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2015 (6) TMI 740 - AT - Service TaxValuation - whether during April 2003 to September 2006 distribution of free of recharge voucher attracts service tax liability or otherwise despite the fact that the recharge voucher are given free of cost to the dealers as consideration for commission. - Held that - Appellant is discharging the service tax liability under the category of Telephone Services on an amount received by them from distributors/dealers for the sale of prepaid SIM Cards; the SIM Cards are sold to the distributors/dealers on MRP and in lieu of the commission payable to them, appellant issues recharge vouchers to that amount which is commission, as free of cost. It is also undisputed that the dealers have recovered the amount as sale of such recharge vouchers from the ultimate subscriber/customer. Value of any taxable service shall be gross amount charged by the service provider for such services rendered by him. In the case in hand, during the relevant period, the appellant herein being service provider has discharged the service tax liability on the prepaid SIM Cards sold by them to the distributors/dealers. The sale of such prepaid SIM Cards on the MRP value is undisputed and discharge of service tax liability for services rendered on such sale is also accepted by revenue. It is to be noted that the recharge voucher are distributed free of cost, appellant has not received any amount towards the recharge voucher, though the distributors/dealers have sold the recharge vouchers. In our view distribution of recharge voucher fee of cost to the distributors/dealers would in a way amount to giving commission to the dealer for the transactions of sale of prepaid SIM Cards for the appellant. It can also be noticed that during the relevant period the Explanation as per the Section 67 of Finance Act, 1994 also do not indicate inclusion in that gross value of any cost towards free distribution made by the service provider. - impugned order is unsustainable and is liable to be set aside - Decisions in the cases of BPL Mobile Cellular (2007 (6) TMI 107 - CESTAT, CHENNAI) and Tata Tele Services Ltd. (2015 (4) TMI 80 - CESTAT MUMBAI) followed - Decided in favour of assesee.
Issues Involved:
1. Whether the distribution of free recharge vouchers to dealers as commission attracts service tax liability. 2. Interpretation of Section 67 of the Finance Act, 1994, regarding the value of taxable services. 3. Applicability of Service Tax (Determination of Value) Rules, 2006. 4. Relevance of CBEC Circulars and judicial precedents. Issue-wise Detailed Analysis: 1. Distribution of Free Recharge Vouchers and Service Tax Liability: The appellant, registered for providing "telephone services," was discharging service tax on the amount received from dealers for prepaid SIM Cards sold at MRP/RSP. The appellant provided free recharge vouchers to dealers as commission, which the dealers sold to subscribers. The Revenue argued that service tax should be paid on these free recharge vouchers, as they included an element of service tax not deposited in the Government treasury. The appellant contended that service tax liability should only be on the amount charged for services rendered, as per Section 67 of the Finance Act, 1994, and that free recharge vouchers did not constitute a taxable amount. 2. Interpretation of Section 67 of the Finance Act, 1994: Section 67 during the relevant period stated that the value of any taxable service shall be the gross amount charged by the service provider for such service rendered. The appellant argued that since they did not charge any amount for the free recharge vouchers, no service tax was due. The adjudicating authority, however, confirmed the demand for differential service tax, interest, and penalties, interpreting that the value of free recharge vouchers should be included in the taxable amount. 3. Applicability of Service Tax (Determination of Value) Rules, 2006: The appellant argued that Rule 6 of the Service Tax (Determination of Value) Rules, 2006, effective from 19.04.2006, did not include "Telephone Services" for determining the value of services rendered. The Tribunal noted that the rules post-19.04.2006 did not apply to telephone services and that the value should be the gross amount charged from the subscriber, as clarified by the 2011 amendment effective from 01.03.2011. 4. Relevance of CBEC Circulars and Judicial Precedents: The appellant relied on CBEC Circular No. 62/11/2003-ST, which stated that if the value charged is "zero," the tax will also be "zero." The Tribunal found this circular relevant and supportive of the appellant's case. The appellant also cited the Tribunal's decisions in BPL Mobile Cellular Ltd. and Reliance Communication Ltd., where it was held that service tax liability should be discharged on the actual amount received from dealers, not on free recharge vouchers. The Tribunal agreed with these precedents, noting that the appellant had not received any amount for the free recharge vouchers and thus no additional service tax was due. Conclusion: The Tribunal concluded that the appellant had correctly discharged the service tax liability on the amount received from dealers for prepaid SIM Cards and that the distribution of free recharge vouchers did not attract additional service tax. The impugned order was set aside, and the appeal was allowed, emphasizing that the service tax should be based on the gross amount charged for services rendered, not on free distributions. The Tribunal's decision was in line with the CBEC circulars and judicial precedents, ensuring a consistent interpretation of the law.
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