2015 (11) TMI 728 - AT - Service Tax

Valuation - 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 or otherwise - Held that - The ratio of the decision of the Tribunal 2008 (3) TMI 59 - CESTAT KOLKATA would squarely apply in the case in hand and we hold that the appellant is eligible for cum-tax benefit and therefore service tax liability and interest thereof needs to be recalculated by the lower authority. This view has also been taken by the bench in appellant s own case - For the limited purpose of re-quantification of the service tax liability we remand the matter to the adjudicating authority to do so and direct the appellant to discharge such service tax as re-quantified along with interest - entire position of law as to taxability of the sim cards and value to be considered for such tax was agitated before the various judicial forum and had to be settled by the apex Court in the case of Idea Mobile Communication Ltd. (2011 (8) TMI 3 - SUPREME COURT OF INDIA ) we are of view that the appellant could have entertained a bonafide belief as to the sale of sim cards is not a taxable activity. Accordingly we by invoking the provisions of Section 80 of the Finance Act 1994 set aside the penalties imposed by the lower authority. - Appeal disposed of.

Summary

Issues:
1. Whether the value of sim cards sold by the appellant to mobile subscribers is taxable under Section 65(105)(zzzx) of the Finance Act, 1994.
2. Determining the correct quantum of service tax liability.
3. Applicability of cum-tax benefit and recalculating service tax liability.
4. Penalty imposed on the appellant and invoking Section 80 of the Finance Act, 1994.

Analysis:
1. The appeal concerned the inclusion of the value of sim cards sold by the appellant to mobile subscribers in taxable service under Section 65(105)(zzzx) of the Finance Act, 1994. The appellant activated sim cards for subscribers and paid sales tax on activation charges but did not discharge service tax liability on the gross value received. The Tribunal referred to a previous case and decided against the appellant, emphasizing the tax liability under the Finance Act.

2. Regarding the correct quantum of service tax liability, the appellant claimed cum-tax benefit, treating the amount realized as inclusive of tax. The Tribunal supported the appellant's claim, citing a case where it was held that the total compensation received should be considered inclusive of service tax unless paid separately by the customer. The Tribunal rejected the Revenue's appeals and disposed of the Cross Objection related to the matter.

3. The Tribunal remanded the matter to the adjudicating authority to re-quantify the service tax liability based on the cum-tax benefit. It directed the appellant to discharge the recalculated service tax along with interest. The decision was supported by the apex Court's dismissal of a civil appeal filed by the Revenue, affirming the applicability of the cum-tax benefit in the appellant's case.

4. In terms of the penalty imposed on the appellant, the Tribunal invoked Section 80 of the Finance Act, 1994, considering the legal uncertainties surrounding the taxability of sim cards. It set aside the penalties imposed by the lower authority, noting that the appellant could have held a bonafide belief that the sale of sim cards was not a taxable activity. The appeal was disposed of with the above decisions and considerations taken into account.