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TMI Blog2017 (1) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... thout a valid functioning of SIM card and the value of taxable service is calculated on the gross amount received from the operator from the subscriber and, therefore, once it has been held that no sales tax can be charged for providing a SIM, the question of charging it on replacement of a SIM, does not arise. Lease line charges - Held that: - similar issue was decided in the case of Bharti Infratel Ltd., Vs. State of Madhya Pradesh and others [2015 (8) TMI 1289 - MADHYA PRADESH HIGH COURT], wherein the Division Bench of this Court while deciding the issue of infrastructure charges received in respect of mobile towers has held that such charges are of the nature of service charges and are not liable for VAT since the mobile towers all along remain in control and possession of the Company and hence there is no sale. In the case of lease line charges also this very principle applies since a subscriber of a lease line does not become the owner of the line either by control or by possession and hence such charges are only for services rendered and there is no element of sale therein - service tax leviable. Sec.2(u) and 2(v) of the MP VAT Act, 2002 is ultra-vires and void, in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs envisaged under Article 246 of the Constitution of India. The petitioner Company has placed reliance upon various judgments delivered by the Hon'ble Supreme Court of India as well as by this Court and their contention is that the case law in respect of overlapping of powers between the State and the Union is well established and there is no scope of overlapping. The petitioner is aggrieved by the action of the State Government in levying VAT on consideration received for providing logistic charges and warranty claims received by the petitioner Company. The contention of the petitioner is that Central Government by Finance Act of 1994 has imposed Service tax on the said service of the petitioners and the petitioners are being assessed to the said tax and the petitioner is paying the requisite tax w.e.f. May 14, 2004. It is further contended on behalf of the petitioner service provider that the use/utility of the SIM card remains the same in both the prepaid and the postpaid connections. In the case of a pre-paid SIM card, service charge is collected mainly for activating the connection, service tax is paid on this consideration as telecommunication service ; a SIM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value of SIM cards, sold by the service provider to their mobile subscribers, should be included as taxable service under Section 65(105) zzzx of the Finance Act, 1994, (which provides for levy of service tax on telecommunication service), or whether it is taxable as sale of goods under the Sales Tax Act. The Hon'ble Supreme Court held that the charges paid by subscribers, for procuring a SIM card, were generally processing charges for activating the cellular phone which would, necessarily, be included in the value of the SIM card; the amount received by the cellular telephone company from its subscribers, towards the SIM Card, forms part of the taxable value for the levy of service tax; SIM cards are never sold as goods independent of the services provided; they are considered part and parcel of the services provided; the dominant intention of the transaction is to provide services, and not to sell the material i.e.; SIM Cards which, on its own but without the service, would hardly have any value; the value of the SIM card forms part of the activation charges as no activation is possible without a valid functioning of the SIM card; the value of the taxable service is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government. Learned counsel for the petitioner has placed reliance upon the judgment delivered by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd., and another Vs. Union of India reported in (2006) 3 SCC 1 and in the case of Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes reported in 2009 (2) SCC 614 wherein it has been categorically held that service tax and VAT is not payable on the same amount as both taxes are mutually exclusive. Learned counsel has submitted that the impugned order seeking to confirm demand of VAT on a transaction which is taxed as a service and on which service tax has been paid under the Finance Act, 1994 is improper and liable to be set aside. The respondents have filed a detailed and exhaustive return and their contention is that the petitioner was not assessed for sale of SIM cards provided to the customer treating it to be a service as it will be activated. It has been argued that initially at the time of giving original SIM card no sale tax has been imposed but in the event when the customer comes before the service provider for issuance of new SIM or for replacement of damaged SIM the petitioner Company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. If the driving licence is lost, for a new one some charges are levied which again are part of service. Same is the case of a SIM card. Replacement charges are only service charges on which service tax has been duly paid. These SIM cards are not the goods and hence there cannot be any element of sale therein and therefore, the consideration received thereof both at the time of issuance and replacement are of the nature of service charges and not sale. Heard learned counsel for the parties at length and perused the record. The matter is being disposed of with the consent of the parties. In the present case, the respondents are charging on VAT from the petitioner Company for providing SIM replacement to customers and Lease Line Charges received from the customers. A SIM Card which is a short form of 'Subscriber Identification Module' contains a Computer Chip with pre-recorded instructions. It is a device which helps the service provider to identify the subscriber. It also enables the subscriber to access the service provider's network by means of electro-magnetic waves. SIM is merely a key to enter service provider's facility and use their services. The proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. There is insufficient material on the basis of which we can reach a decision. However we emphasise that if the sale of a SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. In our opinion the High Court ought not to have finally determined the issue. In any event, the High Court erred in including the cost of the service in the value of the SIM card by relying on the aspects doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel Restaurant Association of India Vs. Union of India (1989) 3 SCC 634- subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot dispute that during the period pertaining to the Assessment Year 1998-1999 and 1999-2000, the appellant had floated a Scheme for rendering Telecom service to the subscribers in which hand sets were made available to the subscribers on non returnable basis along with the Sim Cards. The Department, levied tax on the value of the hand set and also the value of the Sim Cards which substituted the original Sim Cards on account of damage etc. for which extra charge was made. It was this levy of commercial tax which was assailed by the appellant. 