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2018 (11) TMI 233 - AT - Service TaxLevy of service tax or VAT/Sales tax - supply of SIM cards in the course of rendering services - telecommunication services - composite transaction - N/N. 12/2003-ST - appellant submitted that the SIM cards are sold as goods independent of any service element, hence VAT has been correctly paid by them - extended period of limitation - penalty - adjustment of the VAT paid towards the demand for Service Tax. Whether the value of SIM sold by the Appellants as an independent commodity be included in the assessable value of the taxable service under Section 65 (105)(zzzx) of the Finance Act, 1994 for the purpose of levy of service tax? Held that:- The SIM Cards purchased by the Appellants from the vendors/ suppliers/ manufacturers of SIM card and those supplied by them are distinct. The ones procured by them are not mapped to their network and are capable of being programmed and mapped to any network. However the SIM’s provided by the Appellant are programmed and mapped tow their network. Thus these SIM cards are now the part of the telecommunication network of the appellants and after activation are for the purpose of identifying the subscriber on their network so that he can make or receive the call through their network. Thus the claim of the appellant that the sale of SIM card by the appellant is an independent transaction of sale of goods simplicitor is not tenable, because the same SIM cannot be used for any other purpose other than identifying the consumer on appellants network for provision of telecommunication services. The real test laid down by the Apex Court in the case of IDEA MOBILE COMMUNICATION LTD. VERSUS CCE. & C., COCHIN [2011 (8) TMI 3 - SUPREME COURT OF INDIA] is not vis a vis the transfer of SIM or the property in SIM, but the nature of use of the SIM. If the SIM is used for identification of the consumer on network of the mobile operator, then provisioning of SIM is incidental to the service being provided by the operator - there are no merit in the submissions made by the Appellant in respect of non inclusion of the value of SIM in the services provided by them. Benefit of the N/N. 12/2003-ST - Held that:- The SIM as programmed and provided by the Appellant to the consumer is always the part of the tele-communication network of the appellant and has no other use other than to identify the consumer on the said network. Since the property in the said SIM in effect is not transferred to the consumer, and the said SIM is only used for activation, identification and provisioning of the telecommunication services to the consumer, the transaction in SIM cannot be said to be one of sale of goods - 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 - benefit of N/N. 12/2003-ST cannot be extended to appellant. Extended period of limitation - Held that:- The act of appellant declaring on the CAF that property in the SIM Card is transferred is nothing but an act of misdeclaration, as the property in the part of the mobile network used to identify the consumer on network, their credit and other details, is always with the appellants and not transferred. In fact even the right to use the said SIM also is not being transferred. Hence by mis-declaring the same on same on CAF, appellants have claimed transaction in SIM cards as that of independent sale and thus suppressed the value of services provided by them - extended period rightly invoked. Penalty - Held that:- The appellants have suppressed the facts with intention to evade payment of taxes penalty under Section 78 is justified against them. Demand of interest u/s 75 of FA - Held that:- Demand of interest is a natural consequence on account of delay in payment of the tax. Since appellants have short paid the tax, interest is demandable from them under Section 75 of the Finance Act, 1994 - demand of interest upheld. Adjustment of the VAT paid towards the demand for Service Tax - 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. The demand of service tax needs to be recomputed after taking into account the service tax already paid by them. Since Commissioner has in his order not considered the said documents and the service tax already paid by the appellants in respect of these transactions, the matter will have to be remanded back for re-quantification of the demand of service tax. Appeal allowed by way of remand.
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