2004 (10) TMI 6 - AT - Service Tax

Service Tax (1) Sale of SIM card by mobile phone operator to subscriber (2) Computation (3) Demand (4) Limitation (5) Containment

Summary

Issues:
Service Tax liability on sale of SIM cards - Taxability of SIM card sale - Calculation of Service Tax amount - Time-barred demand.

Analysis:
1. Taxability of SIM card sale: The appellant contended that the sale of SIM cards cannot be considered a taxable service, and thus, no Service Tax should be levied. However, the Tribunal referred to a judgment by the Hon'ble High Court of Karalla and a Tribunal decision, establishing that the sale of SIM cards by cellular telephone companies to subscribers falls within the definition of "taxable service" under the Act. Therefore, the argument that SIM card sale is not a taxable service was dismissed.

2. Calculation of Service Tax amount: The appellant argued that the Service Tax amount was incorrectly computed and that the value of bonus SIM cards given to subscribers should not be included in the calculation. The Tribunal agreed with this contention, citing Section 66 of the Act and a Board's Circular, which state that if the value of the taxable service is zero, the tax amount will also be zero. Consequently, the value of bonus SIM cards should not be considered in the computation of Service Tax, leading to a recommendation for recomputation by the adjudicating authority.

3. Time-barred demand: The appellant claimed that the demand for Service Tax was time-barred, arguing that they were not aware of the tax liability and had been regularly filing returns. However, the Tribunal rejected this argument, noting that there was suppression of material facts by the appellant regarding the taxable service provided. The Tribunal invoked the extended period of limitation, citing cases where there was no suppression of facts, which was not the situation in this case. Therefore, the contention regarding the limitation period was dismissed.

In conclusion, the Tribunal upheld the impugned order affirming the Service Tax liability on the sale of SIM cards. The recalculated tax amount, excluding the value of bonus SIM cards, was deemed payable by the appellants. The appeal was disposed of accordingly.