By TIOL News Service

NEW DELHI, SEPT 29, 2017: THE issue before the court is - Whether any attempt to e-recharge such SIM Cards is also liable to attract LBT. And the verdict from the Bombay High Court is unmistakable NO.

Facts of the case

The assessee is a provider of telecommunication services. The assessee provides a SIM card, a plastic/paper card encrypted with the unique number which is known as International Mobile Subscriber Identification (IMSI). It is stated that the SIM card enabled the subscriber to access the telecommunication service provided by the assessee. It is contended that the SIM card does not have any utility or intrinsic value by itself. Under newly-inserted Section 127(2)(aaa) of the Act, a provision was made for levy of LBT in lieu of cess or octroi. The State Govt. by a notification dated 25th March 2010 notified the Bombay Provincial Municipal Corporations (Local Body Tax) Rules, 2010. The LBT Rules provide a mechanism for levy and collection of LBT and rates of LBT. In exercise of the power u/s 127(2)(aaa) of the said Act, the State Govt. directed various Municipal Corporations in the State including the respondent corporation to levy LBT on the entry of the goods into the limits of the city for consumption, use or sale in lieu of octroi or cess w.e.f. 1 st April 2010. On 18th February 2011, another notification was issued by the State Govt. in exercise of the powers u/s 99B r/w section 152B and 152C by which the rates of LBT to be levied by the respondent corporation on entry of various categories of goods into the limits of the city for the financial year 2011 were notified.

The assessee claimed that it and its distributors were compelled to register themselves under the LBT Rules, which was done under protest. It was alleged that neither the assessee nor its distributors paid any LBT on SIM cards or recharge coupons or e-recharge. It was also alleged that officers of the respondent visited the premises of various distributors of the assessee and demanded LBT on SIM cards and recharge coupons on the basis of the amount/value of talk time mentioned. By a communication dated 30th October 2010, the assessee informed the respondent that the SIM cards, recharge coupons and e-recharge were not the goods which could be subjected to LBT and in fact, the assessees were paying service tax on providing telecommunication services. On 28th March 2013, the State Govt. issued a notification for fixing the rate of 3.5% on “SIM cards, memory cards, activation/renewal slips whether “recharged it online or otherwise”. The challenge in this petition under Article 226 of the Constitution of India was to the action of the respondent of assessing, levying and recovering LBT on SIM cards, recharge coupons and e-recharge brought into the limits of the first respondent. There was a consequential challenge to the notification dated 28th March 2013 issued by the State Government.

On hearing the petition, the High Court held that,

++ as far as e-recharge is concerned, by no stretch of imagination, it can be said that erecharge is capable of being brought into limits of a city. In clause 133 quoted above, erecharge is not specifically included. Assuming that it is included, it is nothing but an electronic download by use of internet. Hence, erecharge cannot be subject to levy of LBT. Erecharge is capable of being used. But it cannot be said that by downloading erecharge through internet, erecharge is brought into limits of a Municipal Corporation. Hence, LBT cannot be recovered on erecharge.

++ hence the SIM cards and recharge coupons/cards, as held earlier, would be covered by the definition of goods under subsection 25 of section 2 of the said Act. Charging section for LBT under the said Act is section 152P. LBT is leviable on the entry of goods into the limits of city for consumption, use or sale. Hence, the first respondent was well within its powers to levy LBT on SIM cards and recharge voucher in physical form.

(See 2017-TIOL-2063-HC-MUM-MISC)