2014 (11) TMI 1136 - AT - Service Tax

Business Auxiliary service - appellants are franchisee of BSNL for providing the service of promotion and marketing and distribution of various products of BSNL for which they were receiving commission - Held that - reliance placed in the case of M/s. Daya Shankar Kailash Chand Versus CCE& ST Lucknow 2013 (6) TMI 340 - CESTAT NEW DELHI where it was held that activity of purchase and sale of SIM card belonging to BSNL where BSNL has discharged the service tax on the full value of the SIM cards does not amount to providing business auxiliary services and confirmation of demand on the distributors for the second time is not called for - pre-deposit is waived - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on franchisee for promotion and marketing services provided to BSNL without payment.

Analysis:
The case involved an appeal against an Order-in-Original confirming a service tax liability of Rs. 95,43,690 along with interest and penalty under Sections 76, 77, and 78 of the Finance Act, 1994, for the period from 1-10-2005 to 31-3-2010. The appellants, acting as franchisees of BSNL, were providing promotion, marketing, and distribution services for which they received commission but did not pay service tax. The adjudicating authority determined that the appellants provided Business Auxiliary service, making them liable for service tax and the associated penalties.

The appellants contended that BSNL had already discharged the service tax liability upfront on the full value, inclusive of the commission received by the franchisees. They argued that they were not liable to pay the disputed service tax amount. The appellants relied on various judgments of CESTAT, including one involving M/s. Martend Food and Dehydrates (P) Ltd. and Others v. CCE, Kanpur, to support their claim.

Upon reviewing the case and the judgments cited, the Tribunal referred to the decision in the case of Daya Shankar Kailash Chand v. CCE & ST, Lucknow, where it was noted that the issue before the Supreme Court regarding the value of SIM cards was different from the issue at hand. The Tribunal also highlighted the decision in the case of Martend Food & Dehydrates Pvt. Ltd., where it was held that the activity of purchase and sale of SIM cards, with BSNL discharging the service tax, did not constitute providing business auxiliary services. The Tribunal, following this precedent, set aside the impugned order and allowed the appeal in favor of the appellants, granting them consequential relief.

The Tribunal, considering the settled legal position based on the cited judgments, waived the pre-deposit, allowed the appeal, and set aside the Order-in-Original confirming the service tax liability, interest, and penalty against the franchisees.