IDEA MOBILE COMMUNICATION LTD. versus C.C.E. & C., COCHIN

Citation: [2011] 9 S.C.R. 789 · Decided: 04-08-2011 · Supreme Court of India · Bench: MUKUNDAKAM SHARMA

Judgment (excerpt)

(2011) 9 S.C.R. 789 
IDEA MOBILE COMMUNICATION LTD. 
A 
v. 
C.C.E. & C., COCHIN 
(Civil Appeal No. 6319 of 2011) 
AUGUST 04, 2011 
B 
~ 
[DR. MUKUNDAKAM SHARMA AND 
j 
ANIL R. DAVE, JJ.] 
Finance Act, 1994 - s.65 (105) zzzx - SIM cards -
Whether the value of SIM cards sold by the appellant to its c 
mobile subscribers is to be included in taxable service under 
s.65 (105) zzzx of the Finance Act, 1994, which provides for 
levy of service tax on telecommunication service or whether 
.. 
it was taxable as sale of goods under the Sa/es Tax Act -
Held: The amount received by the cellular telephone 
D 
. ,,. 
company from its subscribers towards SIM Card forms 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 sorvices 
provided and the dominant position of the transaction is to 
E 
provide services and not to sell the material i.e. SIM Cards 
which on its own but without the service would hardly have any 
value at all -
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 
F 
is calculated on the gross total amount received by the 
operator from the subscribers - No element of sale was 
involved in the transaction - Kera/a General Sales Tax Act, 
1963. 
The question which arose for consideration in the 
G 
.... ~ 
present appeal was whether the value of SIM cards sold 
by the appellant to its mobile subscribers is to be 
included in taxable service under Section 65 (105) zzzx 
of the Finance Act, 1994, which provides for levy of 
789 
H 
790 
SUPREME COURT REPORTS 
[2011] 9 S.C.R. 
, 
A service tax on telecommunication service or whether it 
was taxable as sale of goods under the Sales Tax Act. 
Dismissing the appeal, the Court 
B 
HELD:1.1. 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 store personal numbers and it stores 
c information which helps the network service provider to 
recognize the caller. (Para 12] [795-A-B] 
1.2. The High Court gave cogent reasons for coming 
to the conclusion that service tax is payable inasmuch 
., 
D as SIM Card has no intrinsic sale value and it is supplied 
to the customers for providing mobile service to them. 
'· 
(Para 17] (799-C-D] 
1.3. The sales tax authorities themselves conceded 
E 
the position before the High Court that no assessment 
of sales tax would be made on the sale value of the SIM 
Card supplied by the appellant to their customers 
irrespective of the fact whether they have filed returns 
and remitted tax or not. Also even if sales tax is wrongly 
~ 
remitted and paid that would not absolve them from the 
\ 
F responsibility of payment of service tax, if otherwise there 
is a liability to pay the same. If the article is not 
susceptible to tax under the Sales Tax Act, the amount 
of tax paid by the assessee could be refunded as the 
case may be or, the assessee has to follow the law as 
G may be applicable. But one cannot accept a position in 
law that even if tax is wrongly remitted that would absolve 
.~ 
the parties from paying the service tax if the same is 
otherwise found payable and a liability accrues on the 
assessee. The charges paid by the subscribers for 
H procuring a SIM Card are generally processing charges 
Ji, 
' 
) 
IDEA MOBILE COMMUNICATION LTD. v. C.C.E. & C., 791 
COCHIN 
for activating the cellular phone and consequently the 
A 
same would necessarily be included in the value of the 
SIM Card. There cannot be any dispute to the aforesaid 
position as the appellant itself subsequently has been 
paying service tax for the entire collection as processing 
charges for activating cellular phone and paying the 
B 
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 cellular telephone company from its subscribers 
towards SIM Card will form part of the taxable value for c 
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 provided and

Excerpt shown. Read the full judgment & AI analysis in Lexace.