2018 (8) TMI 960 - AT - Service Tax

Business Auxiliary Services - distribution of pre-paid cards and recharge coupons purchased from BSNL - case of appellant is that BSNL had paid service tax on the entire value of the telecom products including the amount of commission paid to the franchisee/appellants - Held that - CESTAT has continuously held that telecom operators discharging service tax on the whole MRP value of SIM cards and recharge cards there could be no further service tax liability on the persons who are dealing / selling the said SIM cards or recharge cards to the public. When the appellants have received incentives and discounts in the course of their trading activity, they are not liable to pay service tax. Another case of Revenue is that there is a specific contract between BSNL and the appellants - Held that - Similar is the issue with all the service providers like BSNL and other operators and the respective dealers as has been elaborately discussed in Tribunal s Delhi order CCE vs. Moradabad Gas Services 2014 (1) TMI 199 - CESTAT NEW DELHI , where it was held that where the principal has already paid service tax on the full value of the SIM cards, franchise cannot be called upon to pay tax again on the same transaction on the ground that his activity is separately liable to service tax under the category of BAS. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Identification of services as "Business Auxiliary Services" under Section 65 of the Finance Act and imposition of service tax on commission received from BSNL by appellants.

Analysis:
The appellants, engaged in distributing pre-paid cards and recharge coupons from BSNL, were issued show-cause notices demanding service tax on the commission received. The original adjudicating authority and the appellate authority confirmed the notices, leading to the appeals. The issue in all 15 appeals was identical, and thus, disposed of collectively.

The appellants argued that their activity was trading of SIM cards and recharge coupons, not promotion and marketing. They highlighted that BSNL had already paid service tax on the telecom products, including the commission paid to them. Citing previous judgments, the appellants contended that the sale of SIM/recharge cards is not liable to service tax.

The Departmental Representative pointed out the agreement between BSNL and the appellants, emphasizing additional services beyond card sales. However, the Tribunal found the case aligned with previous rulings. It was established that if telecom operators pay service tax on the full MRP value of cards, there is no further liability for sellers. The Tribunal also referenced Supreme Court and High Court decisions supporting this stance.

Regarding incentives and discounts received by the appellants, they were found not liable for service tax based on various legal precedents. Consequently, the appeals by the appellants were upheld, while the Revenue's appeal was rejected. The order was pronounced on August 16, 2018.

In summary, the Tribunal ruled in favor of the appellants, emphasizing that the sale of SIM/recharge cards is not subject to service tax if telecom operators have already paid tax on the card value. The judgment highlighted the importance of legal precedents and established principles in determining service tax liability in similar cases.