2016 (4) TMI 1249 - HC - Central Excise

Business Auxiliary Service - Levy of ST on sale of SIM Cards of BSNL - Telecommunication Service or Business Auxiliary Service? - the notice to be issued to the respondents to decide the issue.

Summary

Issues:
1. Interpretation of the demand of Service Tax for "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994.
2. Calculation of taxable service value in relation to SIM card activation charges.
3. Clarification on double taxation regarding distinct services under "Telecommunication Service" and "Business Auxiliary Service."
4. Justification of rejecting the Department's plea based on previous case law and circulars.

Issue 1: Interpretation of "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994.
The judgment raises the question of whether the demand of Service Tax, interest, and penalties for the period in question was correctly confirmed by the Hon'ble CESTAT. The appellant argues that the "Business Auxiliary Service" was clearly defined under Section 65(19) of the Finance Act, 1994, and included services rendered by the respondent. The judgment refers to the law propounded by the Hon'ble Supreme Court in the case of Idea Mobile Communication Ltd. v. Commissioner of Central Excise & Customs, Cochin (2011), emphasizing the need to determine if the demand was justified based on the legal provisions.

Issue 2: Calculation of taxable service value related to SIM card activation charges.
The judgment questions the correctness of the Hon'ble CESTAT's decision to drop the demand based on the value of the SIM card forming part of activation charges. It cites the Supreme Court's ruling in the Idea Mobile Communication case, where it was established that the value of the taxable service is calculated on the gross total amount. The judgment highlights the distinction between transactions to BSNL and payments by BSNL, raising doubts about the justification for dropping the demand in this context.

Issue 3: Clarification on double taxation and distinct services under "Telecommunication Service" and "Business Auxiliary Service."
The judgment delves into whether the Hon'ble CESTAT erred in treating the situation as double taxation, emphasizing the distinct nature of services. It points out that Service Tax was paid on the full value of the SIM card by BSNL under "Telecommunication Service," not under "Business Auxiliary Service." The demand from the respondent under the category of "Business Auxiliary Service" on the commission received from BSNL is deemed different from the "Telecom Service," raising concerns about the correctness of the CESTAT's decision.

Issue 4: Justification of rejecting the Department's plea based on previous case law and circulars.
The judgment questions the justification behind the Hon'ble CESTAT rejecting the Department's plea, citing detailed reasons provided in a previous case involving M/s Martend Food & Dehydrates Pvt. Ltd. The judgment highlights the argument that tax should not be demanded when someone else has paid tax on the taxable value of a service, emphasizing the importance of consistency in tax application. The judgment refers to Board's Circulars and previous case law to support the decision to issue notice to the respondent, indicating a thorough consideration of legal precedents and circular guidelines.

The judgment by the High Court of Allahabad addresses multiple complex issues related to the interpretation of Service Tax laws, calculation of taxable service values, double taxation concerns, and the application of legal precedents and circulars. It reflects a detailed analysis of the legal framework and emphasizes the need for clarity and consistency in determining tax liabilities in the context of distinct services and transactions.