2007 (6) TMI 511 - AT - Central Excise

CENVAT credit - sale of pre-paid SIM Cards - Held that - the service tax cannot be levied as the appellants were carrying on the activity of sale of pre-paid SIM cards - appeal allowed.

Summary

Issues:
1. Whether the sale of pre-paid SIM cards attracts service tax.
2. Whether the appellants were carrying on the activity of Business Auxiliary Service.
3. Whether the appellants were liable to pay service tax on the sale of pre-paid SIM cards.

Analysis:

Issue 1:
The appeals revolve around the question of whether the sale of pre-paid SIM cards by the appellants attracts service tax. The Orders-in-Appeal confirmed the imposition of Service Tax on the appellants for not paying tax on the pre-paid SIM cards sold on behalf of BSNL. The appellants argued that the sale of pre-paid SIM cards does not attract service tax. They relied on a previous decision by the Bench in the case of M/s. South East Corporation, where it was held that service tax cannot be levied as the appellants were engaged in the sale of pre-paid SIM cards. The Bench, after considering the submissions, found that the issue had already been settled in the mentioned case, and based on the precedent, the impugned order confirming service tax was set aside, and the appeals were allowed.

Issue 2:
The question of whether the appellants were engaged in the activity of Business Auxiliary Service was also raised. The Commissioner (Appeals) had found that the appellants were involved in marketing and distribution of products, falling under Business Auxiliary Service. However, the Bench disagreed with this finding. It held that the appellants were not providing any service but were simply engaged in the purchase and sale of goods, which falls under the ambit of 'sale of goods' attracting sales tax. The Bench emphasized that the appellants had paid the full value for the SIM cards to BSNL and sold them at a profit margin, indicating a regular business transaction. The correspondence with BSNL also confirmed that service tax had already been paid on the SIM cards sold to the appellants, eliminating the possibility of double taxation. Consequently, the Bench set aside the Commissioner (Appeals)'s finding regarding Business Auxiliary Service and allowed the appeals.

Issue 3:
Regarding the liability to pay service tax on the sale of pre-paid SIM cards, the Bench reiterated the decision from the case of M/s South East Corporation, emphasizing that the appellants were not carrying out any service but were involved in the purchase and sale of goods. The Bench noted that the correspondence with BSNL clarified that service tax had already been paid on the SIM cards sold to the appellants, further supporting the conclusion that no additional service tax was applicable in this scenario. Therefore, the impugned order imposing service tax was set aside, and the appeals were allowed based on the established legal principles and factual circumstances.

This detailed analysis of the judgment highlights the key legal issues involved, the arguments presented by the parties, and the reasoning behind the final decision rendered by the Bench.