Punjab-Haryana High Court

Bharti Mobile Limited vs State Of Punjab & Ors on 16 October, 2024

Author: Sanjeev Prakash Sharma

Bench: Sanjeev Prakash Sharma

                                  Neutral Citation No:=2024:PHHC:135735-DB




CWP-3320-2004(O&M)
         2004(O&M)

                            Page 1 of 7

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         IN THE HIGH COURT OF PUNJAB AND HARYANA AT
                        CHANDIGARH
                                         CWP-3320-2004(O&M)
                                                     2004(O&M)
                                     Date of Decision: 16.10.2024
                                                            .2024

Bharti Mobile Limited
                                                                    . . . . Petitioner
                                          Vs.

State of Punjab and others
                                                                 . . . . Respondentss
                       ****
CORAM: HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
       HON'BLE MR. JUSTICE SANJAY VASHISTH

                                     ****
Present:       Mr. Rishab Singla, Advocate for the petitioner.

         Mr. Saurabh Kapoor, Addl. A.G., Punjab.
         (through video conferencing)
                               ****
SANJEEV PRAKASH SHARMA, J.(Oral)

1. The issue involved in the present writ petition is only limited to the

controversy whether the SIM Cards issued by the Bhar Bharti ti Mobile Limited

and distributed istributed in the State of Punjab are leviable to Octroi by the various

Municipal Councils, Councils when the same are being sold in their municipal

limits.

2. Heard the learned counsel for the parties and also examined the

provisions with their assistance.

3. "Octroi" has been defined as a cess without refunds on the entry into a

city or municipality of goods for consumption, use or sale therein. As per

the Municipal Account Account Code, 1930, any goods which are brought within

the limits of any Municipality, would be liable for a cess amount which

would be collected as a 'Octroi'.

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4. The question uestion therefore, however requires to be examined is whether S SIM IM

Card can be treated as "goods".. The said question is no more res intergra,,

keeping in view the judgments judgment passed by the Hon'ble Supreme Cour Court, t,

'BSNL Vs. Union of India', 2006(3) SCC 1 and 'Idea Idea Mobile

Communication Ltd. Vs. Commr. of C. Ex. & Cus., Cochin', 2011(23)

STR 433(S.C).

433(S.C)

In paragraph Nos. 86 and 87 of the BSNL's case (supra) (supra), Supreme

Court has held as under:

"

"86. In that case Escotel was admittedly engaged in selling cellular telephone instruments, SIM cards and other accessories and was also paying Central Sales Tax and Sales Tax under the Kerala General Sales Tax Act, 1963 as applicable. The question was one of the valuation of these goods. The State Sales Tax Authorities had sought to include the activation charge in the cost of the SIM card. It was contended by Escotel that the activation was part of the service on which service tax was being paid and could not be included w within ithin the purview of the sale.

The Kerala High Court also dealt with the case of BPL, a service provider. According to BPL, it did not sell cellular telephones. As far as SIM cards were concerned, it was submitted that they had no sale value. A SIM card me merely rely represented a means of the access and indentified the subscribers. This was part of the service of a telephone connection. The Court rejected this submission finding that the SIM card was "goods" within the definition of the word in the State Sales Tax Ta Act.

87. It is not possible for this Court to opine finally on the issue. What a SIM card represents is ultimately a question of fact, as has been correctly submitted by the States. In determining the issue, however the assessing authorities will have to keep in mind mind the following principles: if the SIM card is 2 of 7

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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 tha the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. There is insufficient material on the basis of which we can reach a decision. However we emphasise that if the sale of a SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. In our opinion the High High Court ought not to have finally determined the issue. In any the High Court erred in including the cost of the service in the value of the SIM card by relying on the "aspects"

doctrine. That doctrine merely deals with legislative competence. As has been been succinctly stated in Federation of Hotel & Restaurant Assn. of India v. Union of India: (SCC pp.

652-53, paras 30-31) "...

... subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power.

*** There might be overlapping; but the overlapping must be in law.

aw. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects." Wherein in the Hon'ble Apex Court while examining the imposition of

sales ales tax on the usage of SIM, SIM held that sales tax can be imposed.

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5. The question uestion of SIM card be "goods" was left to be further examined.

However, in Idea Mobile's case (supra) (supra),, the Supreme Court held as

under:

"12.. A SIM Card or Subscriber Identity Module is a

portable memory chip used in cellular telephones. It is a

tiny encoded circuit board which is fitted into cell phones

at the time of signing on as a subscriber. The SIM Card

holds the details of the subscriber, security data and

memory to storee personal numbers and it stores

information which helps the network service provider to

recognize the caller.....

