9911796707
TMI Blog2014 (1) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... gard resulted in confirmation of demand against the said two respondents and imposition of penalties on M/s. Murari Lal Luxmi Shanker. 3. It is seen that the respondents had challenged the said confirmation on merits as also on limitation before Commissioner (Appeals). It was inter alia contended that purchase and sale of sim cards and recharge coupons of BSNL on commission basis cannot be held to be a service inasmuch as the said sale/purchase was a simpliciter business proposition. Demand was also contested on the issue of time bar. The respondents also brought to the notice of the appellate authority that BSNL has paid entire service tax on full amount including the commission amount earned by them. As such confirmation of service tax again on the value of commission would amount to double taxation. 4. Commissioner (Appeals) did not find favour with the respondents' contention on merits as also on limitation. However, he took into consideration the letters written by BSNL as also statement of their authorised representative and concluded that BSNL has paid the service tax on the entire value of sim cards and recharge coupons. As such by taking note of Board's Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in on the same transaction on the ground that his activity is separately liable to service tax under the category of BAS. 7. Inasmuch as there is no dispute 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. We find no merits in the appeals filed by Revenue, accordingly all the appeals are rejected. (Pronounced in the open Court) 8. [Per : Mathew John, Member (T)]. - I concur with the outcome of the order as recorded by Member (Judicial) though for different reasons. So I would like to explain the reasons for the outcome from my perspective. 9. It is appropriate to firstly examine the circulars relied upon by the respondents. These are examined below. 9.1 ST-51/13/2002, dated 7-1-2003. The relevant portion is reproduced below : "I am directed to say that doubts have been raised regarding classification of certain services which appear to fall under two or more categories simultaneously. Some instances where such problems have arisen relate to Management Consultants v. Manpower Recruitment Services, Mandap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st held that there is no case for demanding service tax on the commission received by distributors of sim cards and re-charge cupons from BSNL out of value on which service tax has already been paid as in the following cases. Some of the decisions are the following : (i) Chetan Traders v. CCE - 2009 (13) S.T.R. 419 (Tri.) (ii) Hindustan Associated Traders and Others v. CCE - 2007-TIOL-1699-CESTAT-BANG (iii) South East Corporation v. CCE - 2007-TIOL 1699-1574-CESTAT-BANG = 2007 (8) S.T.R. 405 (Tri) (iv) Karakattu Communication v. CCE - 2007-TIOL-1374-CESTAT-BANG = 2007 (8) S.T.R. 164 (Tri). 11. These decisions consider the transactions to be in the nature of purchase and sale of SIM cards and also consider that collecting tax for a second time from distributor amounts to double taxation of the same transaction. 12. The question whether the so called "sale" of SIM-cards by mobile telephone operators, needed to enable mobile telephone connection, is actually a sale or a part of the service of providing telecommunication service was disputed before the Apex Court in the case of Idea Mobile Communications Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill generate demand for providing services permitted by BSNL, to franchisee BSNL Franchisee will target both individual and corporation customers. 1.2 Franchisee will receive/attend and rectify complaints and provide after sale services. All forms of complaints on phone and walk in complaints (hardware related billing performance forms complaints on phone and walk in complaints related etc.) will be handled directly by Franchisee. Franchisee shall redress all possible disposals. 1.3 Franchisee will receive advertising material from BSNL for displaying them and distribution to sub-franchisee and retailers. 1.4 Franchisee will promote BSNL brands at his own cost. 1.5 Franchisee will store Sims; instruments and other telecom store. 1.6 Franchisee will prepare MIS as per BSNL format and will give to GM (Marketing), BSNL, Circle, office as per frequency specified. 1.7 Franchisee will arrange for special promotional events as per BSNL guideline at his own cost. 1.8 Franchisee will prepare list of sub-franchisee and retailers and will inform to BSNL from time to time. 1.9 Franchisee will verify the credential of new customers. 1.10 Fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the respondents were promoting and marketing the services of BSNL and receiving commission. Consequently the respondents were providing business auxiliary service to BSNL. 14. The question as to what is the taxable value when a telecom operator sells SIM-card of a specified Maximum Retail Price (MRP) at a discounted price to distributors and the distributor sells the cards at MRP to customers was examined by the Tribunal in the case of BPL Mobile Cellular Limited v. CCE - 2007 (8) S.T.R. 546 (Tri.-Chennai). The Tribunal held that the discounted MRP price realised by BPL Mobile Cellular Ltd. from distributors will be the value of service to be taxed in the hands of BPL Mobile Cellular Ltd. This decision is affirmed by the Apex Court as reported at Commissioner v. BPL Mobile Cellular Ltd. - 2011 (24) S.T.R. J175 (S.C.). Obviously in that case service tax got restricted to the tax on discounted price at which the mobile operator was "selling" the card. In the present case of BSNL, tax on the full value of the card is paid undisputedly. 15. The facts of this case are being illustrated by considering sale of SIM-cards for activation of mobile service with assumed value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on which demands are issued are Form 16A under Income Tax Act issued by BSNL to the distributors evidencing payment of commission to distributors. This is not a case where the distributors first paid for the value of the cards took possession and then sold the cards at a higher price. The argument that it is a case of buying and selling of cards appears to be raised only on the basis that there are MRPs for the cards and it is handed over to the customer against payment of such MRP. However the card by itself is of no use to the customer unless the service is activated by the Telecom Operator. So the cards have no value once it is dissociated from the service to be provided against payment made on MRP printed on the cards. So the transaction may have a colour of sale and may be referred to as "sale" by the parties to the transaction but this is essentially not a sale but a charge for service to be provided in future. Tax is demanded on services for which payments were made by BSNL to distributor. (ii) BSNL is paying service tax for value of telecommunication service being provided by them to the customer. Revenue is demanding tax on the service provided by distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-7-1997 (iii) C.B.E. & C. Circular No. B-43/7/97-TRU, dated 11-7-1997 (iv) C.B.E. & C. Circular No. B-11/3/98-TRU, dated 7-10-1998 21. But this approach was changed with effect from 23-8-2007 when Circular No. 96/7/2007-S.T., dated 23-8-2007 was issued. The relevant Extracts from this circular reads as under : Reference Code Issue Clarification (1) (2) (3) 999.03/23-8-2007 A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor. Service tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work. A sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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