Bangalore: The Karnataka High Court on Friday held that private telecom operators generating light energy that enabled customers to transmit data came under the category of goods. Therefore, these services were liable for sales tax (ST).
A Division Bench, comprising Justice V. Gopala Gowda and Justice Arali Nagaraj passed the order on appeals by Bharati (Airtel) Telecom and others who had challenged the single judge order.
The Bench dismissed the appeals and ordered the appellant to pay the balance of Rs. 14 crore due as sales tax for the period 2005-06. The Commercial Tax Department had levied the tax, saying that data transmitted were categorised as goods.
The decision will have nationwide implications as it will now empower the States to collect ST from telecom companies, including government-owned BSNL, and other private operators which transmit different categories of data.
The Bench upheld the State contention that modern-day telecom industry, which operates optical fibre cable (OFC) network, supplies data through artificially generated light. This enables its customers to transmit voice data, video data, and text from one place to another.
It said artificially created light energy (ACLE) is the heart, soul and blood of telecom companies today without which the whole network would be lifeless. No data movement would be possible without ACLE. Therefore, ACLE comes under the category of goods.
The Bench accepted the State contention, thus paving the way for taxing services transmitted or sent through ACLE.
The Congress leader H.K. Patil has welcomed the High Court’s decision.