IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN FRIDAY, THE 17TH JULY 2009 / 26TH ASHADHA 1931 WA.No. 1685 of 2002(D) ---------------------- AGAINST THE JUDGEMENT/ORDER IN OP.17311/2002 Dated 28/06/2002 .................... APPELLANT(S): PETITIONER: ------------------------- M/S.BPL MOBILE CELLULAR LTD., XL 5115, ASHIS BUILDING, SHANMUGHAM ROAD, KOCHI-682 031, REPRESENTED BY ITS ASST.MANAGER (LEGAL), MR.RAJESH MELETH VEETTIL. BY ADV. SRI.A.KUMAR SRI.A.HIDAYATULLA SR RESPONDENT(S): RESPONDENTS: --------------------------- 1. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY,MINISTRY OF FINANCE, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE ASSISTANT COMMISSIONER (ASSMT)-III, COMMERCIAL TAXES, SPECIAL CIRCLE-1, ERNAKULAM. 3. INTELLIGENCE OFFICER, SQUAD NO.I, OFFICE OF THE INSPECTING ASST.COMMISSIONER(INT), DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD. 4. THE DEPUTY COMMISSIOER OF COMMERCIAL TAXES, PALAKKAD. SPL.GOVT.PLEADER FOR R1 TO 4 SHRI.VINOD CHANDRAN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17/07/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA 1685/02 CMP NO.4312 OF 2002 IN WA NO.1685 OF 2002 DISMISSED SD/-P.R.RAMAN, JUDGE 17.7.2009 SD/-P BHAVADASAN TRUE COPY PA TO JUDGE P.R.RAMAN & P.BHAVADASAN, JJ. -------------------------------------------------------- WA NO.1685 OF 2002 -------------------------------------------------------- Dated 17th July 2009 Judgment RAMAN, J. This Writ Appeal is filed against the judgment of the learned Single Judge in OP No.17311 of 2002. The appellant is the writ petitioner, who challenged Ext.P7 order imposing penalty by the 3rd respondent under S.45A of the Kerala General Sales Tax Act, 1963. The main contention raised in the OP was that before passing the final assessment orders, proceedings for imposing penalty had been initiated. But, following the decision of this court in Jyothi Laboratories v. The Inspecting Assistant Commissioner (HC) (1993) 1 KTR 500), the above said contention was repelled. Then it was contended that there was no proper consideration of the issue raised by the petitioner. On the said point, it was held that the petitioner can canvass this question before the statutory authorities either by way of revision and thereafter by way of second revision. Therefore, relegating the petitioner to approach the statutory WA NO.1685/02 2 authorities and without going into the merits of the contentions raised, the Writ Petition was disposed of, but the proceedings pursuant to Ext.P8 demand notice was ordered to be deferred so as to enable the petitioner to approach the appropriate statutory authorities. The learned counsel for the appellant, however contended before us that the prime contention as to whether the SIM cards are goods liable to be taxed under the KGST Act though specifically raised in Grounds G, F etc., were not considered. At this stage, however, it need not be left to be decided by the statutory authorities since this court by an authoritative pronouncement held that SIM cards are not goods liable to be taxed under the KGST Act. 2. We heard the learned counsel on both sides. A Division Bench of this Court in WP(C) No.29731/05 and connected cases, filed by similar cellular operators, considered the question as to whether SIM cards attract sales tax as sale of goods. This Court referred to the fact that the case of Bharat Sanchar Nigam Limited was earlier considered by the Supreme Court which remanded the matter to the Assessing Officer as WA NO.1685/02 3 per the judgment in BSNL v. Union of India (2006) 145 STC 91). After the remand, the Department accepted the contention of the BSNL. Divergent decisions were taken by different mobile operators in the State and ultimately, the matter came before the Division Bench on the question as to whether some of the companies offered service tax on value of SIM cards and recharge coupons. Reference was made to the judgments in STRV No.292/04 and WP(C)No.29642/04, wherein it was held that there was no sale of goods involved and it is part of taxable service rendered by the service provider and those writ petitions were allowed declaring that there is no sale of goods involved and it is only part of taxable service rendered by the service provider. In other words, only the Central Government can collect service charges on the taxable service covering the value of SIM cards, activation charges etc. and no sales tax could be levied. Following the above decision, the question as to whether sales tax is leviable on SIM cards is no longer a res integra between the parties. The penalty imposed under Section 45A of the KGST Act on the assumption that tax is leviable on WA NO.1685/02 4 sale of SIM cards has, therefore, lost its foundation. We accordingly quash Ext.P7. The Writ Appeal is allowed as above. P.R.RAMAN, JUDGE P.BHAVADASAN, JUDGE sta WA NO.1685/02 5