BHARATI HEXACOM LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellant has challenged the order of the Commissioner confirming the demand of service tax amounting to Rs. 85,83,237/ - under Section 73 of Chapter V of the Finance Act, 1944 and imposing penalty of the like amount under Section 78 along with the other penalty imposed under Section 76 as well as ordering interest to be recovered under Section 75 of the said Act.

(2.) THE learned Counsel appearing for the appellant has strongly contended that the applicant had paid sales tax on the SIM cards and since the cards were goods, there was no question invoking the provisions of the said Act for imposition of service tax thereon. He relied on the decision of the Tribunal on Idea Mobile Communication Ltd. v. CCE rendered on 25 -5 -2006 by Final Order No. 978/2006, 2006 (4) S.T.R. 132 (Tribunal) in which in a case where the levy of sales tax was not challenged, the Tribunal held that since the sales tax was already paid, it follows that service tax is not leviable on the item on which sales tax was collected.

(3.) IN the present case, it is evident from the material on record that it is not as if only the SIM cards were sold as goods. The applicant provided cellular services, and as a part of those cellular services SIM cards were supplied and shown to have been sold. In this context, we may refer to the decision in Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors. reported in 2006 (2) S.T.R. 161 (S.C.) : 2006 (145) STC 91, in which Hon'ble Supreme Court indicating the dominant nature test in paragraph 46 of the judgment, held in paragraph 87 of the judgment that in determining the issue the assessing authorities will have to keep in mind following principles: If the SIM card is not sold by the assessee to the subscribers but is merely part of the services rendered by the service providers, then a SIM card cannot be charged separately to sales tax it would depend ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the sales tax authorities to levy sales tax thereon. (Emphasis added). In the present case, the applicant was providing cellular services and as a part of those services, SIM cards were given. Even if some amount is charged for SIM cards, SIM card of the applicant -company was clearly relatable to the services provided by the applicant and ancillary to it. Such SIM card could not have been used for any other services. Moreover, unless activated it was useless, which showed that it was only a part of the services provided, and not goods separately sold. If some company manufactured SIM cards for the purpose of selling them to a cellular service provider for his business, that may stand on the fooling of SIM cards being sold as goods which had nothing to do with cellular service, which was not to be provided by the manufacturer of such SIM cards and was to be provided by the purchaser who was to provide cellular services for whom such tailor made SIM cards were manufactured. It was urged that the applicant was entitled to the benefit of the Notification No. 12/03 -ST dated 20 -6 -2003. Admittedly, this contention has never been raised so far. Even otherwise, prima facie, this notification cannot be of any help to the applicant because, SIM cards were not sold as goods, independent from the services provided, but they were part and parcel of the services provided and the dominant intent was to provide services and not to sell the material, namely, SIM cards which on its own without the service, would hardly have any value. In this view of the matter, there is no prima facie case made out for waiver of pre -deposit. Since in our opinion, the matter is covered by the decision of Hon'ble Supreme Court, we do not find any warrant for waiving any part of the amount payable under the impugned order. It will be most inappropriate to order waiver of pre -deposit including penalty in a case which is covered by a decision of the Hon'ble Supreme Court. If the entire amount payable under the impugned order is pre -deposited within eight weeks from today, the appeal will then be heard for final hearing. However, if the amount is not so deposited, the appeal shall stand dismissed. Post the matter for compliance report on 18 -10 -2006. The application stands disposed of accordingly.