2014 (10) TMI 242 - AT - Service Tax

Sale of sim cards - Whether the appellant herein is required to pay service tax only on the activation charges or has to pay the service tax on the entire amount collected - Held that - service tax liability on the cost of the sim cards has been fastened on the appellant for the period April 2004 to March 2006 with interest and penalties. On the perusal of the judgment of the Apex Court in the case of Idea Mobile Communications Limited (2011 (8) TMI 3 - SUPREME COURT OF INDIA), we find that the issue is now squarely settled against the appellant herein - demand of service tax with interest confirmed - penalties set aside - Decided partly in favour of assessee.

Summary

Issues Involved:
Service tax liability on activation charges vs. entire amount collected; Application of limitation period for tax liability; Imposition of penalties on the appellant.

Analysis:
1. Service Tax Liability on Activation Charges vs. Entire Amount Collected:
The main issue in this case revolved around whether the appellant was required to pay service tax only on the activation charges or on the entire amount collected. The Tribunal noted that the service tax liability on the cost of sim cards was imposed on the appellant for the period from April 2004 to March 2006. Referring to the judgment of the Apex Court in the case of Idea Mobile Communications Limited, the Tribunal found the issue settled against the appellant. Therefore, on merits, the Tribunal held against the appellant, confirming the tax liability on the entire amount collected.

2. Application of Limitation Period for Tax Liability:
The appellant argued that the limitation period should apply, and they should only be liable to pay tax on the sale of sim cards from October 2005 to March 2006. The appellant cited a previous order by a coordinate bench in their own case, which held that the extended period cannot be invoked when an interpretation of provisions was involved and the issue was being contested in the highest court. The Tribunal agreed with this argument and set aside the demand for the period prior to October 2005. However, for the period from October 2005 to March 2006, the Tribunal confirmed the tax liability along with interest.

3. Imposition of Penalties on the Appellant:
Considering that the issue was being contested at various forums and was settled only by a judgment of the Apex Court, the Tribunal deemed the penalties imposed on the appellant as unwarranted. Therefore, the Tribunal set aside the penalties imposed on the appellant, concluding that they were not justified given the circumstances. The appeal was disposed of accordingly, with the penalties being set aside and the tax liability confirmed for the relevant period.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both sides, and the Tribunal's decision on each issue, providing a comprehensive overview of the legal reasoning and outcome of the case.