TMI Blog2014 (1) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... pute about the fact of payment of entire service tax by BSNL on the full value of SIM cards/recharge coupons, we are of the view that Commissioner (Appeals) has rightly set aside the confirmation of demand - Following decision of South East Corporation reported in [2007 (5) TMI 111 - CESTAT, BANGALORE], Chetan Traders reported as [2008 (7) TMI 46 - CESTAT, NEW DELHI] and in the case of Karakkattu Communications reported as [2007 (6) TMI 209 - CESTAT, BANGALORE] - Decided against Revenue. - ST/572-574/2012 - Final Order Nos. ST/A/658-660/2012-Cus.(PB) - Dated:- 22-8-2012 - Ms. Archana Wadhwa and Shri Mathew John, JJ. Shri N. Pathak, DR, for the Appellant. Shri S.K. Mathur, Advocate, for the Respondent. ORDER Though the appeals filed by the Revenue arises out of two different orders passed by Commissioner (Appeals), all the appeals are being disposed of by a common order as the issue involved is identical. 2. After hearing both the sides, we find that the respondents M/s. Moradabad Gas Services and M/s. Arya Electronics are franchises of M/s. BSNL for sale of their SIM cards and recharge coupons. Revenue by entertaining a view that such a sale of SIM cards and rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services whereas the demand against the respondents was under the category of BAS. Inasmuch as the two services provided by BSNL as also by respondents fall under two different categories, the dropping of demand on the respondents was not justified. 6. After hearing both the sides, we note that though there are Tribunal s decisions holding that the activity of sale/purchase of sim cards does not amount to providing of services under the category of BAS (one such reference can be made to the Tribunal s decision in the case of South East Corporation reported in 2007 (8) S.T.R. 405 (Tri.), we find that the issue required to be decided in the present appeal of the Revenue is as to whether the respondents are again liable to discharge service tax when admittedly BSNL has already paid the tax on the full value of sim cards. We note that apart from Board s Circular laying down that to avoid double taxation, payment of service tax by the principal should be taken into account while settling the responsibility of franchise, we also note that the issue stands decided by various precedent decisions of the Tribunal. In the case of South East Corporation referred (supra) as also in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo separate chapters/headings/sub-headings of the Central Excise Tariff, so also Service tax cannot be charged twice on the same service (transactions). However, one service provider may provide more than one taxable service. In such cases, the service provider need only take one registration, but it shall be endorsed for all the taxable services and tax liability will have to be discharged for each of the taxable services separately. (the highlighted words are relied upon by respondents) This clarification is in the context of services that can be classified in more than one taxable entry and is to the effect that a service cannot be taxed twice under two different heads. This does not deal with the issue of taxability of different activities by different persons resulting in one service to a beneficiary which is the issue to be considered in this case. So the clarification is not very relevant to the issue in dispute. 9.2 F. No. 341/ 18/2004-TRU (PT), dated 17-12-2004 This clarification is the context of services rendered by goods transport Agency where the liability is transferred to the receipient of service in specified cases, and the relevant para reads as under : 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or gets his consideration from customer at the time of sale of SIM-cards through the margin in price. In some cases the distributor gets their consideration from the telecom operator by way of commission on the transaction normally called as sale. In the case before us the second type of situation exists. Some clauses from the agreement showing General Obligations of the Franchisee and Responsibilities of the Franchisees and procedure for payment of commission/rewards/marketing expenses as given in the agreement are reproduced below :- General Obligation of the Franchisee 9.1 The Franchisee shall maintain a suitable organisation for the Marketing and Distribution of products services in the allocated territory from his outlet(s). The franchisee shall use its best efforts to actively provide effective services to the subscribers of the BSNL and always act in the interest of both the BSNL and its subscribers. 9.2 The BSNL may from time to time require the franchisee to carry out customers satisfaction surveys as decided by the BSNL, the cost thereof, any, will be borne by the franchisee. 9.3 The BSNL and the franchisees shall follow model rules as described. In the annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stpaid Rs. 200/- (prepaid) Rs. 100. (ii) in Services - As orders issued from time to time. 3.12 Commission on recharge coupons, there will be uniform commission for Recharge coupons in BSNL License area. The commission to be paid to franchisees will be 5% : 3% commission to retailers by franchisees/sub-franchisees from their own commission. Share of Commission in between franchisee and sub-franchisee will be decided mutually. 9.6 The franchisee shall if so desired by the BSNL, make alterations, modification and install such furniture, fixture and air conditioning equipment, introduce customer care hardware including computer with UPS, Modem etc. as required and mutually agree upon the cost of such alteration renovation shall be borne exclusively by the franchisee. Procedure for commission/rewards/marketing expenses claim :- Franchisee will get upfront payment for basic commission, franchisee will retain the basic commission payable to them strictly as per clause 6.7 above and submit the remaining amount collected to the customer service centre, for target achievement and retention bonus due to them, for the duration which ends in the previous month. The claim should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 17. Against the above background the prime arguments of the respondents-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 Rs. 500 including Rs. 15 paid to the distributor. So there is no case for demanding service tax again on the amount of Rs. 15. 18. 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 recharge coupons there is no material involved and it is purely a case of marketing service. If distributors are buying sim-cards from BSNL payment should be from distributor to BSNL. In the case before us tax is demanded on payments made from BSN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 supported by C.B.E. C. in circulars like the following : (i) C.B.E. C. Circular No. B-43/1/97-TRU, dated 6-6-1997 (ii) C.B.E. C. Circular No. B-43/5/97-TR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 23. 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 distributor or a selling agent. 24. 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. 25. Considering the special nature of the impugned activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers is subjected to tax, I am of the view that there is no case to undo decisions already taken by the Tribunal in this regard. A contrary ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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