2018 (6) TMI 1153 - AT - Service Tax

Business Auxiliary Services - appellants are engaged in distribution of pre-paid cards and recharge coupons owned by M/s. IDEA Media Communications Ltd. Cochin - demand of service tax with education cess - 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 - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of services under Business Auxiliary Services, liability to pay service tax, applicability of case laws, interpretation of agreements between parties.

Analysis:
1. Classification of services under Business Auxiliary Services: The appellants, engaged in the distribution of pre-paid cards and recharge coupons, were issued a show-cause notice for service tax under Clause 19 of Section 65 of the Finance Act. The department argued that the services provided fell under "Business Auxiliary Services." The original adjudicating authority and the appellate authority confirmed the demand, leading to the appeal.

2. Liability to pay service tax: The appellants contended that their activity was trading of SIM cards and recharge coupons, not promotion and marketing as considered in the impugned order. They highlighted receiving incentives and discounts related to sales, with M/s. IDEA Media Communications Ltd. already paying sales tax on SIM cards. Citing various case laws, the appellants argued that the sale of SIM/recharge cards is not liable to service tax.

3. Applicability of case laws: The Tribunal found that previous judgments established that if telecom operators pay service tax on the MRP value of SIM cards and recharge cards, there is no additional service tax liability on those selling the cards to the public. This principle was upheld by the Supreme Court and the Madras High Court. The Tribunal also noted that specific contracts between service providers and dealers were common, as seen in the case of CCE vs. Moradabad Gas Services.

4. Interpretation of agreements between parties: The Departmental Representative highlighted an agreement between M/s. IDEA Media Communications Ltd. and the appellants, indicating additional services beyond card sales. However, the Tribunal found this issue to be similar to arrangements between other service providers and dealers, as discussed in previous judgments.

5. Conclusion: Considering the precedents and the nature of the appellants' activities, the Tribunal allowed the appeal, emphasizing that no further service tax liability existed on the appellants for selling SIM cards and recharge coupons. The judgment was pronounced on 31/05/2018.