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TMI Blog2017 (10) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of providing telecommunication services including the mobile telephone services. 3 By a License Agreement dated 28th September 2001 entered into between the Hon'ble President of India through the Department of Telecommunications, Ministry of Communication, Government of India on one part and the petitioner company on the other part, a licence was granted to the petitioner under section 4 of the Indian Telegraph Act,1885 to set up and operate cellular mobile phone services in Mumbai and Maharashtra Telegraph Circle on the terms and conditions set out therein. In accordance with the said agreement, the petitioner is providing telecommunication services including mobile telephony, text messaging, voice messaging, access to internet etc to the members of public in Global System for Mobile communication (GSM) format which involves GSM wireless modem which works with GSM wireless network. The customers of the petitioner avail of the services by using mobile handsets. It is stated that the SIM (Subscriber Identification Module) card is provided by the petitioner which is a plastic/paper card encrypted with the unique number which is known as International Mobile Subsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By a communication dated 30th October 2010, the petitioner informed the first respondent that the SIM cards, recharge coupons and e-recharge were not the goods which could be subjected to LBT and in fact, the petitioners are paying service tax on providing telecommunication services. On 28th March 2013, the State Government issued a notification for fixing the rate of 3.5% on "SIM cards, memory cards, activation/renewal slips whether "recharged it online or otherwise". The challenge in this petition under Article 226 of the Constitution of India is to the action of the first respondent of assessing, levying and recovering LBT on SIM cards, recharge coupons and e-recharge brought into the limits of the first respondent. There is a consequential challenge to the notification dated 28th March 2013 issued by the State Government. 6 In view of the order of the Apex Court dated 12th September 2014, necessary priority is given to hearing of this writ petition and the same is taken up for final disposal. 7 The learned counsel for the petitioner has made detailed submissions. Basically the submission is that the SIM cards, recharge coupons and e-recharge are not the goods on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (1) For the purposes of this Act, the Corporation shall impose the following taxes, namely: (a) Property taxes; (b) a tax on vehicles, boats and animals (2) In addition to the taxes specified in subsection (1) the Corporation may for the purposes of this Act and subject to the provisions thereof impose any of the following taxes, namely: (a) octroi (aa) a cess on entry of goods into the limits of the City for consumption, use, or sale therein to be levied in lieu of Octroi with the previous sanction of the State Government:] [Provided that, the State Government may, by notification in the Official Gazette, direct the Corporation to levy the cess on the entry of the goods into the City for consumption, use or sale therein, in lieu of octroi:] [(aaa) LOCAL BODY TAX ON THE ENTRY OF THE GOODS INTO THE LIMITS OF THE CITY FOR CONSUMPTION, USE OR SALE THEREIN, IN LIEU OF OCTROI OR CESS, if so directed by the State Government by notification in the Official Gazette ;] (b) ***** (c)a tax on dogs (d) a toll on animals and vehicles [***] entering the City: (f) any other tax [not being a tax on professions, trades, callings and employments] which the [State] Legislature has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined in clause (6A) or LBT. Both these levies are on the goods that enter into the limits of a city for consumption, use or sale therein." (emphasis added) In paragraph 13, the Apex Court held thus: "13 What follows from the conjoint reading of the aforesaid provisions is that LBT or octroi is a tax "on the entry of goods into the limits of city", which goods are meant for "consumption, use or sale therein". In this backdrop, we have to find out the true nature of the Sodexo Meal Vouchers and to ascertain whether they are "goods". (emphasis added) 14 Ultimately, the Apex Court on facts proceeded to hold that the Sodexo coupons are provided by the employer to the employees to avail of facility of food and non alcoholic beverages. It was held that a perquisite given to the employees by adopting the methodology of vouchers and therefore, cannot be treated as goods. 15 Now coming to the decision of the Apex Court in the case of Bharat Sanchar Nigam LTD (BSNL), the issue before the Apex Court was about the nature of the transaction by which the mobile phone connections are enjoyed. The question was whether it is a sale or it is a service or it is both. The Apex Court co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any portion of the wiring, the cable,the satellite, the telephone exchange, etc. At the most the concept of the sale in a subscriber's mind would be limited to the handset that may have been purchased for the purposes of getting a telephone connection. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection." 17 In paragraph 109, the Apex Court held thus: "109 Briefly, the subscriber originates/ generates his voice message through the handset. The transmitter in the handset converts the voice into radio waves within the frequency band allotted to the petitioners. The radio waves are transmitted to the switching apparatus in the local exchange and thereafter after verifying the authenticity of the subscriber, the message is transmitted to the telephone exchange of the called party and then to the nearest Base Transceiver Station (BTS). BTS transmits the signal to the receiver apparatus of the called subscriber, which converts the signals into voice, which the subscriber can hear." (emphasis added) 18 In case of Idea Mobile Communication Limited, the issue before the Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible goods which are capable of being brought into the limits of a city. The same are capable of being used after the same are brought into the limits of a city. Hence, the same will be goods within the meaning of clause 25 of Section 2 of the said Act. In the decision of the Apex Court in the case of Idea Mobile, the High Court had come to the conclusion that the SIM card has no intrinsic sale value and therefore, the sales tax is not payable. But, the Apex Court has not considered the question whether the SIM cards are capable of being used which is a relevant consideration for charging LBT. 20 The schedule under the rules framed under the said Act provide for levy of LBT on following items: GROUP II "133 All types of mobile phones, Pager, I Pad, I pod, tablet and all sorts of means of communication and their components, spare parts and accessories. SIM card, memory card, activation/renewal slips/vouchers whether recharged it online or otherwise." (emphasis added) 21 As far as e-recharge is concerned, by no stretch of imagination, it can be said that e-recharge is capable of being brought into limits of a city. In clause 133 quoted above, e-recharge is not specifically in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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