TMI Blog2011 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers - Appeal is dismissed - 6319 OF 2011 - - - Dated:- 4-8-2011 - Dr. Mukundakam Sharma, Anil R. Dave, JJ. JUDGMENT Dr. MUKUNDAKAM SHARMA, J. 1. Leave granted. 2. The present appeal is filed against the judgment and order dated 04.09.2008 passed by the Kerala High Court whereby and whereunder, the High Court allowed the appeal filed by the Commissioner of Central Excise Customs, Cochin. 3. The issue which arises for our consideration in this appeal is whether the value of SIM cards sold by the appellant herein to their mobile subscribers is to be included in 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. 4. The facts leading to the filing of the present case are that during the relevant assessment years, i.e., 1997-1999, the appellant was sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to SIM cards. The Tribunal in the pending Appeal No. ST/18/03, vide order dated 25.05.2006, held that the levy of service tax in the case is not sustainable. 8. Aggrieved thereby, the respondent challenged the order of the Tribunal dated 25.05.2006 before the High Court of Kerala by way of Appeal being CE Appeal No. 20 of 2006. The High Court vide order dated 04.09.2008 allowed the appeal of the respondent - department against which this appeal has been filed, upon which, we heard the learned counsel appearing for the parties. 9. The counsel appearing for the appellant submitted that the appellant was charging from its subscribers Rs. 1,000/- towards sales tax and Rs. 1,200/- as service tax upon activation of the SIM Card and that since they were selling the SIM Cards, therefore, at that point of time, they were charging Rs. 1000/- towards sales tax and for activating the SIM Card they were charging Rs. 1200/- as service tax. Counsel also drew our attention to the earlier judgment rendered by the Kerala High Court as against which the Supreme Court pronounced the Judgment being BSNL vs. Union of India reported in (2006) 3 SCC 1. 10.The counsel appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith entry 97 of List I of the Seventh Schedule to the Constitution. We are, therefore, unable to accept the contention of Mr. Ravindranatha Menon that there is any possibility of constitutional invalidity arising due to legislative incompetence by taking the view that "sale" of SIM card is simultaneously exigible to sales tax as well as service tax. Once the "aspect theory" is kept in focus, it would be clear that the same transaction could be exigible to different taxes in its different aspects. Thus, we see no reason to read down the legislation as suggested by Mr. Menon. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 47. Conclusions: (a) The transaction of sale of SIM Card is without doubt exigible to sales tax under the KGST Act. The activation charges paid are in the nature of deferred payment of consideration for the original sale, or in the nature of value addition, and, therefore, also amount to parts of the sale and become exigible to sales tax under the KGST Act. (b) Both the selling of the SIM Card and the process of activation are "services" provided by the mobile cellular telephone companies to the subscriber, and squarely fall within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the intention of the parties. If the parties intended that the SIM card would 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 Assn. of India v. Union of India: (SCC pp. 652-53, paras 30-31) " `... 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'. * * * There might be overlapping; but the overlapping must be in law. The same transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 same is otherwise found payable and a liability accrues on the assessee. The charges paid by the subscribers for procuring a SIM Card are generally processing charges for activating the cellular phone and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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