TaxTMI 
TaxTMI 
2017 (1) TMI 336
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....cess Services Licences (hereinafter referred to as, 'the UASL') by the Central Government for providing telecom services, inter-alia, for the Telecom Circle which is contiguous with the State of Madhya Pradesh and State of Chattisgarh. The petitioner Company provides various kinds of services ie., Cellular, Fixed Line and Broadband services which includes roaming facilities, STD and ISD and other various value added services to its subscribers. The petitioner is rendering a service. It has been further stated that the Central Government by Finance Act of 1994 has imposed service tax on the said services of the petitioner and they are assessed to said tax w.e.f. 14/05/2004. The petitioner Company is aggrieved by the action of the respondent - State in levying tax on the services provided by the petitioner Company. The contention of the petitioner is that the respondents have no authority under the Constitution of India to levy service tax on the services rendered by the petitioner and the same cannot be recovered under the provisions of the M.P. VAT Act, 2002. It has been further stated by the petitioner Company that levy of service tax on the service rendered by providing....
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.... to the subscriber but merely forms part of the service rendered by the service provider and it cannot be charged separately to sales tax. It is only if the parties intend that the SIM card should be a separate object of sale, sales tax can be levied thereon. If the sale of a SIM card is incidental to the service being provided, and merely facilitates identification of the subscribers, their credit and other details, it would not be assessable to sales tax. On the same analogy the SIM replacement charges are also not liable to be taxed since these again are in the form of service charges and do not represent sale price. The learned counsel for the petitioner submits that SIM cards are included under the definition of telecommunication service which are liable for service tax u/s 65(109a) of Finance Act 1994 read with Finance Act 2007. A SIM card as such is only a card containing a code which enables the person to use his mobile number. It is basically an identity number which is then used for receiving the signals on the mobile network. Learned counsel for the petitioner has relied upon the judgment delivered by the Hon'ble Supreme Court in the case of IDEA Mobile Communicati....
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.... amount received towards the SIM replacement. Therefore, any attempt on the part of the State Government to levy sales tax on the same activity which is already covered by the entry in List I of the Seventh Schedule to the Constitution, would be ultra vires Article 246 of the Constitution of India and consequently the State Government cannot levy sales tax. It has been further contended that Hon'ble the Apex Court in the case of Bharat Sanchar Nigam Ltd., and another Vs. Union of India reported in 2006 (145) STC 91 has examined the position as regards taxation of the same transaction under two different headings. The Apex Court in para 83 of its decision has noted the definition of "subscriber" as defined under the Finance Act enacted by the Parliament which includes a person to whom any service of a leased circuit has been provided. The Apex Court further in paragraph 84 thereof observed that a telephone service is nothing but a service; that there is no sale element apart from any hand set or other accessory supplied. It has been further contended that in the light of the categorical conclusion arrived at by the Apex Court and in view of the fact that the Petitioner is law ....
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....1 STJ 795 (MP) has been considered in the judgment delivered by the Hon'ble Supreme Court in the case of Idea Mobile Communication Ltd., Vs. Commissioner of Central Excise & Customs reported in (2011) 19 STJ 201 (SC) and, therefore, the judgment relied upon by the respondents is of no help to the respondents. It has been stated that the concept of valuable consideration and sale price u/s 2 (u) or 2 (v) would apply only if the amount charged is qua "goods" and not when the amount charged is qua "services". It has been stated in the rejoinder that the Sim cards are just like a license card which enables the petitioner to identify a subscriber and connect the electromagnetic frequency to that particular number. Activation is the process of enabling such an identity creation. For this process both at the time of sale and even at the time of replacement, KYC norms are required to be fulfilled - i.e. customers identity and address is required as well as signature on the form. A very nominal charge is levied both at the time of issuance of original SIM as well as its replacement. The process itself shows that this activity is nothing but a service. It has been contended that in a c....
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....son to use his mobile number. It is basically an identity which is then used for receiving the signals in mobile network. In case, for the first time, a SIM card is given, no VAT is imposed and the Assessing Officer has erroneously held that for the first time there is no sale, hence no VAT can be imposed, however, when the SIM is replaced on account of loss / damage then there is a sale, meaning thereby, for first issuance of a SIM card no VAT is being levied and for replacement VAT is being levied. The matter relating to levy of VAT Taxes has been considered by the Hon'ble Supreme Court in various judgments. In the case of Bharat Sanchar Nigam Ltd., and another Vs. Union of India and others reported in (2006) 3 SCC 1, the apex Court in paragraph 87, 88, 89 and 90 has held as under : 87. What a SIM card represents is ultimately a question of fact as has been correctly submitted by the States. In determining the issue, however the Assessing Authorities will have to keep in mind the following principles: If the SIM Card is not sold by the assessee to the subscribers but is merely part of the services rendered by the service providers, then a SIM card cannot be charged separat....
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....entre cannot include the value of the SIM cards, if they are found ultimately to be goods, in the cost of the service. As was held by us in Gujarat Ambuja Cements Ltd. Vs. Union of India (2005) 4 SCC 214,228. "This mutual exclusivity which has been reflected in Article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject- matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the Court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field." 90. We will therefore have to allow the appeals filed by BPL in Civil Appeal Nos. 3329-30 of 2002 and Escotel in Civil Appeal No.2408 of 2002 and remand the matter to the Sales Tax Authorities concerned for determination of the issue relating to SIM Cards in the light of the observations contained in this judgment. The Division Bench of this Court in the case of M.P. Reliance Telecom Ltd., Indore Vs. Commissioner of Commercial Tax, reported in....
