TMI Blog2007 (3) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... definition under Section 65(74) of Chapter V of the Finance Act, 1994, as amended. On the basis of information received by the department that they have not been including the value of SIM cards in the taxable value on which they were paying service tax, they were asked to inform the practice followed by them for payment of service tax on SIM cards, to which the appellants replied that they were not paying service tax on the value of the SIM cards. They discontinued charging activation charges from customers and payment of service tax due on the said element of taxable services w.e.f. 1-5-2001, prior to which date they were recovering activation charges from post-paid telephone connection subscribers and charging 5% tax on the same. Post 1- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was sale of goods (SIM cards) or a contract of service, was decided against the assessees by the Hon'ble Kerala High Court's judgment in Escotal Mobile Communications Ltd. v. UOI reported in 2004 (177) E.L.T. 99 (Ker.) 2002 (126) S.T.C. 475 (Ker.). The matter was carried in appeal to the Apex Court which, vide its judgment reported in 2006 (2) S.T.R. 161 (S.C.) = (2006) 3 SCC, held that the Centre cannot include the value of SIM cards, if they are found ultimately to be goods, in the cost of the service, and remanded the matter to the Sales Tax Authorities concerned for determination of the issue relating to SIM cards in the light of the observations contained in its judgment. The relevant paragraphs of the apex court's ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviders, then a SIM card cannot be charged separately to sales tax. It would depend ultimately upon the intention of the parties if the parties intended that the SIM card would be a separate object of sales, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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