Service Tax-Liability on value of SIM card - DGST wants Show Cause Notices to be issued
A Show Cause Notice was issued to Idea Mobile 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, reported in 2006-TIOL-857-CESTAT-BANG.
The department filed Central Excise Appeal No.20/2006 before the Hon'ble High Court of Kerala and the same was allowed in 2009-TIOL-318-HC-KERALA-ST. The 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., reported in 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.
Against the High Court order, the party had gone in SLP before the Supreme Court and the case is slated for hearing in the Supreme Court in July 2011.
Now the DGST has information 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, DGST wants field formations to raise protective demands on this issue to safeguard Government revenue.