CESTAT, MUMBAI BENCH
Vodafone Essar Ltd.
Commissioner of Service Tax, Mumbai
Order No. S/355/2012/CSTB/C-I
Application No. ST/S/135 OF 2012
Appeal No. ST/29 OF 2012
February 21, 2012
Ashok Jindal, Judicial Member
The applicant is seeking for waiver of pre-deposit of Rs. 6,18,10,184/- of service tax confirmed against them along with interest and various penalties under the Finance Act, 1994 by the Commissioner of Service Tax, Mumbai.
2. The applicant is a service provider under the category of telecommunication service and providing mobile phone services. To perform this activity, the applicant provides SIM cards to their customers through their dealers. When the applicant is clearing SIM cards to their dealers, which are charged is sales tax/VAT and for providing telephone services/mobile services they charge activation charges on which they are paying service tax.
3. The Revenue is of the view that SIM card is an instrument which provides services only for activation of mobile phone without which the mobile phone cannot function. Therefore, the sale of SIM card is a part of service. Therefore, a show-cause notice was issued to the applicant to include the value of the SIM card in the assessable value of the service tax. Periodical show-cause notices were issued and the impugned demand was confirmed, following the decision of Idea Mobile Communication Ltd. v. CCE & C.  32 STT 262/12 taxmann.com 307 (SC).
4. Shri Bharat Raichandani, Ld. Advocate for the applicant appeared before us and submitted that during the pendency of the stay application, the department has already recovered Rs. 3.8 crores and they have already paid Rs. 4.00 crores as sales tax/VAT for the sale of the SIM card. Therefore, the same may be treated as sufficient in compliance to the provisions of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. To support of his contention, the Ld. Advocate relied on the decision of Essar Telecom Infrastructure (P.) Ltd. v. Union of India  35 STT 453/21 taxmann.com 219 (Kar.), Union of India v. K.G. Khosla & Co. Ltd.  43 STC 457 (SC) and Bharat Heavy Electricals Ltd. v. Union of India  102 STC 373 (SC). He also submitted that in their own case for the earlier period, this Tribunal has allowed their appeal holding that on the amount on sale of SIM card, service tax is not leviable in Hutchison Max Telecom (P.) Ltd. v. CCE  16 STT 19 (New Delhi-Cestat). The said decision is pending under challenge before the Hon’ble High Court of Bombay in appeal filed by the Revenue.
5. On the other hand, Shri Premanand Das, Ld. Commissioners (AR) appeared on behalf of the Revenue and submitted that the issue has taken finality in the case of Idea. Mobile Communication Ltd. cited (supra) wherein the Hon’ble Apex Court was of the view that the SIM card having no intrinsic sale value and is supplied to customers for providing mobile service to the customers. It was also held that the sale of SIM card is merely incidental to the service being provided and only facility is identification of the subscribers, their credit and other details, it would not be assessable to sales tax. Therefore, the applicant be asked to make full pre-deposit for consideration of the appeal.
6. He also requested that as the issue has attained finality, therefore, the appeal be dismissed.
7. After carefully considering the submissions made by both sides, we are of the view that in the case of Idea Mobile Communication Ltd., cited (supra), the Hon’ble Apex Court has confirmed the view taken by the Hon’ble Kerala High Court wherein it was held that a transaction of selling of SIM card to the subscriber is also a part of the “service” rendered by the service provider to the subscriber. We also are not convinced with the contention of the Ld. Counsel that the amount paid as sales tax be considered as sufficient compliance of Section 35F of the Central Excise Act, read with Section 83 of the Finance Act. As this Tribunal have no power to adjust such payments as the same is created under the Special Act i.e., Customs Act, Finance Act and Central Excise Act. Therefore, we have no power to adjust the payment of sales tax against service tax. As discussed above, the applicant have failed to make out a case for 100% waiver of pre-deposit. Following the decision of Idea Mobile Communication Ltd. (supra), we direct the applicant to make pre-deposit of balance amount of service tax adjudged within twelve weeks and report compliance on 05/06/12. On such compliance, the interest and various penalties under the Finance Act shall remain stayed during the pendency of the appeal.