2019 (11) TMI 535 - HC - VAT and Sales Tax

Levy of VAT - Transfer of right to use of telephone instruments provided by the assessee to its subscribers/customers - sale of SIM cards for mobile network service - HELD THAT - Once the assessee had raised specific challenge as to absence of any transfer of right to use, it was for the Tribunal to have applied its mind and offered reasoning to meet such challenge. Second, had such exercise been gone into, it would have become necessary for the Tribunal to call for and examine evidence including the agreements entered into by the assessee with its subscribers; the bills raised by the assessee on its subscribers and other materials as may have also been relevant to determine the true nature of the contract entered into between the assessee and its subscribers which gave rise to the disputed receipts at the hands of the assessee. If upon examination of such material the Tribunal had reached the conclusion that there was a transfer of right to use, then in that situation a further question would have arisen as to apportionment and determination of the amount received by the assessee as may be attributed towards consideration for transfer of right to use as only that amount may have been subjected to tax. Admittedly, the activity performed by the assessee also involved providing service. Therefore, unless such bifurcation or apportionment is found to be permissible in law and unless such bifurcation was actually done, the exact assessment of the tax liability of the assessee would remain illusive or undetermined. Liability of tax on SIM cards - HELD THAT - The Supreme Court in the Cases of BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA 2006 (3) TMI 1 - SUPREME COURT and IDEA MOBILE COMMUNICATION LTD. VERSUS CCE. C., COCHIN 2011 (8) TMI 3 - SUPREME COURT , has held that the matter was remitted to the Tribunal to pass a fresh order - Similar treatment is warranted in the present case as well owing to similarity of law situation. The matter is remitted to the Tribunal to pass a fresh order after affording limited opportunity to the parties to lead additional evidence - revision allowed by way of remand.

Summary

Issues:
Sales tax on transfer of right to use of telephone instruments and sale of SIM cards.

Analysis:
1. The revisionist, a telecom company, challenged the orders of the Commercial Tax Tribunal confirming the tax demand on the transfer of right to use telephone instruments and sale of SIM cards to subscribers/customers.

2. The High Court noted that the facts and orders were identical in all cases, leading to a common decision for all revisions.

3. The revisionist contested the Tribunal's order, arguing that there was no transfer of right to use as claimed by the authorities. They emphasized that the charges were for services rendered, not for the transfer of any rights.

4. The Tribunal's reasoning was criticized for not addressing the specific challenges raised by the revisionist. The Court highlighted the need for a detailed examination of evidence, such as agreements and bills, to determine the true nature of the transactions.

5. The Court found the Tribunal's approach unacceptable and emphasized the importance of distinguishing between charges for services and charges for the transfer of rights. Without proper analysis and apportionment, the tax liability could not be accurately determined.

6. Regarding the sale of SIM cards, the Court referred to a previous case where a similar matter was remitted to the Tribunal for a fresh decision. The Court decided to set aside the Tribunal's order and remit the case back for a reevaluation with the opportunity for additional evidence.

7. The Court directed the Tribunal to conduct a fresh assessment considering the specific issues raised by the revisionist and to complete the process within a year. The Court left the questions of law unanswered and disposed of the revision accordingly.