition, thus, stands disposed of. No order as to costs.

Pradipta Ray, Chairman

27. I agree.