2007 (5) TMI 111 - AT - Service Tax

Demand Service tax) -Revenue contended that appellant was liable to pay service tax under Business Auxiliary service on the selling/marketing the services of BSNL - Held that revenue contention was not correct and set aside demand

Summary

Issues:
- Confirmation of Service Tax and penalty imposition under Sections 76 and 77 of the Finance Act based on the Commissioner (Appeals) order.
- Whether the appellants' activities fall within the purview of Business Auxiliary Services.
- Applicability of Sales Tax on the sale of post-paid/pre-paid Cellular Sim Cards by the appellants.
- Double taxation concern due to BSNL already paying service tax on the Sim cards sold to the appellants.

Analysis:

1. Confirmation of Service Tax and Penalty Imposition:
The appeal arose from the Commissioner (Appeals) confirming the ACCE's Order, which imposed Service Tax of Rs. 18,446/- and a penalty of Rs. 500/- under Sections 76 and 77 of the Finance Act. The appellants argued that they were merely distributors appointed by BSNL and not carrying out any service activity. However, the Commissioner held that their activities of selling/marketing BSNL services constituted Business Auxiliary Services, leading to the imposition of Service Tax and penalty.

2. Activities Falling within Business Auxiliary Services:
Upon review, the Tribunal found that the appellants were not engaged in Business Auxiliary Services but were involved in the purchase and sale of BSNL post-paid/pre-paid Cellular Sim Cards. The Tribunal emphasized that the appellants had paid the full value for the Sim Cards to BSNL and sold them in the market, resulting in a profit margin. This transaction was deemed as a typical business practice of selling goods, not a service. The Tribunal disagreed with the Commissioner's finding that the appellants' activities constituted Business Auxiliary Services, especially considering the absence of service provision by the appellants.

3. Applicability of Sales Tax:
The Tribunal noted that the issue of Sales Tax applicability was already pending before the Apex Court. It opined that the appellants' actions of purchasing and selling the Sim Cards aligned more with the concept of 'sale of goods,' attracting Sales Tax. The Tribunal highlighted the correspondence between the appellants and BSNL, where BSNL clarified that they had already paid service tax on the Sim cards sold to the appellants. This clarification indicated that BSNL had discharged its tax obligations, eliminating the possibility of double taxation on the appellants.

4. Double Taxation Concern:
The Tribunal addressed the concern of double taxation by emphasizing that BSNL had already paid service tax on the Sim cards sold to the appellants. Given this, subjecting the appellants to additional Service Tax would result in unjust double taxation. The Tribunal concluded that there was no merit in the Commissioner's order and set it aside, allowing the appeal with any consequential relief deemed necessary.

In conclusion, the Tribunal ruled in favor of the appellants, rejecting the imposition of Service Tax and penalty while highlighting that their activities did not qualify as Business Auxiliary Services. The Tribunal also considered the pending Sales Tax issue and the absence of grounds for double taxation, ultimately overturning the Commissioner's decision.