3. Learned Counsel submits that insofar as the supply of hand set to the subscribers was concerned, it was not the main business of the appellant who was liable to pay only service tax under the provisions of Finance Act, 1994 with the result the appellant was not required to get itself registered as a 'Dealer' under the Commercial Tax Act, 1994 but on account of some mis-conception, application was made to the Department and a registration as 'Dealer' was obtained. Learned Counsel has referred to the decision in State of Tamil Nadu and Anr. v. Board of Trustees of the Port of Madras STC Vol. 114 1999 Page 520 and the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities we find that the Authorities have been discerning enough between the Sim Card supplied free of charge and the Sim Card substituted on payment of charges. It is only the Sim Card which is substituted on account of damage etc. and for which extra charge is made that the Authorities are charging commercial tax. However, the situation with regard to the supply of hand set is entirely different from the one present before Their Lordships and, therefore, we do not find that the contention of the appellant is substantiated by the ratio of the said decision. Reference has also been made to 114 STC Page 520. The said case was dealing with the incidental transaction of unservicable goods. The case of the appellant obviously is that it is not an unserviceable item which has been supplied to the subscriber but very much a hand set which is an essential component for receiving the service. Under these circumstances, the decision in Board of Trustees (supra) also does not further the case of the appellant. 7. In view of the above discussion, we do not find that these appeals give rise to any question of law, much less substantial, for decision in the appeal under Section 53(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent. The apex Court in the case of Idea Mobile Communication Ltd., Vs. Commissioner of Central Excise Customs, Cochin reported in (2011) 19 STJ 201 (SC), in paragraphs 12, 17, 18 and 19 has held as under : 12. A SIM Card or Subscriber Identity Module is a portable memory chip used in cellular telephones. It is a tiny encoded circuit board which is fitted into cell phones at the time of signing on as a subscriber. The SIM Card holds the details of the subscriber, security data and memory to store personal numbers and it stores information which helps the network service provider to recognize the caller. As stated hereinbefore the Kerala High Court had occasion to deal with the aforesaid issue and in that context in its Judgment pronounced on 15th February, 2002 in Escotel Mobile Communications Ltd. vs. Union of India and Others, reported in (2002) Vol. 126 STC 475 (Kerala), it was stated in paragraph 36 that a transaction of selling of SIM Card to the subscriber is also a part of the service rendered by the service provider to the subscriber. The Kerala High Court in the facts and circumstances of the case observed at paras 36 and 47 as under: - 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing authority under the Sales Tax Act dropped the proceedings after conceding the position that SIM Card has no intrinsic sale value and it is supplied to the customers for providing telephone service to the customers. This aforesaid stand of the Sales Tax authority is practically the end of the matter and signifies the conclusion. 18. The sales tax authorities have themselves conceded the position before the High Court that no assessment of sales tax would be made on the sale value of the SIM Card supplied by the appellant to their customers irrespective of the fact whether they have filed returns and remitted tax or not. It also cannot be disputed that even if sales tax is wrongly remitted and paid that would not absolve them from the responsibility of payment of service tax, if otherwise there is a liability to pay the same. If the article is not susceptible to tax under the Sales Tax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to follow the law as may be applicable. But we cannot accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout a valid functioning of SIM card and the value of taxable service is calculated on the gross amount received from the operator from the subscriber and, therefore, once it has been held by the Hon'ble Supreme Court that no sales tax can be charged for providing a SIM, the question of charging it on replacement of a SIM, does not arise. The impugned order passed by the assessing authority dt. 31/7/2014 and the Notice dt. 31/7/2014 deserves to be quashed. The other issue in respect of of VAT on lease line charges is only in the present Writ Petition (WP No. 7631/2014) and is covered by the judgment delivered by the Division Bench of this Court in the case of Bharti Infratel Ltd., Vs. State of Madhya Pradesh and others (W.P.No. 5340/2013, decided on 20/8/2015), wherein the Division Bench of this Court while deciding the issue of infrastructure charges received in respect of mobile towers has held that such charges are of the nature of service charges and are not liable for VAT since the mobile towers all along remain in control and possession of the Company and hence there is no sale. In the case of lease line charges also this very principle applies since a subscriber of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essly agreed by the sharing operator that nothing contained in the MSA or otherwise shall create any title, right, tenancy, or any similar right in favour of the sharing operator. 36. There are other provisions in the MSA which control the right of the sharing operator to gain access to the site and the passive infrastructure . For instance, Clause 3.1.2 states that the access shall be limited to the purpose of carrying out operation and maintenance activities and that too only to the authorised representatives or properly authorise subcontractors of the sharing operator. Clause 1.8 of the Schedule 2 of the MSA has to be read along with the above clause. The tables set out in this schedule providing for payment of service credits by petitioner to the sharing operators for failure to achieve the uptime service levels and those prescribing payment of service credits by petitioner to the sharing operators for non-submission of the reports and providing for stiff penalties for any failure on the part of petitioner show that it is the responsibility of petitioner to ensure that the passive infrastructure functions to its full efficiency and potential, which in turn means that it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) There is no intention on the part of the Indus to transfer the right to use; it is only a licence or an authority granted to telecom operator as defined in Section 52 of the Easements Act, 1952. A licence cannot in law confer any right; it can only prevent an act from being unlawful which, but for the licence, would be unlawful. A licence can never convey by itself any interest in the property; e) The entire MSA has to be read as a whole without laying any undue emphasis upon a particular word or clause therein. What is permitted under the MSA is a licence to the telecom operators to have access to passive infrastructure and a permission to keep equipments of the sharing telecom operator in a prefabricated shelter with provision to have ingress and aggress only to the authorized representatives of the mobile operator. 39. In the matter of Indus Towers Limited v. Union of India decided on 18th April, 2013 [Writ Petition (C) No.4976/2011] almost a similar question was raised by the petitioner therein before the Delhi High Court and the Division Bench of Delhi High Court in complete agreement with the view taken by the Karnataka High Court in the case of M/s. Indus To ..... X X X X Extracts X X X X X X X X Extracts X X X X
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