2007 (3) TMI 66

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ere asked to inform the practice followed by them for payment of service tax on SIM cards, to which the appellants replied that they were not paying service tax on the value of the SIM cards. They discontinued charging activation charges from customers and payment of service tax due on the said element of taxable services w.e.f. 1-5-2001, prior to which date they were recovering activation charges from post-paid telephone connection subscribers and charging 5% tax on the same. Post 1-5-2001, they were selling SIM cards and paying sales tax on the sale proceeds, as levied by the Government of Maharashtra. Show cause notices proposing to demand service tax together with interest on the sale of SIM cards and proposing penal action were issued .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... tter was carried in appeal to the Apex Court which, vide its judgment reported in 2006 (2) S.T.R. 161 (S.C.) = (2006) 3 SCC, held that the Centre cannot include the value of SIM cards, if they are found ultimately to be goods, in the cost of the service, and remanded the matter to the Sales Tax Authorities concerned for determination of the issue relating to SIM cards in the light of the observations contained in its judgment. The relevant paragraphs of the apex court's judgment are reproduced herein below "185. This brings us to the decision of the Kerala High Court in Escotel. 86. In that case Escotel was admittedly engaged in selling cellular telephone instruments, SIM cards and other accessories and was also paying Central sales t .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... on There is insufficient material on the basis of which we can reach a decision However we emphasise that if the sale of SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers their credit and other details it would not be assessable to sales tax In our opinion the High Court ought not to have finally determined the issue. In any event, the High Court erred in including the cost of the service in the value of the SIM card by relying on the "aspects" doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel & Restaurant Assn. of In din v. Union of India (SCC pp. 652-53, paras 30-31)..... 88. No one denies the legislat .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X