Tata Communications Ltd. and Another Vs. Union of India and Another - Court Judgment

S.B. Sinha

The petitioner who is an ISP licensee and inter alia carries on

business of internet telephone has filed this petition claiming inter alia

the following reliefs:-

 (a) “quashing and setting aside the impugned demand notice dated January 2011 (Annexure – 1) of the respondents;

(b) strike out from the definition of gross revenue in the ISP license in clause 1.1(v) three items of income namely “revenue on account of interest, dividend and any other miscellaneous revenue”,

(c) strike out clause 13.4 (A) (h) in the ISP license, imposing 50% penalty on shortfall of license fees.” 2. By reason of the impugned bills, the petitioner has been called upon to pay a sum of Rs. 8,35,642/- for the assessment years 2005 - 2006 and 2006 -2007. The said bills read as under:-

This is regarding assessment of Annual License fee assessment in respect of:-

Service Category ISP (IT) License No. (1) 820-240/99-

LR 20.09.1999- Delhi Area), (2) 820-281/99-LR Dated 17.01.2000- (Gurgaon Area) and (3) 820-282/99- LR dated 17.01.2000-GZB Area)

Financial Year

The assessment of License fee is based upon Audited AGR Statement and Annual Report of M/s Direct Internet (P) Ltd. The assessment has been determined on the basis of declaration of revenue made by the Company in its statement of accounts submitted in this office.

Services Area Year AGR Revenue Share Due Revenue Share Due Difference

(C-D)Interest on delayed Interest adjusted Penalty and interest on Total

Dues (A) (B) (C) (D) (E) (F) (G) (H) (I) All India 2005-06 94,49 1 5,669 - 5,669 4,548 - 4,80 7 15,0 25 2006-07 56,86 ,353 3,41,181 - 3,41,181 2,12,7 27 - 2,66 ,708 8,20, 617 Total 57,80 ,844 3,46,851 - 3,46,851 2,17,2 76 2,71 ,515 8,35, 642 E and OE Total amount payable: 8, 35,642

3. Along with the said letter a detailed calculation sheet showing computation of the AGR and interest thereon was annexed. The said bill also contains the calculation of interest to the extent of Rs. 2,12,727/- as well penalty for sums containing the following details: - Interest due as on 31.01.2011 2,12,727 Principal due as on 31.01.2011 3,41,181 Total due as on 31.01.2011 5,53,908 Penalty and interest on penalty 2,66,708 Total Dues as on 31.01.2011 8,20,617

4. The principal contention of the petitioner is that the dispute between the parties is a part of ongoing disputes between the

licensees holding telecom licenses, on the one hand, and respondent

on the other.

5. In view of the question involved herein it may not be necessary

for us to enter into the merit of the matter.

6. The license inter alia questioned the demands raised by

respondent herein claiming ‘Adjusted Gross Revenue’ (AGR) from the

licensees so far as the non licensed activities are concerned.

7. This Tribunal by a judgment and order dated 7.7.2006 held that

that non licensed activities keeping in view the provisions of Section 4

of the Indian Telegraph Act, 1865, can not be the subject matter of

any demand on AGR basis.

8. By reason of the said order the matter was remitted to the TRAI,

directing:-

“In view of the fact we have come to the conclusion that there has been no effective consultation with the TRAI which is mandatory under the TRAI Act, we think we should not further delve into the exercise of finding out which component of the AGR as defined by the Government in the conditions of Licence, deservers to be retained and which component which the petitioners contend is not derived from the licensed revenue of the licensee should be excluded at this stage. We think it more appropriate that the matter should be remanded to the TRAI which is the 3rd Respondent herein, before whom the Government should produce the material relied by it while rejecting TRAI’s recommendation so that TRAI can consider the same and sent is conclusions to this Tribunal and thereafter, this Tribunal will have the benefit of a comprehensive recommendation of the TRAI after considering the materials relied upon by the Government. While forming its conclusions the TRAI shall hear the Government as well as the licensees and consider the material that may be placed before it by either side. In this process it is not necessary for the TRAI to hold fresh consultative proceedings unless it thinks necessary. During this proceeding before the TRAI the petitioners shall place before it their contentions in regard to the various components of AGR which they have challenged before this Tribunal and the TRAI after hearing the Government on this issue also, send its recommendations to this Tribunal preferably within three months of the receipt of this order.”

