P. Sam Koshy, J.

1. Heard Mr. S. Suri Babu, learned counsel appearing for Mr. S. Krishna Murthy, learned counsel for the petitioner; and Mr. Swaroop Oorilla, learned Special Government Pleader for State Tax, for the respondents.

2. The present Writ Petition under Article 226 of the Constitution of India has been filed by the petitioner challenging the revision order R.C.No.E3/R/80/2005-06, dated 06.04.2006, passed by respondent No.2 under the Andhra Pradesh General Sales Tax, 1957 (for short the ‘APGST Act’) to levy turnover tax under Section 5A of the APGST Act on the second and subsequent sales of cell phones and telephones and levy of tax on airtime charges.

3. Vide the impugned order, respondent No.2 initiated the revisional proceedings under Section 20(2) of the APGST Act for the assessment year 2000-01 and to levy turnover tax to the tune of Rs.1,38,81,530/- @ 1% interest rate.

4. The facts of the case are that the petitioner is a Hindu Undivided Family concern and is engaged in the distribution of cell phones and airtime charges and is an assessee on the rolls of respondent No.1. Respondent No.1 vide proceedings dated 06.03.2002, completed the final assessment under the APGST Act for the year 2000-01. While completing the said assessment, respondent No.1 exempted second sales of cell phones and telephones amounting to Rs.1,38,81,530/- and airtime charges amounting to Rs.1,27,56,046/.

5. Respondent No.2 in exercise of its revision power under Section 20(2) of the APGST Act issued a revision show cause notice dated 27.01.2003, proposing to levy turnover tax under Section 5A of the APGST Act on a turnover of Rs.1,38,81,530/- at 1% rate of interest. The petitioner filed its objections dated 04.03.2003, bringing to the notice of respondent No.2, the clarification issued by respondent No.3 dated 18.02.2003 to the effect that no turnover tax under Section 5A could be levied on second sales of cell phones and telephones. The said Circular was, however, superseded by a subsequent Circular dated 04.06.2004 prospectively, and no further orders were passed on the said notice.

6. Respondent No.2 after a gap of 3 years had again issued a show cause notice dated 17.03.2006 proposing levy of turnover tax on the same turnover of Rs.1,38,81,530/- and in addition a turnover of Rs.1,27,55,046/- representing charges collected towards airtime. In reply to the revision show cause notice, the petitioner filed its objections dated 29.03.2006 and reiterated the clarification issued by respondent No.3 and its subsequent supersession prospectively in respect of second / subsequent sales of cell phones / telephones and also produced the latest judgment of the Hon’ble Supreme Court in the case of M/s. Bharat Sanchar Nigam Limited Vs. Union of India Ltd. ([(2006) 42 APSTJ 85]) wherein it was held that ‘airtime charges’ cannot be considered as “goods” and requested respondent No.2 to drop further action. In spite of the said reply, respondent No.2 vide proceedings dated 06.04.2006, passed the impugned order confirming the turnovers proposed for assessment on the ground that the circular instructions of the Commissioner of Commercial Taxes are not binding on it and that the decision of the Hon’ble Supreme Court has no application to the facts of the present case.

7. The petitioner submitted that under Section 42-A of the APGST Act, the instructions and directions issued by respondent No.3 / The Commissioner of Commercial Taxes are binding on all Officers except the appellate authorities, therefore the respondent No.2 has no jurisdiction to pass the impugned order. That the petitioner has no other alternative and effective remedy except to file the present Writ Petition and the Writ Petition is therefore maintainable.

8. Learned counsel appearing for the petitioner submitted that the respondent No.1 in response to the representation made by the sister concern of the petitioner in his reference dated 18.2.2003 categorically stated that “turnover tax under Section 5A of the APGST Act” is not leviable on the subsequent sales of telephone / cell phones w.e.f. 01.06.2000 as per the notification issued in G.O.Ms. No.911 Rev. dated 31.12.1999 read with G.O.Ms. No. 370, dated 01.06.2000. The said G.O exempted all kinds of electronic goods, computers etc. from levy of turnover tax under Section 5A of the APGST Act.

9. It was further submitted that the said G.O. dated 01.06.2000 categorically stated that electronic goods enumerated therein are liable to tax only at 4%. That “telephones” are covered by HSN Code 8517, whereas cell phones are covered by HSN Code 8525. Both the said code numbers are detailed against item 12 of the goods enumerated in the said G.O. In spite of the specific directions issued by respondent No.3 with reference to the aforesaid G.Os., respondent No.2 rejected the contentions and the clarification given in the endorsement dated 18.02.2003 which otherwise is clearly binding on respondent No.2 and the impugned order is therefore without jurisdiction and violative of the statutory directions issued by respondent No.3.

10. Learned counsel appearing for the petitioner also contended that respondent No.2 issued show cause notice dated 27.01.2003 proposing to levy turnover tax on second sales of telephones and cell phones, but no orders were passed on the said show cause notice. In the second show cause notice dated 17.3.2006, respondent No.2 has not referred to the earlier proceedings initiated by him and the orders, if any, passed thereon. Instead respondent No.2 initiated fresh proceedings on the same turnover which the petitioner presumes that the earlier proceedings have not been concluded and initiation of the fresh proceedings on the same turnover is highly illegal.

