2023 (12) TMI 1067 - AT - Service Tax

Levy of service tax - Business Auxiliary service or not - Appellant only receives distributor s profit margin - BSNL pays service tax on the wholesale price including the distributor s profit margin, thus appellant were not paying service tax on this income received - exemption under Sl. No.29(f) of the mega Exemption Notification No. 25/2012 ST dated 20-06-2012 - dispute in the instant case relates to the period 2015-16 whereas the Show Cause Notice was issued on 30-12-2020 - invocation of extended period of limitation - HELD THAT - The Appellant submits that they are distributors of BSNL Prepaid/Post-paid SIM, Vouchers and are engaged for sale and distribution of BSNL products. The relation between them and BSNL is that of buyer and seller. There is no service provider/service receiver relationship. The Appellant does not provide any service and does not receive any service charges from BSNL. They only receive distributor s profit margin. BSNL supplies these cards etc. with fixed Maximum Retail Price (MRP) to them which is inclusive of Service Tax reduced by distributor s profit margin which is sold by them to end users at MRP. The difference is the distributor profit margin. BSNL pays service tax on the wholesale price including the distributor's profit margin. The issue is no longer res integra as the Tribunal Kolkata has decided the issue in Appellant's own case M/S KEDIA COMPUTER SERVICES VERSUS CCEX., CUS. S. TAX, BHUBANESWAR 2020 (7) TMI 183 - CESTAT KOLKATA for the period July 2003 to November 2004 and December 2004 to July 2005 while dealing with identical facts has held that there is no agency service or sales promotion service provided in such transactions, but it is a case of sale/purchase of item from BSNL on principle to principle basis which is pure trading activity and on the cellular products, the BSNL has already discharged Service Tax, hence, demanding service tax again from the trader would amount to double taxation. Thus, the demand confirmed in the impugned order is not sustainable on merits. Since the demand itself is not sustainable the question of demanding interest or imposing penalty does not arise. Extended period of limitation - HELD THAT - The dispute in the instant case relates to the period from 2015-16 whereas the Show Cause Notice was issued on 30-12-2020 i.e. beyond the normal period of limitation under Section 73(1) of the Act. The normal period of limitation under Section 73(1) is 30 month from the relevant date while the Show Cause Notice is issued after lapse of 4 year 9 months. Accordingly, the demand is liable to be set aside on the ground of limitation also. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issue involves determination of liability to pay service tax on the income received by the Appellant from the sale of BSNL products, the applicability of Mega Exemption Notification, the nature of the transaction between the Appellant and BSNL, and the period of limitation for demanding service tax.

Details of the Judgment:

1. Nature of Transaction and Liability for Service Tax:
The Appellant, a distributor of BSNL's cellular products, contended that their relationship with BSNL is that of a buyer and seller, with no service provider/service receiver relationship. They argued that the distributor profit margin received by them is not subject to service tax as BSNL already pays service tax on the wholesale price. The Tribunal referred to a previous case where it was held that demanding service tax from the distributor would amount to double taxation, as the transactions are purely trading activities.

2. Applicability of Mega Exemption Notification:
The Appellant claimed exemption under Sl. No.29(f) of the Mega Exemption Notification, which covers selling agents or distributors of SIM cards or recharge coupon vouchers. They argued that no service tax is leviable on the sale of BSNL products as it is a trading activity. The Tribunal found that the Appellant's case fell within the exemption and that the Ld. Commissioner erred in taxing the entire sale value of SIM cards and vouchers.

3. Period of Limitation:
The Appellant contended that the demand for service tax was beyond the normal period of limitation under Section 73(1) of the Act. The Tribunal agreed that the demand was time-barred as the Show Cause Notice was issued after the lapse of 4 years and 9 months from the relevant date. Therefore, the demand was set aside on the ground of limitation.

4. Decision and Conclusion:
Relying on previous decisions and the specific facts of the case, the Tribunal held that the demand for service tax was not sustainable on merits. The impugned order was set aside, and the appeal filed by the Appellant was allowed. Since the demand itself was deemed unsustainable, there was no requirement to impose interest or penalty.

In conclusion, the Tribunal ruled in favor of the Appellant, setting aside the demand for service tax based on the nature of the transaction, the applicability of the Mega Exemption Notification, and the period of limitation for making such a demand.