9. Pursuant thereto and in furtherance thereof the TRAI submitted a report before this Tribunal on 13.9.2006.

10. By a judgment and order dated 30.8.2007, this Tribunal laid down as to which of the activities of the licensees would fall within the purview of the ‘licensed activity’ and which would not.

11. The petitioner herein also filed two petitions before this Tribunal being Petition Nos. 48 and 59 of 2005 questioning the purported demand notices issued by respondents to pay additional license fee for the financial years 2002-2003 and 2003-2004 in respect of its ILD Licence.

12. The said petitions were taken up for hearing along with the other connected matters and were allowed.

13. Despite the fact that in the appeals preferred thereagainst before the Supreme Court of India by the Union of India, no stay was granted staying the operation of the judgment but merely an order stay of refund of the excess amount was issued, similar demands were raised by respondent on petitioner. An additional demand was raised by the respondent on or about 1.7.2008 asking petitioner to make payments, said to be having regard to the position as was prevailing prior to the passing of the said judgment dated 30.8.2007.

14. We may also notice that this Tribunal by a judgment dated 13.3.2009 directed first respondent to raise bills at least from the said date on the basis of the law laid down by it in its judgment dated 30^thAugust, 2007.

15. Despite the same a demand was raised for a sum of Rupees One Thirty Seven Crores Fifty Six Lakhs, Seventy Nine Thousand Three Hundred and Twenty Six on or about 16.6.2009 which was revised to 104 Crores on 24.12.2009.

16. The petitioner herein filed a petition before this Tribunal questioning the validity of the said demand, which was marked as Petition No. 130 of 2010.

17. This Tribunal by a judgment and order dated 19th August, 2010 clearly held that the said bill could not have been raised being barred under the principle of rejudicata as contained in Section 11 of the Code of Civil Procedure, stating:-

In that view of the matter, we hold:-

(i) The demand of the respondent to the extent of a sum of Rs. 23.36 crores and the interest and penalty levied thereupon must be set aside.

(ii) The claim of the petitioner in respect of Rs.1.03 crores towards additional license fee due to the disallowance of cost items is rejected.

(iii) The petitioner is not entitled to get any credit for excess amounts paid towards ISP VPN license fees.

(iv) The petitioner is liable to pay interest on Rs.1.03 crores and/or any other sum due from it, in terms of the judgment of this Tribunal dated 30.8.2007.

(v) Clause 6.8, in terms whereof, the penal interest is levied at 150%, being covered by the judgment of this Tribunal dated 11.2.2010, is set aside.

The petitioner, it is made clear, shall be entitled to bring separate action as against the respondent for refund of the excess amount paid to the respondent in relation to the ISP VPN license fee or otherwise.

18. Mr. Ruchir Misra, learned counsel appearing on behalf of respondent, however, would submit that the assessment orders, in question being for the financial years 2005-06 and 2006-07 and, thus, for the period prior to rendition of Judgment by this Tribunal, the impugned bills cannot be faulted.

19. We do not agree with learned counsel. The Assessments have been carried out only in January, 2011. The respondents, therefore, were bound to apply the principles of law laid down by this Tribunal in various judgments as noticed here to before and any deviation or departure therefrom was not permissible.

20. The Petitioner No. 2 is a subsidiary of Petitioner No. 1 and the judgements passed in its favour were binding on respondent.

21. In any event as order of assessment having been passed recently, question of imposition of any penalty or interest on penalty till the date of assessment from the date when the amount become due did not arise. In fact it is the contention of petitioner that the respondents have realized excess amount towards the license fee payable @ 6% of the AGR from petitioner.

22. In view of the aforementioned binding judgments of this Tribunal inter parties we are of the opinion that the impugned demands can not be sustained. They are set aside accordingly.

23. This petition is allowed.

24. In the facts and circumstances of this case, there shall be no order as to costs.