M/S. Annapurna Marketing, Hyd vs. Commercial Tax Officer, Hyd And 4 Othrs

The sales tax authorities have themselves conceded the position belore the High Court that no assessment of sales tax would be made on the sale value ol the SIM Card supplied by the appellant to their customers irrespective of the fact whether they have filed returns and remitted tax or not. It also cannot be disputed that even if sales tax is wrongty remitted and paid that woutd not absolve them lrorn the responsibility of payment of service tax, i I otherwise there is a liabitity to pay the same. I[ the article is not susceptiblc to tax under the Sales ]'ax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to tbllow the law as may be applicable. But we cannol' accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the same is otherwise found payable and a liability accrues on the assessee. The chargcs paid by the subscribers for procuring a SIM Card are 4 gcncrally l)rocessing charges lbr activating the ccllu lar phonc and conscqucntly the same would ncccssarily- be includcd in the value of the SIM Card. 19. 'l'here cannot be any dispute to the afbrcsaid position as the appellant itself subsequently has bccn paying service tax fbr the entire collection as proccssing chargcs tbr actrvating cellular phone and paying the servicc tax on thc activation. The appellant also acccpts the position that activation is a taxable scrvicc. -['he position in law is therclore clear that the anror-urt rcceived by the ccllular telephone company fi.orn its subscribers towards SIM Card will form part of'lhc taxable value lor lcvy of service tax, lor the S IM Clards are r1e\/er sold as goods independent fiom sclviccs ;rrovided. ['hcy arc considered part and parccl of the serviccs provided and the dominant position of the transaction is to provide seruices and not to scll the r.naterial i.c. SIM Cards which on its owrr but rvitl-rout the servicc would hardly have any i,aluc at all. Thus. it is established from the records and lacts ol' this case that the value of SIM cards lirrnrs part o1- the activation charges as no activation is possiblc r.vithout a valid functioning of SIM card and thc value ol the taxablc service is calculated on the gross total auroulrt receivcd by the operator lrom the subscribcrs. The Sales 'l'ax authority understood the i I ti f I i :

The aloresaid ludgment clearly lays down the issue that the issuance of SIM Cards would therelore be not amenable to sales tax as it does not amount to sale of good but only amounts to providing services. The same view earlier was also reiterated by the Hon'ble Suprerne Court in the case of Bharat Sanchar Nigam Li,nited v. State of Antlhra Pratlesh2, which has been lurther lollowed by the Unified High Court of Andhra Pradesh (DB) in 2Ol2 25 STR 321 (A.['}.). This Bench also had an occasion of taking up one similar writ petition i.e., W.P.No.5675 of 2004 which stood decided on 24.01.2024, wherein the aforesaid judgments were taken note of and in the light of the afbresaid judgments, we had allowed the writ petition holding that the allotment of SIM Cards to the subscribers would not attract sales tax under the VAT Act. For ready reference, the provisions of ceftain portions of the said order of the Division Bench are reproduced hereunder: ' zooo 1:1 scc eg.r

As regards the othcrs issue are concemed, a Dirision Bench ol IJigh Courl of Andhra Pradesh in thc casc of M/s.Bharath Sarrchar Nigam Ltd. (3 supra), br. rcf'erring to the aloresaid judgrnents of the llon'blc Sulrrernc Court i.c., Bharat Sanchar Nigam Ltd. ( I supra) and ldea Mobile Communication Ltd. (2 supra), rn conclusion paragraphs i.e., 62.2 and 62.1, lias specially held that SIM cards, recharge coupon v'ouchers. rnobilc tclcphonc rcnta.[s on post paid connections. valuc added serviccs such as ring tones, rnusic down loads, rvall papers etc., and proceeds received on sharing of inlrastructure cannot be subjected to tax eithcr under Section 4(l) or Section 4(8) of thc A.P. VAT Act, 2005. While holding so. the Division llcnch specifically held that telephone insttutnents, rnotrilc handsets, modems ald Caller ID instrutnents are "goods" both under Article 366(12)of the Constitution of'India and Section 2(16) ol'the A.P. VAl' Act, 2OO5- For ready reference, palas 62.2 aud (r2.3 arc rcproduced hereunder:- "62.2 SIM Cards, rccharge coupon vouchers, mobile telephone rentals on post paid connections, value added scrvice such as ring toncs, music down loads, wall papcrs etc., and procecds received on sharing of inftastlucturc caunot bc subjected to tax either undcr Section 4( l) or Section 4(8) ofthe Act. (r2.3. 'l elcphone instrunrcnts, mobile handsets, rroderns and Caller I[) instnrntents'are "goods,' both t, I

