2007 (4) TMI 98 - AT - Service Tax

Stay/dispensation of pre-deposit Issue arises (i) Whether service tax is payable on the value of SIM Cards (ii) Whether service tax at the enhanced rate is liable to be paid in respect of vouchers and cards post paid Held (i) No (ii) Ordered pre-deposit of Rs.6 lakh

Summary

Issues involved:
1. Whether service tax is payable on the value of SIM cards for the period July, 2002 to March, 2006.
2. Whether service tax at the enhanced rate is liable to be paid in respect of vouchers and cards post paid, considering a change in the rate of service tax during the period when the cards are sold and tax paid by the applicants and the date of actual rendering of service.

Analysis:
1. The first issue revolves around the liability of service tax on the value of SIM cards for the mentioned period. The Tribunal referred to a previous decision where it was held that if sales tax has been paid on SIM cards as goods, service tax cannot be demanded on the same, as they are mutually exclusive. Therefore, in the present case, where sales tax has been paid on SIM cards, the demand for service tax on the cards was deemed unjustified.

2. The second issue pertains to the payment of differential tax due to an increase in the tax rate between the payment date and the actual service availing date. The Tribunal noted that circulars from the Board require payment of service tax at the rate prevailing at the time of payment. However, these circulars do not specify the relevant date for determining the tax rate. As the issue appeared arguable, the Tribunal directed a partial pre-deposit of Rs. 6 lakhs towards service tax within a specified period. Upon such deposit, the pre-deposit of the remaining amount of service tax and penalty was waived, with a stay on recovery until the appeal's disposal.

This judgment from the Appellate Tribunal CESTAT, Mumbai, addressed the issues of service tax liability on SIM cards and the payment of differential tax rates for vouchers and postpaid cards. The decision provided clarity on the non-requirement of service tax when sales tax has been paid on SIM cards and outlined the procedure for determining the tax rate in cases of rate changes between payment and service availing dates.