Bharti Cellular Ltd. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. this appeal has been directed by the appellant against the impugned order-in-appeal vide which the commissioner (appeals) has affirmed the order-in-original regarding the service tax liability of the appellants to the tune of rs. 53,41,647/- for the period 27-9-1995 to 18-12-1997.this liability has been fastened on them in respect of sale of sim card by them to their customers.2. the ld. counsel has contended that the sale of sim cards by the appellants to their customers cannot be termed as taxable service and as such no service tax in respect thereof can be legally claimed by the department. he has also contended that the amount of the service tax has not been calculated in accordance with the provisions of section 66 of the act read with the board's circular no. 62/11/2003-st,.....

Judgment:
1. This appeal has been directed by the appellant against the impugned order-in-appeal vide which the Commissioner (Appeals) has affirmed the order-in-original regarding the Service Tax liability of the appellants to the tune of Rs. 53,41,647/- for the period 27-9-1995 to 18-12-1997.

This liability has been fastened on them in respect of sale of SIM card by them to their customers.

2. The ld. Counsel has contended that the sale of SIM cards by the appellants to their customers cannot be termed as taxable service and as such no Service Tax in respect thereof can be legally claimed by the department. He has also contended that the amount of the Service Tax has not been calculated in accordance with the provisions of Section 66 of the Act read with the Board's Circular No. 62/11/2003-ST, dated 21-8-2003. Lastly, he has argued that the demand raised is also time-barred.

3. On the other hand, the Id. SDR has reiterated the correctness of the impugned order. We have heard both the sides and gone through the record.

4. The appellants are engaged in providing cellular telephone connection service to the subscribers. The issue as to whether the sale of SIM cards by the cellular telephone connection Service Companies, to the subscribers, is a taxable service or not under the Act, already stands settled by the judgment of the Hon'ble High Court of Kerala in Escotal Mobile Communications Ltd. v. Union of India and Ors., reported in 2002 (126) STC 475 wherein it has been ruled by the Hon'ble High Court that such a service falls within the definition of "taxable service" under the Act. This judgment was followed by the Tribunal in M/s. Aircell Digilink India Ltd. v. CCE, Jaipur reported in 2004 (173) E.L.T. 31 (T) = 2004-TIOL-752-CESTAT-DEL. Therefore, the first argument of the counsel that sale of SIM card by the appellants to their subscribers cannot be termed, as taxable service is not liable to be accepted.

5. To elaborate the second contention regarding the wrong computation of Service Tax amount, the Id. Counsel has contended that under Section 66 of the Act read with the Board's Circular No. 62/11 /2003-ST, dated 21-8-2003, the tax could be claimed @ 8% of the value of taxable service and if the value is zero, the tax will also be zero even though the service is taxable. Therefore, the SIM cards given by the appellants by way of bonus to the subscribers during the period in question could not be taken into account while computing the demand, as the value charged by the appellants was zero. This contention of the Id. Counsel in our view deserves to be accepted. The bare perusal of the charging Section viz. 66, read with the above referred board's circular, it is quite evident that the Service Tax is chargeable @ 8% of the value of taxable service. Where the value is zero, tax will also be zero even though the service is taxable, therefore, the allowance of the value of bonus SIM cards issued by the appellants to their subscribers, has to be given to them. The value of those bonus SIM cards cannot be taken into account and as such the Service Tax amount deserves to be recomputed, by the adjudicating authority accordingly.

6. However, the third contention of the counsel on the question of limitation cannot be accepted. The argument of the Id. Counsel that the appellants were under the bona fide belief that the sale of SIM card to the subscribers was not taxable and they have been filing the Service Tax returns regularly and the department never pointed out any deficiency therein and as such extended period of limitation, cannot be invoked, in our view, deserves to be rejected. It is difficult to accept, the appellants did not know that the service of SIM cards being provided by them to the subscribers was not taxable under the Service Tax law. In their returns in ST-3 form they never gave the details and mode of computation of the service tax, being paid by them, during the period in dispute i.e. 27-91995 to 18-12-1997. There was rather apparently suppression of material facts by them from the department and as such extended period of limitation has rightly been invoked against them for raising demand of Service Tax for the period in dispute through show cause notice dated 3-6-1998. The ratio of law laid down in Pushpam Pharmaceuticals Co. v. CCE, Bombay [1995 (78) E.L.T.401 (S.C.)] and M/s. Ultra Flax (P) Ltd. v. CCE, Faridabad [2004 (167) E.L.T. 354 (Tri. -Del.)] referred by the Counsel, is not attracted to the facts of the present case. Those cases were under the Central Excise Act and there was material on the record to suggest therein that there was no suppression of the facts by the assessee from the department. But such is not the position in this case.

7. In the light of discussion made above, the impugned order is upheld.However, the exact tax amount shall be re-computed in the light of discussion made above, which the appellants will be liable to pay. The appeal of the appellants in these terms stands disposed of.