2017 (8) TMI 221 - AT - Service Tax

Business Auxiliary Services - whether the sale and purchase of SIM cards, recharge coupons, starter packs would amount to business auxiliary service? - Held that - similar issue settled by the judgment in the case of The Commissioner of Central Excise Versus M/s. Bharat Cell 2015 (10) TMI 1111 - MADRAS HIGH COURT , where Decision made in the case of G.R. Movers vs. Commissioner of Central Excise, Lucknow 2013 (6) TMI 339 - CESTAT NEW DELHI followed and it was held that there is no business auxiliary service and the demand is set aside. Amount reflected in the credit notes issued by M/s. VCL to appellant - demand - Held that - these are nothing but reimbursable expenses - issue stands covered by the decision in the case of Commissioner of Service Tax Versus M/s. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT , where it was held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission. Margin earned by the appellant for outright purchase and sale of pepsico products - demand - Held that - It is not disputed that the appellants in these appeals have discharged VAT on the products sold by them. Therefore, the department cannot demand service tax basing upon the distribution agreement entered into with M/s. Pepsico Holdings (India) Pvt. Ltd. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Taxability of margin earned on resale of recharge vouchers and electronic coupons.
2. Taxability of credit notes issued by the principal company.
3. Taxability of margin earned on the sale of other products.

Analysis:

1. The appellants were distributors of a cellular company and earned a margin on the resale of recharge vouchers and electronic coupons. The department alleged that this margin constituted a discount or commission, leading to a demand for service tax. The appellants argued that the margin was not a commission or discount, and they were not providing business auxiliary services. They contended that the principal company had already paid service tax on the entire MRP. The appellants cited relevant case law to support their position, including judgments from various High Courts. The Tribunal found in favor of the appellants, stating that the demand for service tax on the margin earned was unsustainable.

2. In two specific appeals, the demand was based on credit notes issued by the principal company to the appellants. The appellants argued that these credit notes were reimbursements for various expenses and should not be included in the taxable value. Citing a relevant judgment from the High Court, the appellants contended that reimbursable expenses cannot be taxed. The Tribunal agreed with the appellants, holding that the demand based on the credit notes was unsustainable.

3. Another issue raised in two appeals was the taxability of the margin earned on the sale of products other than recharge vouchers and electronic coupons. The appellants had already paid VAT on these products and argued that the demand for service tax was unjustified. They relied on a Tribunal decision to support their position. The Tribunal concurred with the appellants, stating that the department could not demand service tax on products where VAT had already been paid. The judgment cited by the appellants was deemed applicable to this issue as well.

In conclusion, the Tribunal found the demands raised by the department to be unsustainable in all aspects. The impugned orders were set aside, and the appeals were allowed with any consequential relief.