The a-foresaid decision of the Andhra Pradesh High Court was subjected to challenge before the Hon'ble Supreme Court in the case of Bharat the Hon'ble Supreme Court held as under: "ln the present case, the High Court held that SIM Cards, Rechargeable Coupons, Fixed Monthly Charges and Value-Added Services (towards SMS, ring tones, download music etc.) are not "goods". It relied upon not only the judgment in "ldea Mobile Communication" but also the judgments of this Court in "Bharat Sanchar Nigam Ltd. vs. Union of India t2006 (2) SCR 8231, Associated Cement Companies Ltd. vs. Commissioner of Customs" [200] (1) SCR 608] and Tata Consultancy Services vs. State of A.P-" [2OO5 (l) SCC i08]. The High Court, however, remitted the matter for consideration for asce(ainment of facts relating to levy of sales tax on non-refundable deposits and refundable deposits. lt also held that the transactions retating to telephone sets, modems and caller IDs instruments are subject to sales tax [evy." Having considered submissions of the learned counsel lor the parties and also having gone through the impugned judgment, this Court is of the opinion that no interference is calted for especially in view of the fact that the lligh Court has taken note of all the decisions on the Point. Furthermore, in the recent judgment in C.A.Nos. I 1400-ll4ol 120 l8 "Commissioner of Customs, Central Excise & Service Tax Vs. M/s'

Sinrilar is au order that was passed by a Division Bcnch olMadhya Pradesh High Court in the case of M/s.ldea Ccllular Ltd. (4 supra). wherein again the sanrc vieri,was reiterated, relying upon the judgrnent of'the I[onble Supreme Court in the cases ol Bharat Sanchar Nigam Ltd. (l supra) and ldea Mobile Comrnunicatiou Ltd, (2 supra), and held that the provisions ol'thc M.P. VAT Act, 2OO2 insofar as it relates to inrposition of VAT on SIM reltlacement charges and lcasc line reveuue to be ultra-uires and void. I l. [n vicw ol- tlre afcrresaid ludicial pronou rlccnlen ts which lay to [est, thc issue so lar as recharge ol- coupons, SIM replacerrcnt chargcs and activation chargcs, ctc., would be amenable to sales tax undcr Lhc A.I'}. CiST Act or not, rve arc ol' the considered opinion that thc impugned re-assessment order dated 10.03.2004 foL the year 2000-01 would not be sustainablc and the same, theretbre, deserves to be and is accorclingly set aside/quashed. I 2. ]'hc Writ Pctition, to the a [bresaid extent, stands allor.rcd. No ordct as to costs. Conscqucntly,

Accordingly, we allow the writ petition setting aside the impugned order holding that SIM Cards are not be leviable to tax under the provisions of the VAT Act. Consequently, miscellaneous petitions pending, if any, shall stand closed. There shall be no order as to costs. A .L. VIJAYA LAXMI SISTANT REGISTRAR //// ECTION OFFICER One CC to SRI LAKSHMI KUMARAN & SRIDHA , Advocate. [OPUC] 1. 2. 3. 4.

One CC to SRI SWAROOP OORILLA, SPL.G.P for Two CCs to GP for Revenue [OUT] One CC to SC for CBIT [OPUC] Deputy Solicitor General Of lndia [OPUC] Two CD Copies. BSK TKS tate Tax. [OPUC]