19. There cannot be any dispute to the aforesaid position

as the appellant itself subsequently has been paying

service tax for the entire colle collection ction as processing charges

for activating cellular phone and paying the service tax

on the activation. The appellant also accepts the position

that activation is a taxable service. The position in law is

therefore clear that the amount received by the cel cellular lular

telephone company from its subscribers towards SIM

Card will form part of the taxable value for levy of service

tax, for the SIM Cards are never sold as goods

independent from services provided. They are considered

part and parcel of the services pro provided vided and the dominant

position of the transaction is to provide services and not

to sell the material i.e. SIM Cards which on its own but

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without the service would hardly have any value at all.

Thus, it is established from the records and facts of this

case se that the value of SIM cards forms part of the

activation charges as no activation is possible without a

valid functioning of SIM card and the value of the taxable

service is calculated on the gross total amount received

by the operator from the subscrib subscribers.

ers. The Sales Tax

authority understood the aforesaid position that no

element of sale is involved in the present transaction."

Thus, the Hon'ble Apex Court has found that the SIM Cards to be

never sold as "goods" independent from services provided. In vview iew

thereto, independently the SIM Cards cannot be termed as "goods" for the

purpose of Octroi.

6. The High Court of Judicature at Bombay, in Writ rit petition No. 7926 of

2006, titled as, 'Bharat Bharat Sanchar Nigam Limited Vs. The State of

Maharashtra' decided on 09.11.2017, held as under:

Maharashtra',

"10. The principle of levying service tax is distinct and

different from the principle applied to levy of octroi. Sales

tax can be levied on the amount at which a particular

commodity is sold. Octroi is to be levied on the price for

which a particular commodity is purchased. It could be

open to a sales tax authority to consider the price at

which the commodity is sold so as to levy sales tax. This

principle cannot fall within the domain of the authorities

who are empowered to levy octroi, as octroi is not

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dependent ent upon the price at which the commodity is sold,

but depends on the price at which the commodity is

purchased and brought within the Municipal Corporation

limits of a particular place. Octroi cannot be levied on the

talk time which would be a subject of the choice of a

customer.

11. Considering the above, we find that, the reason

assigned by the Corporation to levy octrol on the price at

which the petitioner may intend to sell its SIM card,

provided it is sold as a distinct object of sale, is an

unsustainable able ground and is not supported by any

provision of law which has been cited before us."

7. The Hon'ble Supreme Court in Special Leave Petition(C) Nos.16551 Nos.16551--

16555 of 2012, 'Bharat Sanchar Nigam Ltd Vs. The State of Andhra

Department' upheld the view taken by the High Court Pradesh Revenue Department',upheld

of Andhra Pradesh and held as under:

" In the present case, the High Court held that SIM

Cards, Rechargeable Coupons, Fixed Monthly Charges

and Value-Added Added Services (towards SMS, ring tones,

download music etc.) are not "goods". It relied upon not

only the judgment in "Idea Mobile Communication Communication"" but

also the judgments of this Court in "Bharat Sanchar

Nigam Ltd. vs. Union of India" [2006(2) SCR 8231,

"Associated Cement Companies Itd. vs. Commissioner of

Customs". [2001 (1) SCR 608] and "Tata Consultancy

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Services vs. State of A.P." (relied upon by the revenue) .

The High Court, however, remitted the matter for

consideration for ascertainment of facts relating to levy of

sales tax on non-refundable refundable deposits and refundable

deposits. It also held that the transactions relating to

telephone sets,, modems and caller IDs instruments are

subject to sales tax levy.

Having considered submissions of the learned counsel for

the parties and also having gone through the impugned

judgment, this Court is of the opinion that no interference

is called for especially ecially in view of the fact that the High

Court has taken note of all the decisions on the point."

8. In view of the above, we have no hesitation to hold that the SIM

Cards which have been distributed in various Municipal Councils ouncils for the

relevant period were not leviable to Octroi. According Accordingly,, the present writ

petition is allowed and the notifications dated 26.07.2001(Annexure P P-6),

6),

08.08.2001 (Annexure P-7) P 7) and 30.10.2002 (Annexure P P-8)

8) are hereby set

aside.

All pending applications also stand dismisse dismissed d as withdrawn

accordingly.

(SANJEEV SANJEEV PRAKASH SHARMA SHARMA) JUDGE

(SANJAY VASHISTH) JUDGE October 16,, 2024 Rashmi