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2017 (1) TMI 336 - HC - VAT and Sales TaxVAT or service tax - activity in the nature of service or sale - SIM replacement charges - lease line revenue - Vires of Sec.2(u) and 2(v) of the MP VAT Act, 2002 - whether the SIM replacement and lease line is selling of goods or providing of services? - Held that: - the amount received by the cellular telephone company from its subscribers towards SIM card will form part of the taxable value for levy of service tax, as the SIM cards are never sold as goods independent from service provided. They are considered to be part and parcel of the services provided and dominant position of the transaction is to provide services and not to sell the material ie., the SIM cards which on its own, but without the services, would hardly have any value at all. Even in the case of replacement of SIM Card, the value of replacement in respect 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 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 far as it relates to imposition of VAT on SIM replacement charges and lease line revenue, which are merely services - petition allowed - decided in favor of petitioner-assessee.
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