TaxTMI 
TaxTMI 
2010 (1) TMI 415
X X X X Extracts X X X X
X X X X Extracts X X X X
....he SIM Card and the FWP are enabling de vices supplied by the petitioner to its subscribers, so as to enable the subscriber to access the services provided. It is the petitioner's case that neither of these devices are supplied at a cost to the subscriber, but are retained as the property of the petitioner and are only provided to the subscribers in order to enable them to avail the services which are contracted for. The petitioner has two kinds of billing systems - one, where a subscriber can avail the services after payment of a certain amount for a specified time and usage and the other where it is post-paid, namely, the subscriber pays the service charges after availing the services. Under both these schemes, service tax is collected in respect of the services provided. In the first instance, the activation device is charged. Even for this, service charges are collected and other than this, there are no additional charges collected towards the provision of the SIM Card or the GSM FWP, for the reason that without activation, neither the same SIM Card nor the GSM FWP would have any value and are totally useless. In terms of the subscriber agreement form, which is mandatorily r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ale was not involved and that the transfer of such goods would not attract the provisions of the Sales Tax Act. The above said judgment of the Supreme Court was in the case of Bharat Sanchar Nigam Limited and Another v. Union of India dated 2-3-2006 in Writ Petition (Civil) 183/2003 [2006 (2) S.T.R. 161 (S.C.)]. It is the petitioner's case that this legal and factual position has been brought to the notice of the third respondent, but he has proceeded and has proposed to initiate criminal prosecution. It is at that stage that the present petition is filed. This Court had granted an order of stay of further proceedings and the same continues to operate. 3. The Counsel for the petitioner, elaborating on the grounds urged in the petition, would submit that the aforesaid devices though are pre-packed commodities, would not attract the provisions of the SWM Act or the Rules, the relevant provisions which are cited by the third respondent in initiating the proceedings clearly do not cover the same. It is only those packaged commodities which are sought to be sold in a packed form, which are covered under the said provisions, in this regard, the Counsel would draw attention to Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ply notwithstanding any declaration on the package to the effect -"Not for Sale". "Packing is only for protection". "Not to be sold alongwith the Package", "Free Gift Package", "Displayed only for advertisement" etc. would not exempt the commodities from the rigour of the provisions of the SWM Act and the Rules. Further, importing any pre-packed commodities would require the importer to get himself registered with the Government of India, Directorate of Legal Metrology, New Delhi. It is an admitted fact that the petitioner is not so registered. The petitioner has thus violated Rule 35, which is also punishable under the Act. It is in order to evade customs duty and sales tax, that the petitioner has devised the so-called schemes to camouflage the sale of these devices, by contending that it is the service which is provided and the devices are supplied to enable the subscriber to access the services. On the other hand, it is clear that the cost of the de vices is certainly worked into the so-called service charges that are collected. This is apparent from the circumstance that in the event of any theft or accidental physical damage caused to the device, it is not anywhere declared b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uting such devious modus operandi on the part of the petitioner. The service charges attract service tax and the allegation that the petitioner intends to deprive the State of its revenue under other fiscal legislation is therefore not tenable. 6. In the light of the above rival contentions, it is firstly necessary to understand the nature of the transaction involved to examine whether the proceedings sought to be initiated under the SWM Act and Rules, which is sought to be questioned in the present petition is warranted. The Apex Court in the decision cited above has expressed the nature of the transaction insofar as a contract between a telecom service provider and a sub scriber is concerned. The Supreme Court has held as follows "..........The contract between the telecom service provider and the subscriber is merely to receive, transmit and deliver messages of the subscriber through a complex system of fibre optics, satellite and cables. Briefly, the subscriber originates/generates his voice message through the handset. The transmitter in the handset converts the voice into radio waves within the frequency band allotted to the petitioners. The radio waves are transm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervations though made in the context of considering whether the trans action would attract sales tax, it is relevant to consider whether the above said devices in the case on hand are either sold or sought to be sold to a subscriber alongwith the services that are provided. On the face of it, in terms of the standard form agreement, which a subscriber is required to execute in availing the services provided by the petitioner, there is clearly a term which requires the subscriber to return these/devices on termination of the contract. The terms and conditions for providing services as enumerated at Clause-9 of the terms reads as follows: "The SIM Card and the Cellular number are and shall always remain the sole property of BCL and shall be returned by the subscriber to BCL upon termination and/or deactivation or temporary suspension of services. Upon termination and/or deactivation or temporary suspension of services the subscriber shall not claim any right or interest to the same." This would clearly indicate that there is no transfer of the property in the goods. The contention that the devices always remain as the property of the petitioner would have to be accepted. The th....