2012 (8) TMI 73 - AT - Service Tax

Waiver of pre-deposit - telecommunication service - applicant provides SIM cards to their customers through their dealers Held that - Amount paid as sales tax cannot be considered as sufficient compliance of Section 35F of the Central Excise Act, read with Section 83 of the Finance Act - Tribunal have no power to adjust such payments as the same is created under the Special Act i.e., Customs Act, Finance Act and Central Excise Act - applicant directed to make pre-deposit - penalties under the Finance Act shall remain stayed during the pendency of the appeal.

Summary

Issues: Waiver of pre-deposit of service tax confirmed, inclusion of SIM card value in assessable value for service tax, applicability of previous judgments on similar cases, compliance with Section 35F of the Central Excise Act, 1944, adjustment of sales tax against service tax, finality of the issue based on previous court decisions.

Waiver of Pre-deposit of Service Tax Confirmed:
The applicant sought a waiver of pre-deposit of Rs. 6,18,10,184/- of service tax confirmed against them by the Commissioner of Service Tax, Mumbai. The Revenue contended that the SIM card is an instrument necessary for the activation of mobile phones, making its sale a part of the service provided. The Tribunal, considering the decision of Idea Mobile Communication Ltd., held that the sale of SIM cards to subscribers is part of the service rendered by the provider. The Tribunal found the applicant's argument regarding the sufficiency of sales tax payment for compliance with Section 35F of the Central Excise Act unconvincing, as they lacked the power to adjust such payments against service tax. Consequently, the Tribunal directed the applicant to make a pre-deposit of the balance amount of service tax adjudged within twelve weeks. Compliance would stay interest and penalties under the Finance Act during the appeal's pendency.

Inclusion of SIM Card Value in Assessable Value for Service Tax:
The Revenue argued that the value of the SIM card should be included in the assessable value for service tax, citing the decision of Idea Mobile Communication Ltd. The Tribunal agreed with this view, stating that the sale of SIM cards to subscribers is integral to the service provided, as confirmed by the Hon'ble Kerala High Court and the Hon'ble Apex Court in the aforementioned case. This inclusion led to the confirmation of the demand for service tax against the applicant.

Applicability of Previous Judgments on Similar Cases:
The applicant relied on previous judgments, including Essar Telecom Infrastructure (P.) Ltd. v. Union of India, Union of India v. K.G. Khosla & Co. Ltd., and Bharat Heavy Electricals Ltd. v. Union of India, to support their case. They also highlighted a previous favorable decision by the Tribunal in Hutchison Max Telecom (P.) Ltd. v. CCE, which held that service tax was not leviable on the sale of SIM cards. However, the Tribunal emphasized the finality of the issue based on the decision in Idea Mobile Communication Ltd., dismissing the applicant's arguments in this regard.

Compliance with Section 35F of the Central Excise Act, 1944 and Adjustment of Sales Tax Against Service Tax:
The applicant argued that the amount paid as sales tax should be considered sufficient compliance with Section 35F of the Central Excise Act, 1944, read with Section 83 of the Finance Act. However, the Tribunal clarified that they lacked the authority to adjust sales tax payments against service tax, as their powers were limited to the acts under which they were established, namely the Customs Act, Finance Act, and Central Excise Act.

Finality of the Issue Based on Previous Court Decisions:
The Revenue contended that the issue had attained finality based on the decision in Idea Mobile Communication Ltd., and requested the dismissal of the appeal. The Tribunal concurred with this view, emphasizing the confirmation of the view that the sale of SIM cards to subscribers is part of the service provided. The Tribunal, therefore, directed the applicant to make the required pre-deposit within the specified timeline, with the stay of interest and penalties under the Finance Act during the appeal process.