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TMI Blog2013 (11) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... NIGAM LTD, HYDERABAD [2011 (9) TMI 216 - Andhra Pradesh High Court] - Decided against assessee. What is the rate of tax that should apply, that is, whether the rate prevalent at the time of rendering of the service or the rate prevalent at the time of receipt of payment for the services rendered, especially in a case when payment is received in advance - Held that:- rate of tax that should apply in respect of service tax is the rate prevalent at the time of rendering of the service and not the rate prevalent at the time of receipt of consideration or the rate prevalent on the date of payment of tax as that would create uncertainties. The basic feature of a tax system is its certainty. Therefore, any interpretation that leads to uncertainties should be eschewed - Following decision of Maharashtra Chamber of Housing Industry vs. U.O.I. [2012 (1) TMI 98 - BOMBAY HIGH COURT] - Decided against assessee. Whether the extended period of time could have been invoked for demand of service tax - Held that:- Adjudicating authority has held that only normal period of time would apply in respect of demand of service tax on the gross amount charged as the records of the appellant had been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was also noticed that the appellant had collected advance rental on post-paid services provided on or after 14-5-2003 and 10-9-2004 and the differential service tax liability on account of such rentals amounted to Rs.5,74,129/-. Accordingly a show cause notice dated 25/04/2006 was issued to the appellant demanding differential service tax of Rs.1,99,22,580/- along with interest thereon and also proposing to impose penalties under the provisions of Finance Act,1994. The said notice was adjudicated vide the impugned order. The Adjudicating authority upheld the demands. However, he restricted the demand to Rs. 51,21,967/- in respect of the amount of Rs.1,73,95,879/- on the ground that the appellant had been audited by the department during April and May, 2004 and the financial records maintained by the appellant were scrutinized and therefore, suppression of facts cannot be alleged and hence extended period of time is not invokable. However, in respect of the other two demands, he confirmed the demands amounting to Rs. 25,26,701/- invoking the extended period of time without giving any benefit of non-suppression of facts. He also confirmed the demand for interest and imposed penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng aside these demands. 3.3 Alternatively, the ld. Counsel pleads that extended period of time is invokable as there is no suppression of facts in the instant case and therefore, the demand be restricted to the normal period of limitation. 3.4 The appellant also prays for setting aside the penalties imposed both under section 76 and under section 78 as there is no willful mis-statement or suppression of facts and hence penalty be waived under section 80. 4. The ld. Commissioner (AR) appearing for the Revenue strongly refutes the contentions of the appellant. He submits that the issue relating to whether SIM cards are goods or not has been settled in favour of Revenue by the decision of the Hon'ble High Court of Kerala in the case of Idea Mobile Communication Ltd. [2010] (19) STR 18 (Ker)] and by the hon'ble High Court of Andhra Pradesh in the case of State of A.P. vs. Bharat Sanchar Nigam Ltd. [2012 (25) STR 321 (A.P.) wherein it has been held that SIM cards are not goods leviable to sales tax but services exigible to service tax. These decisions were not presented before the hon'ble High Court of Bombay when they delivered the decision in Vodafone India Ltd. case and hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the mobile tower. In other words, unless it is activated, service provider cannot give service connection to the customer. Signals are transmitted and conveyed through towers and through SIM card communication signals reach the customer's Mobile instrument. In other words, it is an integral part required to provide mobile service to the customer. Customer cannot get service without SIM card and it is an essential part of the service. SIM card has no intrinsic value or purpose other than use in mobile phone for receiving mobile telephone service from the service provider. Therefore, in our view, the stand taken by the BSNL and BPL Mobile Services that it is not goods sold or intended to be sold to the customer but supplied as part of service is absolutely tenable and acceptable. Consequently, we hold that the value of SIM card supplied by the respondent forms part of taxable service on which service tax is payable by the respondent. Since the dispute was bona fie and it is settled based on the observations of the Supreme Court, we feel levy of penalty under Section 73 of the Finance Act, 1994 was not tenable. While upholding the demand of service tax on value of SIM cards and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of Recharge Coupons/Vouchers, the hon'ble High Court held as follows:- 23. Even according to the Revenue, recharge coupons stand on the same footing as SIM cards. As the Supreme Court, in IDEA Mobile Judgment in Civil Appeal No.6319 of 2011 dated 4.8.2011, has held that SIM cards are not "goods" liable to tax under sales tax enactments, it must necessarily follow that recharge coupons cannot also be brought to tax under the Act. Once it is held that recharge coupons are not liable to tax under the Act, it matters little that the supply of recharge coupon is routed by the service provider through several distributors before it reaches the subscriber. 5.3. What emerges from the above decisions of the hon'ble Kerala and A.P. High Courts is that SIM cards/ Recharge Coupons are not goods but service and service tax alone can be levied on the supply of such cards/coupons. While considering the case of Vodafone India Ltd. by the hon'ble Bombay High Court, these decisions of the Kerala and A.P. High Court was not brought to the notice of the Court and therefore, the said decision has to be considered as per incuriam . In view of the above factual and legal position, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of the Central Government by the 5 th of the month immediately following the calendar month in which the payments are received, towards the value of taxable service. According to the appellant, it is the rate prevalent at the time of receipt of the consideration that is relevant. For example, if a service is rendered during the month of June in a year, and the consideration is received say in August and it is the rate prevalent in August that should be relevant. In other words, it is receipt of consideration that is relevant for determination of tax and not the levy. The argument is absurd. Receipt of consideration can either precede or succeed the provision or rendering of the service depending upon the agreement made between the parties. In a case where consideration is received in advance, service may not be rendered at all either due to cancellation of the agreement between the two parties or the tax itself has been exempted at the time of rendering of the service. In such a situation, where no service has been rendered or tax is nil on the services rendered, can it be said that there is a liability to pay the tax, only on the ground that at the time of receipt of consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in India?" The hon'ble High Court answered the question as follows:- 4. The Service Tax, which has been imposed by way of Finance Act, 1994 (the Act), levies Service Tax as provided in Section 64(3) of the Act to all taxable services provided on or after commencement of Chapter 97 of the Act. Thus, the taxable event is providing all taxable services which has been defined by Section 65(105) of the Act. Similarly, the Rules, which have been incorporated as Chapter-98, define person liable for paying the service tax under Rule 2(d) to mean in clause(iv), in relation to any taxable services provided by a person who is a non-resident or is from outside India, does not have any office in India, the person receiving taxable service in India. The taxable event in relation to Service Tax is admittedly the rendering of taxable service. The said taxable services were rendered between November 2001 and March 2002. In the circumstances, merely because the invoice is raised and payment made subsequently viz. after 16.05.2002 the liability cannot be fastened on the recipient of the services as the taxable event had already occurred paste and raising of invoices and/or making of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply in respect of service tax is the rate prevalent at the time of rendering of the service and not the rate prevalent at the time of receipt of consideration or the rate prevalent on the date of payment of tax as that would create uncertainties. The basic feature of a tax system is its certainty. Therefore, any interpretation that leads to uncertainties should be eschewed. 5.10 The next issue for consideration is whether the extended period of time could have been invoked for demand of service tax. The ld. Adjudicating authority has held that only normal period of time would apply in respect of demand of service tax on the gross amount charged as the records of the appellant had been audited by the Department and no suppression could be alleged. If that be so, in respect of application of rate of tax on the balance of talk time available in respect of pre-paid SIM cards/re-chare coupons and the rental advance, the same logic should apply. Therefore, we hold that in respect of these demands also, the normal period of time shall only apply and not the extended period of time. 5.11 As regards penalties, penalty under section 76 is for the default in payment of tax by the due date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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