2016 (11) TMI 670 - HC - VAT and Sales Tax

Court remands assessment of 'Service Income' and 'SIM Cards' for fresh review

The court partially allowed the writ petitions by remanding the assessment of 'Service Income' and 'SIM Cards' for fresh consideration. The Assessing ... Levy of VAT on mobile (telecom) services - Airtime Charges - Service Income - Miscellaneous Income - SIM Cards - Held that: - The Assessing Officer has referred to the petitioner's objection, wherein, the petitioner has stated that the Airtime Charges are collected from the subscribers towards Extending Mobile Telephone Services by which subscribers can communicate to others while on the move and receive calls as well, Air time charges represent call charges for originating by mobile subscriber. The tariff is dependent on the plan under which a subscriber has enrolled on the network. The call charges per call will depend on plan tariff and call durations. This is only a service and there is no transfer of goods or sales to attract the provisions of the TNGST Act - the conclusion of the Assessing Officer under the said head, which is termed as 'Service Income' by the petitioner calls for interference. Miscellaneous Income - Held that: - the petitioner is ready and willing to file an Appeal after effecting pre-deposit. This submission is taken on record and the Court will grant time to file an Appeal - liberty is granted to the petitioner to file an Appeal before the Appellate Authority and if the Appeal is filed within a period of 30 days from the date of receipt of a copy of this order, the Appellate Authority shall entertain the Appeal without reference to limitation, as these Writ Petitions have been pending before this Court, since 2010 onwards. SIM Card - Held that: - the petitioner has stated that no sales tax can be charged on the value of SIM Card and in the petitioner's case since the SIM is merely incidental to the service, the petitioner has also given the details of the purchases effected by their vendors viz., M/s.Gemplus India P Ltd., and has also given the cost incurred by them and other details. This aspect of the matter, though was verbatim extracted by the Assessing Officer while completing the Assessment, erroneously stated that there are no records available. Even assuming if there are no records, nothing prevented the Assessing Officer to direct the petitioner to produce necessary records. Therefore, the Assessment on said head, calls for interference - the respondent shall afford an opportunity of personal hearing to the petitioner and redo the Assessments. Petitions disposed off. Issues Involved:1. Classification of 'Service Income'2. Classification of 'Miscellaneous Income'3. Taxability of SIM CardsDetailed Analysis:1. Classification of 'Service Income':The petitioner, a Public Limited Company, challenged the assessment orders for the years 1999-2000 to 2002-2003 under the Tamil Nadu General Sales Tax Act, 1959. The petitioner categorized certain incomes as 'Service Income,' which included Airtime Charges, Recurring Charges, Connection/Activation Charges, Public Switch Telephone Network (PSTN) charges, Value Added Services, Interconnect Charges, Income from Bandwidth, Plan Enrollment Fee, Easy Deal Processing Fee, and Residual Income. The Assessing Officer rejected the petitioner's objections by referencing the Kerala High Court's decision in Tvl.Escotel Mobile Communications Ltd. vs. Union of India. However, the court found this rejection erroneous based on the Supreme Court's decision in BSNL vs. Union of India, which clarified that if a SIM card is part of the service and not sold separately, it cannot be charged sales tax. The court concluded that the Assessing Officer's findings on 'Service Income' required interference and remanded the matter for fresh consideration.2. Classification of 'Miscellaneous Income':For the second category, termed 'Miscellaneous Income' by the petitioner, which included items such as one-time processing fees and expired talk time, the petitioner's counsel expressed willingness to file an appeal after making a pre-deposit. The court recorded this submission and granted time to file an appeal, providing the petitioner with an opportunity to challenge these findings before the Appellate Authority.3. Taxability of SIM Cards:The third major issue concerned the taxability of SIM Cards. The Assessing Officer had stated that the petitioner did not provide the net purchase value of SIM Cards delivered to subscribers, leading to the assessment of tax on the deemed sale value of SIM Cards. The petitioner argued that the SIM cards were incidental to the service provided and not subject to sales tax. The court noted that the Assessing Officer had erroneously stated the absence of records despite the petitioner providing details of purchases from vendors. The court found that the Assessing Officer should have directed the petitioner to produce necessary records if they were missing. Consequently, the court set aside the assessment on SIM Cards and remanded the matter for fresh consideration, directing the Assessing Officer to consider the Supreme Court's decision in BSNL vs. Union of India and provide an opportunity for a personal hearing.Conclusion:The court partly allowed the writ petitions with the following directions:(i) The findings regarding 'Service Income' are set aside and remanded to the Assessing Officer for fresh consideration.(ii) The petitioner is granted liberty to file an appeal on findings related to Rent from building, Interest of deposits, Sale of Assets, Sale of Scraps, Financial Charges from agent, Recovery from employees, and Income from Volvo truck. If filed within 30 days, the Appellate Authority shall entertain the appeal without reference to limitation.(iii) The findings on SIM Cards are set aside and remanded to the Assessing Officer for fresh consideration, with instructions to consider the Supreme Court's decision in BSNL vs. Union of India and provide a personal hearing.The court ordered no costs and closed the connected miscellaneous petitions.