By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Whether service tax is applicable on MRP of RCV (Recharge Coupons Vouchers) or on amount actually received from distributors after reduction of their commission?
Facts:
The appellant provided telecommunication service and charged their customers for the services to be provided by them as per the value of the recharge vouchers (RCV) purchased. While arriving at the taxable value, the appellant deducted the discount offered to their distributors from the value of the voucher and contended that it had service tax liability only to the extent of the amount received by them. As per section 67 of the Act, the value of any taxable service ought to be the gross amount charged by the service provider for such service provided or to be provided by him and thus, service tax was payable on the amount charged or consideration received by them from the distributors. The appellant further submitted that there was a clear principal to principal relationship between them and the distributors. Hence, service tax was payable on the discounted price and not on the MRP printed on the RCV’s. According to the revenue, since the RCV’s were sold on MRP, they were treated as OTC (over the counter) goods in the market and issuance of receipt for OTC goods being rarely practiced, production of the document in support of the allegation that RCV’s were sold on MRP was not feasible.
Held:
As per the provisions of section 67, if the provision of service is for a consideration in money, then the taxable value was the gross amount charged by the service provider for such service provided or to be provided by him and thus, the service was provided to the consumer and not to the distributor. The Tribunal further held that, where it was established that the charges collected from the consumers in lieu of the RCV’s was a service charge and not a sale, it was automatically established that the amount deducted by the dealer was nothing but commission to be included in the taxable income of the Appellant and thus, directed the appellant to pre-deposit 25% of the demand.
