Karnataka - Bangalore   

Court stays sales tax order on BSNL

BANGALORE: The Karnataka High Court on Friday stayed a single judge order directing the public sector Bharat Sanchar Nigam Ltd. (BSNL) to deposit within four weeks Rs. 560 crore as sales tax to the Department of Commercial Tax, Karnataka.

A Division Bench comprising Justice N. Kumar and Justice Kempanna passed the order on appeals by BSNL challenging the August 11, 2010 order of Justice Ashok Hinchigeri asking it to pay Rs. 560 crore within four weeks.

In its appeal, BSNL said it had filed a petition before the single judge challenging the levy of sales tax of Rs. 6,600 crore by the Department of Commercial Tax for providing voice and data services, including Internet, to customers in Karnataka. It had urged the court to stay the levy.

Interim order

It said the single judge had passed an interim order stating that the demand notice would remain stayed if and when BSNL deposited Rs. 560 crore with the Department of Commercial Tax.

BSNL challenged this order saying that the Department of Commercial Tax had wrongly assessed and categorised transmission of voice and data through optical fibre cable (OFC) as transportation of goods. It said the department had asked it to pay sales tax of Rs. 6,600 crore from 2002 to 2008.

It said as it was already paying service tax, it was illegal and unconstitutional for the Department of Commercial Tax to levy sales tax. It said the local VAT officer of the department in Bangalore had asked BSNL to pay sales tax.

The Bench pointed out that the single judge had posted the case to September 6. It urged the Bench to stay the single judge order asking it to pay Rs. 560 crore.

The Bench stayed the order relating to the payment of tax and posted the matter back to the single judge for further hearing.

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