Service tax liability on the value of SIM card – SLP (C) No.24690/2009 filed by M/s. Idea Mobile Communication Ltd. against the Order of the Hon'ble High Court of Kerala – Reg. - Service Tax - F.No.V/DGST/21-30/Legal/10/2010/2698

DIRECTORATE GENERAL OF SERVICE TAX 9th Floor, Piramal Chambers, Jijibhoy Lane, Parel, Lalbaug, Mumbai 400 012 Dated: April 29, 2011 Sub: Service tax liability on the value of SIM card SLP (C) No.24690/2009 filed by M/s. Idea Mobile Communication Ltd. against the Order of the Hon'ble High Court of Kerala Reg. The above SLP has been filed by M/s. Idea Mobile Communication Ltd. against the order dated 4.9.2008 of the Hon'ble High court of Kerala in Central Excise Appeal No. 20/2006. The issue in brief leading to the filing of SLP is as below:- A notice was issued to the petitioner demanding service tax on the value of SIM card issued by them to the subscribers. The demand was confirmed by the original adjudicating authority and upheld by the 1st Appellate Authority. However, the CESTAT set aside the demand holding that service tax is not liable to be paid since the petitioner has paid sales tax on the SIM card. The department filed Central Excise Appeal No.20/2006 before the Hon'ble High Court of Kerala and the same was allowed. The Hon'ble High Court held that the State Sales Tax Authorities, consequent to remand in terms of the Supreme Court judgment in BSNL Anr. Vs Union of India Ors., had dropped proceedings to levy Sales Tax on SIM card in respect of other mobile phone operators who had challenged the levy of Sales Tax and a different stand cannot be taken in the case of the petitioner despite that they have remitted Sales Tax and consequently Service Tax is chargeable on the value of the SIM card. The information received from various formations all over India, it is seen that while in most of the States/Zones, Service tax is being paid on the value of SIM cards, there are certain Zones/States where service tax is not being paid and the State authorities are collecting Sates Tax/VAT on these SIM cards. In view of the practice followed in majority of the field formations on the issue and the matter being sub-judice, you are requested to issue directions to the field formations under your charge to raise protective demands on this issue to safeguard Government revenue. [F.No.V/DGST/21-30/Legal/10/2010/2698] Yours faithfully, Additional Director General