2008 (7) TMI 50 - AT - Service Tax

Appellants are provider of cell phone service - Revenue wants to add the value of the SIM card towards the assessable value held that service tax is leviable on services only and not on goods on which sales tax has been lawfully levied it is not in dispute that the SIM cards are imported on payment of Custom duty and sales tax is being paid in respect of the sale of SIM cards therefore, service tax cannot be levied on the value of the SIM cards sold by the appellants

Summary

Issues:
1. Whether the value of SIM cards imported on payment of Custom duty should be added to the value of taxable service for assessing Service Tax.
2. Whether the SIM card is part of the service rendered by the provider or a separate object of sale, impacting the tax liability.

Issue 1:
The case involved an appeal against an order assessing Service Tax where the value of SIM cards imported on payment of Custom duty was added to the taxable service value. The appellant contended that since SIM cards were imported with Custom duty payment and Sales Tax was also paid on their sale, adding their value to the taxable service was unjustified. The Revenue argued that the Supreme Court held in a previous case that the nature of a SIM card as a separate object of sale or part of the service provided should be determined based on the intention of the parties. The Tribunal had previously ruled in a similar case that Service Tax should only be levied on the activation charges, not the SIM card value. The Tribunal found that since the SIM cards were recognized as 'goods' by the Customs department and Sales Tax was paid on them, Service Tax should not be levied on the SIM card value. Therefore, the impugned orders were set aside, and the appeals were allowed.

Issue 2:
The main contention revolved around whether the SIM card should be considered a separate object of sale or part of the service provided by the appellant. The Tribunal, relying on previous decisions and the definition of 'goods' under the Customs Act and Sale of Goods Act, concluded that since the SIM cards were recognized as 'goods' by the Customs department and Sales Tax was paid on them, Service Tax should not be levied on the SIM card value. The Tribunal emphasized that Service Tax should only be applicable to the activation charges, as it was through the activation of SIM cards that the taxable service of telephone connection was provided to subscribers. The Tribunal found that the facts of the case aligned with previous rulings and set aside the impugned orders, allowing the appeals.

This judgment clarified the tax liabilities concerning SIM cards imported on payment of Custom duty and their treatment under Service Tax laws. The decision emphasized the importance of recognizing the nature of SIM cards as 'goods' and the impact on tax assessments based on previous legal interpretations and definitions.