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2018 (3) TMI 556 - HC - Service TaxBusiness Auxiliary Services - appellants are franchisee/distributors appointed by the BSNL for sale of SIM cards - Held that - the law is settled by the Hon ble Apex Court in the case of Martend Food & Dehydrates Pvt. Ltd. 2013 (6) TMI 339 - CESTAT NEW DELHI , where it has been held that the activities of purchase and sale of SIM cards belonging to BSNL where BSNL has discharged the service tax on the full value of the SIM cards does not amount to providing business auxiliary service - appeal dismissed - decided against Revenue.
Issues:
1. Interpretation of "Business Auxiliary Service" under section 65(19) of the Finance Act, 1994. 2. Exemption from service tax under notification no. 25/2012-ST dated 20.6.2012. 3. Taxability of SIM card value in relation to service tax. 4. Distinction between "Telecommunication Service" and "Business Auxiliary Service." 5. Consideration of previous CESTAT case regarding service tax liability of distributors to BSNL. Issue 1 - Interpretation of "Business Auxiliary Service": The High Court addressed whether the activities of purchasing and selling SIM cards by franchisee/distributors appointed by BSNL constitute "Business Auxiliary Service." The court noted that the distributors did not engage in promoting BSNL goods and that BSNL had already paid service tax on the SIM cards. The court concluded that the distributors' activities did not fall under the purview of "Business Auxiliary Service," leading to a finding against the demand for service tax and penalties. Issue 2 - Exemption under notification no. 25/2012-ST: The court examined whether the exemption from service tax, effective from 1.7.2012 under notification no. 25/2012-ST, justified dropping the demand for service tax. The court found that the activities of the distributors, involving the sale of SIM cards where BSNL had already paid service tax, did not amount to providing business auxiliary service. Consequently, the court ruled in favor of the assessee, dismissing the appeal at the admission stage. Issue 3 - Taxability of SIM card value: Regarding the taxability of SIM card value in relation to service tax, the court considered the value of SIM cards as part of activation charges. The court referred to a Supreme Court judgment on the calculation of taxable service based on the gross amount received by the operator from subscribers. The court found that the demand for service tax on the same amount from the distributors would result in double taxation, which is impermissible under the law. Issue 4 - Distinction between services: The court analyzed whether the demand for service tax under "Business Auxiliary Service" on communication received from BSNL, distinct from "Telecommunication Service," constituted double taxation. The court emphasized that service tax had already been paid by BSNL under "Telecommunication Service" for the full value of SIM cards, making the demand under "Business Auxiliary Service" unsustainable. Issue 5 - Previous CESTAT case precedent: The court considered a previous CESTAT case involving a similar scenario where BSNL paid service tax for telecommunication services, and distributors were demanded service tax under "Business Auxiliary Service." The court referred to the precedent recognizing the distinction between the services provided by BSNL and distributors. Based on this precedent and the absence of service provision related to BSNL goods promotion, the court ruled against the demand for service tax and penalties. In conclusion, the High Court dismissed the appeal, citing the precedent set by the Supreme Court and previous CESTAT cases, ruling in favor of the assessee due to the absence of "Business Auxiliary Service" activities by the distributors and the risk of double taxation on the same value of SIM cards already taxed by BSNL.
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