By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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No service tax is payable on commission paid by BSNL to distributors of SIM cards / recharge coupons if BSNL has already paid service tax on value of such SIM cards etc. supplied to distributor. Facts: The Appellants were distributors of SIM-cards and marketers of re-charge coupons. BSNL supplied these cards with fixed Maximum Retail Price (MRP) to the Appellants and paid service tax thereon. The Appellants collected the value of the cards and remitted the same to BSNL. For this activity, BSNL paid commission to the Appellants on which service tax was demanded. The Appellants submitted that the service tax demanded from the distributor on a value on which service tax was already paid by BSNL amounted to double taxation and that the said question was under dispute before the Tribunal in the past in which it held that the demand was not maintainable. Appellant referred to decisions of (i) Chetan Traders vs. CCE-2009 (13) S.T.R. 419 (Tri.) (ii) Hindustan Associated Traders and others vs. CCE-2007-TIOL- 1699-CESTAT-BANG. (iii) South East Corporation vs. CCE-2007-TIOL-1374-CESTAT-BANG.
Drawing attention to some clauses of the agreement, the revenue contended that the activities of the Appellants clearly brought out that they provided service in the nature of business auxiliary service. They further pointed out that the tax paid by BSNL was for telecommunication service to the customers and the tax demanded in the present appeal was for Business Auxiliary Service provided by the distributors to BSNL and thus there was no double taxation. The Revenue also submitted that the decisions of the Tribunal relied upon by the Appellants were no longer reliable because the decisions considered the transactions to be in the nature of purchase and sale of SIM-cards which attained finality in Idea Mobile Communications Ltd. v. CCE 2011 (23) STR 433 (SC).
Held:
Although the Appellants promoted and marketed the services and received commission which was covered under business auxiliary service, it was a case where BSNL sold the cards through the distributor and collected money from customers through distributors on which service tax was first discharged by BSNL and then paid commission to the distributors out of the consideration received from their customers. Considering the special nature of the activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers was subjected to tax and also considering that the recent Notification No.25/2012-ST granted exemption in this regard, the appeal was allowed.
