2017 (12) TMI 236 - AT - Service Tax

Business Auxiliary Service - transaction in Electronic Recharge Coupons (ERCs) - commission/discount earned by the respondent on such transaction in ERC - Held that - There was no relationship of agent and principal between the respondent and the telecom operators - similar issue decided in the case of Chotey Lal Radhey Shyam 2015 (11) TMI 979 - CESTAT ALLAHABAD , where the Tribunal held that when the telecom operators paid service tax on the full MRP of such ERCs/SIM cards, there is no liability on the appellant, who are involved in sale of such ERC/SIM cards to the subscribers. The telecom operators have paid service tax on the full MRP of ERC, which was further sold by the respondent, service tax not attracted - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Applicability of service tax on commission/discount earned by the respondent on transactions in Electronic Recharge Coupons (ERCs) under "Business Auxiliary Service."
2. Determination of the relationship between the respondent and the telecom operators regarding the distribution and promotion of ERCs.
3. Assessment of liability to pay service tax on transactions in ERCs by the respondent.

Analysis:
1. The dispute in the case revolved around the service tax liability on the commission/discount earned by the respondent on transactions in ERCs under the category of "Business Auxiliary Service." The Revenue contended that the respondent's activities of distribution, promotion, and marketing of ERCs on behalf of telecom operators made them liable for service tax. However, the Commissioner dropped all proceedings, stating that the respondent was buying and selling ERCs on their own account, without involving any service of promotion or marketing. The Original Authority's decision was based on a detailed analysis of the agreements, concluding that the service tax liability did not apply in this scenario.

2. The appellant argued that the respondent was acting as a bridge between subscribers and telecom operators, distributing and promoting the telecom services. The appellant emphasized that there was no sale of goods involved, and the delivery of SIM cards or ERCs was solely for rendering services to subscribers. Referring to relevant court decisions, the appellant contended that the respondent's role was that of a distributor and promoter of telecom services, not subject to service tax under "Business Auxiliary Service." The appellant criticized the Original Authority's decision for dropping the demand.

3. The Tribunal noted that the only issue for consideration was the respondent's liability to pay service tax on transactions in ERCs. After examining the agreements involved, the Tribunal found that the respondent was not acting as an agent of telecom operators, even when receiving commission for marketing and promoting the telecom services. Citing previous Tribunal decisions and High Court judgments, the Tribunal concluded that since the telecom operators had already paid service tax on the full MRP of the ERCs, the respondent's liability for service tax did not apply. The Tribunal dismissed the Revenue's appeal, stating that the decisions relied upon by the Revenue did not align with the facts of the present case.

In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing that the respondent's activities did not fall under the purview of "Business Auxiliary Service" for service tax liability. The judgment highlighted the importance of analyzing the specific contractual terms and the nature of the transactions to determine the applicability of service tax in such cases.