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TMI Blog2015 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri S V Nair, Assistant Commissioner (AR) ORDER Per: Ramesh Nair: The appeal is directed against order-in-appeal No. PVR/173/NGP/2013 dated 14.3.2013 passed by Commissioner of Central Excise Customs (Appeals), Nagpur, wherein the learned Commissioner (Appeals) rejected the appeal filed by the appellant against order-in-original No. 09/VW/JC/ST/2012 dated 12.3.2012. 2. The fact of the case is that the appellant is an authorized distributor of BSNL products and is engaged in sale and purchase of BSNL SIM cards and recharge vouchers under franchise agreement with BSNL since April 2006. For this activity, they get commission from BSNL at fixed rates on the sale of SIM cards. A show cause notice dated 14/16.7.2010 was issued to the appellant for demand of service tax on the commission received by the appellant from BSNL under the category of 'business auxiliary service'. It was adjudicated by the adjudicating authority vide order dated 12.3.2012, wherein the demand of service tax on the commission amounting to ₹ 6,15,005/- was confirmed and demanded interest under Section 75, penalties under Section 76, 77 and 78 were also imposed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 65(19) (ii) of Finance Act, 1994 to BSNL. 12. The Hon. Apex Court held in the case of Idea Mobile Communications Ltd. (supra) that the transaction is one of providing service and not of sale of sim-cards. Sale of recharge coupons also is under dispute in this case. In the case of re-charge coupons the scope for dispute on this issue is much less because there is hardly any material involved in the transaction. Nevertheless for sake of convenience such transactions is being referred to as sale in this order as referred to by the appellants because the transaction has a colour of sale. Nothing about taxability is to be inferred by use of this word in the remaining part of this order. 13. The question as to what will be the nature of transaction when a distributor sells sim-cards to customer can still be a matter of dispute because distributor is not providing any telecommunication service to the customer. This issue can come up in two different types of transactions depending on the business model of the telecom operator. In some cases the distributor gets his consideration from customer at the time of sale of sim-cards through the margin in price. In some cases the distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istributor out of MRP realized, puts the parties to these transactions at a doubly disadvantageous position as compared to the value taxed in the case of BPL Mobile because BPL Mobile was paying tax only on the discounted price of the card and there is no evidence to show that the value of service rendered by those distributors was being subjected to tax. 18. Against the above background the prime arguments of the appellant-distributors in these case are the following,- (i) The distributor is buying and selling sim-cards and there is no service involved in the activity of the distributor. (ii) BSNL has paid service tax on the entire value of ₹ 500 including ₹ 15 paid to the distributor. So there is no case for demanding service tax again on the amount of ₹ 15. 19. Some facts and relevant laws that are to be noted in this context are the following,- (i) It is already held by the Apex Court that the essential nature of the transaction is one of providing service and not of sale of SIM-cards. In the case of SIM-cards there is at least some material involved. In the case of re-charge coupons there is no material involved and it is purely a case of marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double taxation. The argument that tax should not be demanded in situations where somebody else has paid tax on the taxable value of a service is not an argument that can be accepted normally. If this argument is adopted, a taxpayer X in a VAT chain can argue that the next person Y who uses the service as input will be paying tax and X need not pay tax. In a VAT chain it is difficult to identify who is the ultimate consumer who is not paying further tax. Taking the case of telecommunication service if the customer is a person who does not pay service tax on any of his activities a telecom operator cannot adopt this argument. But if the customer is an industrialist he is eligible for credit of service tax to be paid by him. So a telecom operator can adopt the argument in respect of services rendered to such customers. Such logic will make any VAT system for collecting tax unworkable. During the initial phase of levying service tax when the Cenvat credit scheme was not extended to service tax, this concept that a sub-contractor need not pay tax if the main service provider was paying tax on the value inclusive of the value of service provided by the sub-contractor was initially s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by them from their customers on which consideration service tax is first discharged by BSNL. That is to say the transactions of both the parties are essentially one and payment on the full value of service occurs earlier than payment of commission to the distributor. Further payment of tax on full value of service rendered by the principal, that is BSNL, is easily verifiable unlike in the case of services rendered by many other sub-contractors for other type of services. 24. Some services which are on similar footing as sale of SIM cards or re-charge coupons by distributors are services provided by,- (a) sub-broker to a stock broker; (b) mutual fund agent to a mutual fund or asset management company; (c) selling or marketing agent of lottery tickets to a distributer or a selling agent. 25. Interestingly the above services as also the services of selling agent or a distributor of SIM cards or recharge coupon vouchers have been exempted from service tax vide entry No. 29 in Notification 25/2012-S.T., dated 20-6-2012. So the special nature of services in such cases is recognized though only recently. 26. Though the correct procedure for discharge of the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and allow the appeal with consequential relief to the appellants. Virendra Electric Works 4. We note and refer to the latest decision in the case of Martend Food Dehydrates Pvt. Ltd. Vide Final Order No. ST/A/684-687/12 Cus dated 6.11.2012, wherein after taking note of the entire case law available on the said issue, the Tribunal in a detailed order has held that activity of purchase and sale of SIM card 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 services and confirmation of demand on the distributor for the second time is not called for. Inasmuch as Revenue in the present appeals has not rebutted or contested the certificates issued by BSNL as regards full payment of service tax on the entire value of Sim Cards and recharge coupons, we are of the view that Commissioner (Appeals) order is required to be upheld. We order accordingly and reject the appeals filed by the Revenue. 6. From the perusal of the above judgments, it is observed that the service in question itself is held as non-taxable. Therefore, the bona fide of the appellant stands proved. In the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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