2017 (9) TMI 938 - AT - Service Tax

Business Auxiliary Service - Commission received for selling SIM Card, Pre-paid and Recharge Vouchers of M/s. Bharti Cellular Ltd. - Held that - the value at which the SIM Card is sold, the telecom service provider i.e. M/s. Bharti Cellular Ltd. are liable to pay service tax on the entire value of the SIM Card, Pre-paid and Recharge Vouchers. Since the entire value which includes the commission suffered the service tax in the hands of the principal telecom service provider M/s. Bharti Cellular Ltd., the demand of service tax from the appellant who is only distributor of SIM Card/Pre-paid and Recharge Vouchers will amount to double taxation - similar issue decided in the case of RB AGENCIES Versus COMMISSIONER OF CENTRAL EXCISE, CALICUT 2007 (7) TMI 200 - CESTAT, BANGALORE , where it was held that the appellants do not render any service but simply sell the goods, Therefore, they would not be liable to pay Service Tax under the category of Business Auxiliary Services - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Demand of service tax on commission received for selling SIM cards and vouchers under Business Auxiliary Service category.
2. Liability of distributor to pay service tax on commission when telecom service provider has already paid tax on entire value.

Issue 1: Demand of service tax on commission under Business Auxiliary Service category
The appellant was engaged in selling SIM cards and recharge vouchers for a telecom service provider, receiving commission. The department demanded service tax on this commission under Business Auxiliary Service. The Ld. Assistant Commissioner for the Revenue reiterated the findings of the impugned order, stating that the telecom service provider was liable to pay service tax on the entire value of the SIM cards and vouchers, including the commission. However, the Tribunal found that since the telecom service provider had already paid service tax on the entire value, demanding service tax from the distributor would result in double taxation. The Tribunal referred to previous judgments to support this view, including the case of R.B. Agencies Vs. Commissioner of Central Excise, Calicut.

Issue 2: Liability of distributor to pay service tax when telecom service provider has already paid tax
In a similar case, the Tribunal considered whether a distributor was liable to pay service tax on commission received for selling SIM cards and vouchers when the telecom service provider had already paid tax on the goods. The Tribunal noted that the distributor merely purchased the goods and sold them for profit, without providing any additional services to attract service tax liability. Referring to the case of South East Corporation Vs. Commr. of Cus. C. Ex. & S.T., Cochin, the Tribunal held that the distributor's activity fell within the purview of sale of goods, not Business Auxiliary Service. The Tribunal concluded that there was no merit in the demand for service tax and set aside the impugned order, allowing the appeal.

In both issues, the Tribunal emphasized that the distributor's role was limited to selling goods and earning a profit, without engaging in activities that would warrant service tax liability. The judgments cited supported the view that when the principal service provider had already paid tax on the goods, imposing service tax on the distributor would lead to double taxation, which was not sustainable. Ultimately, the Tribunal ruled in favor of the distributors in both cases, setting aside the demand for service tax.