2023 (8) TMI 1150 - AT - Service Tax

Levy of service tax - Business Auxiliary Service or not - appellant is Authorized distributor/Franchisee - dealing with recharge coupon/mobile connection and getting commission from BSNL - HELD THAT - This issue has been considered by various benches of the Tribunal and has consistently been held that the assessee is not liable to pay service tax under the category of Business Auxiliary Service . Further, in view of the judgement of GOYAL AUTOMOBILES AND NAROTA RAM GOYAL SONS VERSUS COMMISSIONER OF CENTRAL EXCISE CHANDIGARH - II 2016 (2) TMI 725 - CESTAT NEW DELHI which was not challenged by the Revenue before the appellate authority wherein the Tribunal held the commission paid to appellants is also included in the value on which tax has been collected from the customer. The customer is, consequently, the recipient of the full value of services from none other than M/s. Bharat Sanchar Nigam Ltd.; thus, it is no different from the other two products. Further, this Tribunal in the case of M/S. DEVANGI COMMUNICATIONS, M/S. BOOPALAM ELECTRONICS, INDEPENDENT ASSOCIATES, M/S. SOMAYA MARKETING, M/S. VINAYAKA AGENCIES, M/S. MAGNUM VISION, M/S. BHOOPALAM MARKETING SERVICES PVT. LTD. VERSUS THE COMMISSIONER OF SERVICE TAX, THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-II AND CCE VERSUS SHRI V.M. NAYAK BENNE 2018 (8) TMI 960 - CESTAT BANGALORE held that when the telecom operators are discharging service tax on the whole MRP value of SIM cards and recharge cards, then 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. The impugned order is not sustainable in law - Appeal allowed.

Summary

Issues Involved:
1. Liability to pay service tax under "Business Auxiliary Service."
2. Applicability of extended period of limitation.
3. Justification of interest and penalties imposed.

Summary:

1. Liability to pay service tax under "Business Auxiliary Service":
The appellant, an authorized distributor of BSNL, was issued a show cause notice demanding service tax on commissions and discounts received, alleging they provided services under "Business Auxiliary Service" as defined in Section 65(19) of the Finance Act, 1994. The appellant contended that BSNL had already discharged service tax on the full value, including the appellant's commission, thus arguing against double taxation. The Tribunal cited multiple precedents, including cases like M/s Lovely Traders vs. CCE & ST, Rohtak, and Goyal Automobiles vs. CCE, Chandigarh, which consistently held that distributors dealing with recharge coupons/mobile connections and receiving commissions from telecom operators are not liable to pay service tax under "Business Auxiliary Service." The Tribunal agreed with these precedents, finding that the appellant was not liable for the service tax demanded.

2. Applicability of extended period of limitation:
The show cause notice invoked the extended period of limitation under Section 73(1) of the Finance Act, 1994, alleging non-declaration of service tax practices by the appellant. The appellant argued that their belief in non-liability was bona fide, supported by various judicial decisions, including Collector of Central Excise vs. Chemiphar Drugs & Liniments and M/s Padmini Products vs. Collector of Central Excise. The Tribunal found merit in the appellant's argument, noting that similar issues had been adjudicated in favor of the appellants in other cases, thus negating the applicability of the extended period of limitation.

3. Justification of interest and penalties imposed:
The Commissioner had ordered recovery of interest under Section 75 and imposed penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant contended that there was no malafide intention, and thus, the imposition of interest and penalties was unjustified. The Tribunal, referencing the consistent judicial stance on similar matters, found that the demand for interest and penalties was not warranted. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law.

Conclusion:
The Tribunal concluded that the appellant was not liable to pay service tax under "Business Auxiliary Service," the extended period of limitation was not applicable, and the imposition of interest and penalties was unjustified. The appeal was allowed with consequential relief.