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2015 (6) TMI 740 - CESTAT MUMBAI

2015 (6) TMI 740 - CESTAT MUMBAI - TMI - Valuation - whether during April 2003 to September 2006 distribution of free of recharge voucher attracts service tax liability or otherwise despite the fact that the recharge voucher are given free of cost to the dealers as consideration for commission. - Held that:- Appellant is discharging the service tax liability under the category of "Telephone Services" on an amount received by them from distributors/dealers for the sale of prepaid SIM Cards; the S .....

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od, the appellant herein being service provider has discharged the service tax liability on the prepaid SIM Cards sold by them to the distributors/dealers. The sale of such prepaid SIM Cards on the MRP value is undisputed and discharge of service tax liability for services rendered on such sale is also accepted by revenue. It is to be noted that the recharge voucher are distributed free of cost, appellant has not received any amount towards the recharge voucher, though the distributors/dealers h .....

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stainable and is liable to be set aside - Decisions in the cases of BPL Mobile Cellular (2007 (6) TMI 107 - CESTAT, CHENNAI) and Tata Tele Services Ltd. (2015 (4) TMI 80 - CESTAT MUMBAI) followed - Decided in favour of assesee. - Appeal No. ST/111/09 - Dated:- 28-5-2015 - Mr. M. V. Ravindran, Member (J) And P. S. Pruthi, Member (T),JJ. For the Appellant : Vinay Jain, CA For the Respondent : Shri B S Meena, Addl Commissioner (AR) ORDER Per: M V Ravindran: This appeal is directed against No. 50/ST .....

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discharges the service tax liability on the amount received by them from the dealers. The model of business is that the appellant sells the pre-paid SIM Cards to their dealers on the MRP/RSP mentioned on the SIM Cards and discharges the service tax liability as indicated on the SIM Cards. Appellant does not give any commission on the RSP/MRP mentioned on the SIM Cards, instead provides prepaid recharge vouchers, free of charge to the dealers as commission for the sale effected by them. The amou .....

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ax, interest thereof and penalties were proposed on amount of recharge vouchers distributed free by them during the period 01.04.2003 to 30.09.2006. Appellant contested the show-cause notice before the adjudicating authority mainly on the ground that the provisions of Section 67 of the Finance Act, 1994, during the relevant period indicates the service tax liability to be discharged on the amount charged for the services rendered. Adjudicating authority did not accept the contentions, confirmed .....

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ovider for the services rendered. It is his submission that the distribution of free recharge voucher was amounting to commission given by them to the dealer; they have already discharged the service tax liability on the amount received from the dealer for the sale of SIM Cards which according to him is not in dispute. He would also submit that the provisions of Section 67 and the Explanation thereof did not include the value of any amount which has been given free of charge. 3.1 He would also t .....

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as specifically clarified that the said valuation rules will be effective from 01.03.2011 and explanation added to Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 indicates that the value shall be the gross amount charged from the subscriber. It is his submission that since the clarification is effective from 01.03.2011 the question of applying the same for the period in question in this case will not arise. 3.2 He would rely upon the decision of this Tribunal in the case of BP .....

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on of this Tribunal in the case of Tata Tele Services Ltd. -Appeal No.ST/79, 179/10-Mum for the same proposition. 4. Learned D.R. on the other hand, would draw our attention to the findings recorded by the adjudicating authority. 4.1 It is his submission that the appellant herein has distributed recharge vouchers free to the dealers in lieu of commission payable. He would submit that the services provided by the appellant are to the subscriber. He would submit that the subscriber who had purchas .....

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ervice tax liability. He would emphasise that the impugned order be upheld. 5. We have considered the submissions made at length by both sides and perused the records. 6. It is an admitted fact that the appellant is discharging the service tax liability under the category of "Telephone Services" on an amount received by them from distributors/dealers for the sale of prepaid SIM Cards; the SIM Cards are sold to the distributors/dealers on MRP and in lieu of the commission payable to the .....

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as consideration for commission. 6.2 The provisions of Section 67 during the relevant period are as under:- Section 67 "For the purposes of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service rendered by him". (2) .......................... Explanation (1) - For the removal of doubts, it is hereby declared that the value of a taxable service as the case may be, includes, - (a) the aggregate of commission or brokerag .....

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the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; (f) the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; (g) the commission or any amount received by the rail travel agent from the Railways or the customer. 6.3 We find from the above reproduced prov .....

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e. It is to be noted that the recharge voucher are distributed free of cost, appellant has not received any amount towards the recharge voucher, though the distributors/dealers have sold the recharge vouchers. In our view distribution of recharge voucher fee of cost to the distributors/dealers would in a way amount to giving commission to the dealer for the transactions of sale of prepaid SIM Cards for the appellant. It can also be noticed that during the relevant period the Explanation as per t .....

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said provisions of Rule 6(1) of Service Tax (Determination of Value) Rules, 2006 and note does not include the "Telephone Services" by any stretch of imagination. For the brevity sake we reproduce the Rule 6(1) of Service Tax (Determination of Value) Rules, 2006 which would be only relevance for us post 19.04.2006:- "Rule 6 (1) Subject to the provisions of section 67, the value of the taxable services shall include,- (i) the commission or brokerage charged by a broker on the sale .....

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ther sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; (vi) the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; (vii) the commission or any amount received by the rail travel agent from the Railways or the customer; (viii) the remuneration or commission, by whatever name called, paid .....

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ed with effect from 01.07.2012 and the provisions for inclusion/exclusion of the value under Rule 5 were further explained by an Explanation in respect of telecommunication services which reads as under:- "Explanation.- For the removal of doubts, it is hereby clarified that for the value of telecommunication service shall be gross amount paid by the person to whom telecommunication service is actually provided". (Emphasis ours) It can be seen from the above, the said explanation is now .....

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om para 5 of the Circular No. 62/11/2003-ST dated 21.8.2003. We reproduce the same:- "Service rendered free of charge: 5.1 In the context of certain services, a doubt has been raised as to whether service tax will be payable if the service is provided free of charge. 5.2 As per charging section viz. section 66 of the Act, service tax is chargeable at the rate of 8% of the value of taxable service. Thus if the value is zero the tax will also be zero even though the service is taxable." .....

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on payable to them. The Bench recorded as under:- "5 . After giving careful consideration to the submissions, we note that ld. Commissioner (Appeals) misdirected himself by quoting from the text of Section 67 as this provision stood prior to the period of dispute. According to the amended provisions of Section 67, the value of any taxable service shall be the gross amount charged by the service-provider for such service rendered by him. In instant case, the amount charged by the assessee (s .....

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