B.S.V. Murthy, Member (T)

1. This stay application has been filed against the demand of Rs. 46,18,543/- for the period from April, 2004 to March, 2006 and penalties imposed on the appellants. The appellants are engaged in providing cellular telephone services in Gujarat Circle and paying service tax under the category of telephone service. The demand of service tax is on the value of SIM card which was not included in the gross value of telephone services on the ground that sales tax was being paid on the same.

2. The demand has been confirmed on the basis of the Boards circular No. 23/3/97-ST dt. 13-10-1997; as per the judgment of the Apex court in the case of BSNL : 2006 (2) S.T.R. 161 (S.C.), the amount charged for SIM card will attract service tax, if it is a part of the telephone service. The order of the Commissioner has been challenged on the ground that principles of natural justice has not been observed; SIM cards are goods and are sold for a price and sales tax has been paid; the view that a SIM card is essentially activating device is not based on any sustainable evidence; the judgment of the Honble Supreme Court in the BSNL case clearly lays down that if SIM cards are sold, their value cannot be included. The appellants also relied upon the judgment of the Tribunal in BPL Mobile Communication Ltd. v. CCE : 2007 (7) S.T.R. 440 (T) and Idea Mobile Communication Ltd. v. CCE 2006 (4) S.T.R. 132 (T) wherein a view was taken that if sales tax was paid on the amount charged for SIM card, the same amount will not attract service tax. In both these judgments, the Tribunal has considered the Honble Supreme Courts decision in BSNLs case and followed the same. Honble Rajasthan High Court also has observed that if sales tax is leviable on SIM cards, SIM cards are not chargeable to service tax and on that ground, Honble High Court allowed the complete waiver of pre-deposit in their order dt. 27-8-2007 in WP No. 7355/2006. The appellants also cited the judgment of this Tribunal in Bharti Tele-ventures Ltd. 2007 (8) S.T.R. 24 (T) and Bharti Hexacom Ltd. 2006 (4) S.T.R. 324 (T).

3. We find that all these judgments are relevant and consistent view has been taken that if SIM cards have been charged to sales tax, the cost of the SIM card would (sic)(not) be included for the purpose of levy of service tax. Therefore a prima facie case has been made out by the appellants for waiver of pre-deposit and accordingly we waive the requirement of pre-deposit of duty and penalties imposed against the appellants and also stay the recovery of the same.

(Pronounced in Court)