11. Learned counsel appearing for the petitioner further contended that respondent No.2 relied on the decision of the Kerala High Court in the case of Escotel Mobile Communications Ltd. vs. Union of India ((2002) 126 STC 475 (Kerala)) wherein it was held that sale of SIM cards are “goods” within the definition of the word “goods” in the Kerala General Sales Tax Act, 1963. The Hon’ble Supreme Court had not given any finding on the ground that there is insufficient material on the basis of which it can reach a decision, however, the Hon’ble Supreme Court held that if the sale of a SIM Card is merely incidental to the service being provided and only facilitates identification to the subscribers, their credit and other details would not be assessable to sales tax. In any event, the High Court erred in including the cost of the service in the value of the SIM Card by relying on the aspects doctrine. Therefore, in view of the above observation of the Hon’ble Supreme Court the decision of the Kerala High Court cannot be followed overlooking the findings of the Hon’ble Supreme Court in the matter.

12. On the other hand, the learned Special Government Pleader for State Tax argued on the sole contention that the petitioner was a dealer involved in sales of airtime cards and such sale of SIM Cards / airtime cards cannot be said to be mere incidental to the service as it is not a telephone service provider. The transaction that took place in this case amounts to be a separate object of sale as is evident from the copies of sale invoices filed by them and, as such, it is exigible to tax and hence the contentions put forth by the petitioner that the turnover relating to airtime cards do not form part of the turnover at all is not tenable and not acceptable.

13. Having heard the questions put forth on either side and on perusal of records, the question that falls for consideration is “whether the petitioner can claim exemption on the total turnover of subsequent sale of telephones and cell phones for the assessment year 2000-2001 having regard to the clarification issued by respondent No.3 dated 18.02.2003 read with G.O.Ms.No.911 Rev. dated 31.12.1999 and G.O.Ms.No.370 Rev. dated 01.06.2000?

14. Having perused the material on record, this Bench finds considerable force in the contention advanced by the learned counsel appearing for the petitioner. The record discloses that respondent No.3 vide its reference dated 18.02.2003 categorically clarified that turnover tax under Section 5A of the APGST Act was not leviable on the subsequent sales of telephones and cell phones with effect from 01.06.2000 pursuant to the G.O.Ms.No.911 Rev. dated 31.12.1999 read with G.O.Ms.No.370 Rev. dated 01.06.2000. The relevant portion of the said clarification reads thus:

               “…Adverting to your letter cited, it is informed that turnover tax under Section 5-A of the APGST Act, 1957, is not leviable on the subsequent sales of Telephones / Cell Phones with effect from 1-6- 2000…”

15. It was only by a subsequent Circular dated 04.06.2004 that this exemption came to be withdrawn and that too expressly on a prospective basis. The relevant portion of the said Circular reads thus:

               “….The Attention of all DCs (CT) in the state is invited to the reference cited. They are informed that Telephones and Cell Phones fall under item 11 of the ‘1st Schedule of the APGST Act, 1957’. Hence, turnover tax is leviable on the subsequent sales of Telephones and Cell Phones. These instructions are issued in supercession of the clarification issued in the reference cited above and shall be complied with prospectively.”

16. Since the impugned revision pertains to the assessment year 2000-2001, which falls well within the period covered by the exemption and well before the date on which the withdrawal took effect, the turnover in question stood squarely covered by the exemption at the relevant point in time.

17. Under Section 42-A of the APGST Act, the instructions and clarifications issued by the Commissioner of Commercial Taxes bind all Officers subordinate to him except appellate authorities, and the Page 10 of 11 respondent No.2 accordingly had no jurisdiction to treat the said clarification as non-binding or to reopen an issue already settled by it. Per contra the reliance placed by respondent No.2 on the decision of the Kerala High Court in the case Escotel Mobile Communications Ltd. (supra) is misplaced since the Hon’ble Supreme Court while dealing with the matter observed that the sale of a SIM Card, where merely incidental to the service and used only for identification of the subscriber, would not be exigible to sales tax, and that the High Court had erred in importing the value of the service into the value of the card.

18. The same reasoning extends with equal force to the levy on airtime charges, which stands answered against the Revenue by the judgment of the Hon’ble Supreme Court in the case of M/s. Bharat Sanchar Nigam Limited vs. Union of India ((2006) 42 APSTJ 85) holding that airtime charges do not constitute “goods” exigible to sales tax. The second show cause notice dated 17.03.2006 also does not advert to the fate of the earlier show cause notice dated 27.01.2003 issued on the identical turnover and re-agitates the same issue without any fresh material or change in law justifying reopening.

19. Therefore, since the Commissioner of Commercial Taxes had exempted the levy of tax on the total turnover of subsequent sale of telephones and cell phones by the circular with effect from 01.06.2000 as per G.O.Ms.No.911 and the levy of tax on the said turnover was made applicable only with effect from 04.06.2004 and that too prospectively, the petitioner is held to be exempted from paying the amount demanded and the impugned revisional order passed by the respondent No.2 is hereby set aside accordingly.

20. In view of the aforesaid discussion, the question of law framed in this case stands answered in favour of the petitioner and against the Revenue Department. The Writ Petition accordingly stands allowed.

21. As a sequel, miscellaneous petitions pending if any, shall stand closed. However, there shall be no order as to costs.