2018 (11) TMI 232 - AT - Service Tax

Valuation - includibility - value of SIM supplied by the Appellant for activation and providing the mobile telephony services to its customer - benefit of N/N. 12/2003-ST - benefit of cum tax price - demand of interest - penalty u/s 76 and 78 - adjustment of VAT paid on sale of SIM to its consumers.

Whether the value of SIM supplied by the Appellant for activation and providing the mobile telephony services to its customer includible in taxable value of services provided by him? - Held that:- The issue is decided by apex court in the case of BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT], where it was held 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 - thus, if SIM Cards are sold then their value can’t be included in the value of the service and no service tax can be charged.

If the value of such SIM’s is includible in the taxable value of the services provided by them whether the benefit of exemption under notification No 12/2003-ST can be extended to them - Held that:- The supply of SIM cards is integral with provision of the taxable service and without the said SIM cards the provisioning of this taxable service is impossible. Accordingly the benefit of Notification No 12/2003-ST cannot be extended to the Appellants.

Whether the benefit of cum tax price needs to be extended to the appellant for determining the service tax leviable? - Held that:- Hon’ble Supreme Court has in the case Dugar Tetenal Ltd [2008 (3) TMI 50 - SUPREME COURT] has held in favor of allowing such benefit.

Whether interest is demandable and recoverable from the appellants? - Held that:- The interest is compensatory in nature and is required to be paid by the tax payer in case of any default in payment of tax for the period of default - demand of interest upheld.

Whether in facts and circumstances of this case penalty under Section 76 and Section 78 of the Finance Act, 1994 are justified? - Held that:- Penalty under Section 76 is for the delay in payment of service tax - penalties imposed under Section 76 of the Finance Act, 1994 are justified - Since the penalties imposed under Section 76 are upheld, we do not find justification in separate penalties imposed under Section 78.

Whether the adjustment of VAT paid on sale of SIM to its consumers is allowed? - Held that:- We are not in position to permit or allow for such adjustment or uphold such contention. VAT is levied under the State Act and Service Tax under the Central Act. Since both the authorities, under which Service Tax and VAT are levied are not the same, the tribunal being creature of the Central Act, would not be in position to determine such transfer and adjustment of VAT paid under State Act, towards the tax liability under a Central Act.

Appeal disposed off.