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2018 (3) TMI 1659 - HC - VAT and Sales TaxJurisdiction - declaration sought that respondent and its officers and agents are incompetent either to legislate or to impose and realise sales tax and re-sale tax under any power conferred under serial No 54, List II of the Seventh Schedule to the Constitution of India, on the services provided by Cellular Mobile Telephone service providers - TNGST Act. Held that - The legal issue has been settled by the Hon ble Supreme Court in the case of BSNL Vs Union of India and Others 2006 (3) TMI 1 - SUPREME COURT which was considered by the Hon ble Supreme Court in the case of Idea Mobile Communication Ltd Vs Commissioner of Central Excise and Customs, Cochin, 2011 (8) TMI 3 - SUPREME COURT OF INDIA , where it was held that there was no element of sale involved in the sale of sim cards or recharge vouchers. Petition allowed.
Issues:
Challenge to the competency of imposing sales tax on services provided by Cellular Mobile Telephone service providers under List II of the Seventh Schedule to the Constitution of India. Analysis: The Writ Petition sought a declaration that the first respondent and its officers are incompetent to impose and realize sales tax on services provided by Cellular Mobile Telephone service providers. The petitioner argued that demands and notices requiring payment of such taxes under the Tamil Nadu General Sales Tax Act are ultra vires. However, the legal issue had already been settled by the Supreme Court in the case of BSNL Vs Union of India and Others. The Supreme Court had addressed the nature of transactions involving mobile phone connections, whether they constitute a sale, a service, or both. The Court emphasized that if a SIM card is not sold but is part of the services rendered, it cannot be charged separately to sales tax. The Court clarified that the value of SIM cards forms part of the activation charges, as they are considered part and parcel of the services provided by the operators. The Court concluded that there was no element of sale involved in the sale of SIM cards or recharge vouchers. The judgment referenced the case of Escotel Mobile Communications Ltd, which merged with the appellant company, M/s Idea Mobile Communication Ltd. The Kerala High Court had dealt with the valuation of goods and activation charges in relation to SIM cards. The Supreme Court highlighted that if the SIM card is merely incidental to the service provided, it would not be assessable to sales tax. The Court emphasized that the dominant position of the transaction is to provide services rather than to sell SIM cards as goods independent from services. Therefore, the value of SIM cards forms part of the activation charges, and no element of sale is involved in such transactions. In light of the Supreme Court decisions and the legal position established, the High Court allowed the Writ Petition, stating that there was no element of sale involved in the transactions related to SIM cards or recharge vouchers. The Court concluded that the Sales Tax authority had correctly understood that no element of sale was present in the transactions. As a result, the Writ Petition was allowed, and no costs were imposed. The connected Miscellaneous Petition was closed accordingly.
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