2023 (11) TMI 896 - AT - Service Tax

Levy of service tax - Business Auxiliary Service - appellants were appointed franchisees by M/s Bharat Sanchar Nigam Limited (BSNL) for providing services of sale and purchase of sim cards - extended period of limitation - HELD THAT - This issue has been considered by this Tribunal in the latest decision in the case of M/S S.R. MEDICAL AGENCIES VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-II 2023 (8) TMI 1150 - CESTAT CHANDIGARH and after considering the various decisions of the Tribunal, this Tribunal has observed 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. Besides, it is also found that the entire demand is barred by limitation also. The impugned order is not sustainable in law and is set aside - appeal allowed.

Issues Involved:
1. Classification of services provided by the appellant.
2. Demand of service tax under the category of 'Business Auxiliary Service'.
3. Applicability of extended period of limitation.
4. Previous adjudications and their impact on the current case.
5. Double taxation and revenue neutrality.

Summary:

1. Classification of Services Provided by the Appellant:
The appellant was appointed as a franchisee by BSNL for the sale and purchase of SIM cards. The department contended that the appellant was providing 'Business Auxiliary Service' (BAS) to BSNL and was liable for service tax. The appellant argued that their activities were purely sales transactions and not services, as evidenced by their financial records and the terms of their agreement with BSNL. They contended that the discounts received were essentially commissions on sales and not subject to service tax under BAS.

2. Demand of Service Tax under 'Business Auxiliary Service':
The department issued a show cause notice demanding service tax for the period 2005-06 to 2007-08, amounting to Rs. 3,84,323/-. The appellant cited multiple Tribunal decisions which held that dealers of telecom services, who receive commissions, are not liable to pay service tax under BAS. They argued that service tax had already been paid on the MRP of SIM cards and recharge coupons by BSNL, and hence, any additional tax on commissions would amount to double taxation.

3. Applicability of Extended Period of Limitation:
The appellant argued that the demand was time-barred as the department was already aware of their activities from a previous show cause notice issued in 2009. They relied on the Supreme Court judgment in Nizam Sugar Factory which held that suppression could not be alleged in subsequent notices for similar facts. The Tribunal agreed that the entire demand was barred by limitation.

4. Previous Adjudications and Their Impact:
The appellant highlighted that in a previous adjudication, the demand for service tax was dropped, and the department did not challenge this decision. They presented several Tribunal decisions supporting their stance that commissions on sales activities do not attract service tax under BAS. The Tribunal found these precedents applicable and persuasive.

5. Double Taxation and Revenue Neutrality:
The Tribunal noted that service tax on the MRP of SIM cards and recharge coupons was already paid by BSNL, and taxing the appellant on commissions would result in double taxation. The Tribunal cited various decisions, including those of High Courts, which supported the view that such commissions are not separately taxable.

Conclusion:
The Tribunal concluded that the services provided by the appellant did not fall under 'Business Auxiliary Service' and that the demand for service tax was unsustainable. The Tribunal also held that the entire demand was barred by limitation. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

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