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....tomer the Cellular phone as part of the deal which constituted sale. It cannot be denied that the Cellular phone had a market value and they were supplied to the customer, apparently not free of charge but the charge with constituted part of the package. In Anand Commercial Agencies (supra) the Apex Court considered a situation where bottles were supplied free of charge on understanding that they would be returned to the 'Dealer' with a stipulation that the amount of advance deposited would stand forfeited if the bottles were not returned within the prescribed period. This amount was treated as forming sale price and charged appropriately to tax. The decisions relied upon by the learned Counsel for the appellant however, deal with the matter in different field. In Bharat Sanchar Nigam Limited Their Lordships were considering whether the Sim Card sold to the subscribers were dealing with a situation where the Sim Card not sold to the subscribers but forming part of the services rendered were held as not chargeable to sales tax. In that decision also it was clarified that if the parties contended that the Sim Card would be a separate subject of sale, it would be open to the S....
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....thereon. In order to consider whether the value of SIM card constitutes taxable service, we have to examine the functioning of this item in the service provided by the respondent. Admittedly SIM card is a computer chip having it's own SIM number on which telephone number can be activated. SIM card is a device through which customer gets connection from the mobile tower. In other words, unless it is activated, service provider cannot give service connection to the customer. Signals are transmitted and conveyed through towers and through SIM card communication signals reach the customer's mobile instrument. In other words, it is an integral part required to provide mobile service to the customer. Customer cannot get service without SIM card and it is an essential part of the service. SIM card has no intrinsic value or purpose other than use in mobile phone for receiving mobile telephone service from the service provider. Therefore, in our view, the stand taken by the BSNL and BPL mobile services that it is not goods sold or intended to be sold to the customer but supplied as part of service is absolutely tenable and acceptable. Consequently, we hold that the value of SIM card supplie....
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....ts. Thus, we see no reason to read down the legislation as suggested by Mr. Menon. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 47. Conclusions: (a) The transaction of sale of SIM Card is without doubt exigible to sales tax under the KGST Act. The activation charges paid are in the nature of deferred payment of consideration for the original sale, or in the nature of value addition, and, therefore, also amount to parts of the sale and become exigible to sales tax under the KGST Act. (b) Both the selling of the SIM Card and the process of activation are "services" provided by the mobile cellular telephone companies to the subscriber, and squarely fall within the definition of "taxable service" as defined in section 65(72)(b) of the Finance Act. They are also exigible to service tax on the value of "taxable service" as defined in Section 67 of the Finance Act." 17. The High Court has given cogent reasons for coming to the conclusion that service tax is payable inasmuch as SIM Card has no intrinsic sale value and it is supplied to the customers for providing mobile service to them. It should also be noted at this stage that after the remand of the mat....
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....s established from the records and facts of this case that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. The Sales Tax authority understood the aforesaid position that no element of sale is involved in the present transaction. In the light of the aforesaid judgments delivered on the subject matter, the position of law is very clear that the amount received by the cellular telephone company from its subscribers towards SIM card will form part of the taxable value for levy of service tax, as the SIM cards are never sold as goods independent from service provided. As already held by the Hon'ble Supreme Court, they are considered to be part and parcel of the services provided and dominant position of the transaction is to provide services and not to sell the material ie., the SIM cards which on its own, but without the services, would hardly have any value at all. Even in the case of replacement of SIM Card, the value of replacement in respect of SIM cards forms part of the act....
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....d and operated by the sharing telecom operators. The passive infrastructure is shared by several telecom operators and that is why they are referred to as sharing telecom operators in the MSA. The MSA merely permits access to the sharing telecom operators to the passive infrastructure to the extent it is necessary for the proper functioning of the active infrastructure. The MSA also defines "site access availability" as meaning the availability of access to the sharing operator to the passive infrastructure at the site. Clause 2 of the MSA which has been quoted above provides for "site access" and Clause 1.7 limits the site access availability to the sharing operator on use - only basis so far as it is necessary for installation, operation and maintenance etc. of the active infrastructure; the clause further states that the sharing operator does not have, nor shall it ever have, any right, title or interest over the site or the passive infrastructure. The Clause also takes care to declare that the sharing operator shall not be deemed to be the tenant of petitioner and no tenancy rights shall be deemed to exist over the site/passive infrastructure. Clause 2.1.8, presumably by way of....
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....r has not transferred the possession of the passive infrastructure to the sharing telecom operators in the manner understood in law, the limited access provided to them can only be regarded as a permissive use or a limited licence to use the same. The possession of the passive infrastructure always remained with the petitioner. The sharing telecom operators did not therefore, have any right to use the passive infrastructure. 38. A careful perusal of the judgment of the Karnataka (supra) shows that the following propositions were laid down:- a) No operation of the infrastructure is transferred tothe sharing telecom operator. The latter is only provided access to use the passive infrastructure, but Indus has retained the right to lease, licence etc. the passive infrastructure to any advertising agency; b) The entire infrastructure is in the physical control and possession of Indus at all times and there is no parting of the same nor any transfer of the right to use the equipment or apparatus; c) The permission granted to the telecom operator to have access to the passive infrastructure for limited purposes is loosely termed by the taxing authorities as "a right to use the pas....