2006 (4) TMI 63 - HC - Service Tax

Tribunal held that the issue as to the levy of service tax in respect of the sale of SIM card was not free from doubt and, therefore, penalty was not justified.- impugned order does not give rise to any substantial question of law - appeal is dismissed.

Summary

Issues:
- Tribunal setting aside penalty for service tax on sale of SIM Card
- Reference to judgments of Kerala High Court and Allahabad High Court
- Supreme Court's observations on the issue
- Dispute regarding the judgment of Kerala High Court pending before Supreme Court
- Justification of penalty based on doubt regarding service tax levy on SIM card sale

Analysis:
The High Court judgment dealt with the Tribunal setting aside the penalty imposed on the respondent for service tax on the sale of SIM cards. The Tribunal found the issue of service tax levy on SIM card sales to be uncertain, referencing judgments from the Kerala High Court and Allahabad High Court. The Tribunal noted that the Allahabad High Court's decision had been overturned by the Supreme Court, while the issue from the Kerala High Court was pending before the Constitution Bench.

Moreover, the Supreme Court's observations in the case of Bharat Sanchar Nigam Ltd. & another vs. Union of India highlighted the complexity of determining whether a SIM card constitutes a separate object of sale or is part of the services rendered by the service provider. The Supreme Court emphasized that the intention of the parties and the nature of the transaction are crucial in deciding the taxability of SIM cards.

The learned senior counsel for the revenue referred to the Supreme Court's decision regarding the levy of sales tax on SIM card sales to subscribers. It was acknowledged that the judgment of the Kerala High Court was still pending before the Supreme Court, adding to the uncertainty surrounding the issue.

Considering the conflicting judgments and the lack of clarity on the taxability of SIM card sales, the High Court upheld the Tribunal's decision to set aside the penalty. The Court agreed that the issue of service tax levy on SIM card sales was not free from doubt, leading to the conclusion that the penalty was not justified. Ultimately, the High Court found no substantial question of law arising from the impugned order and dismissed the appeal promptly.