SIM card resale on outright purchase basis is not Business Auxiliary Service; service tax and penalty were unsustainable.

Purchase and resale of BSNL post-paid and pre-paid SIM cards on an outright basis was treated as a sale transaction, not an agency or commission-based service. The Tribunal found that the assessees paid the full value to BSNL and merely resold the SIM cards for profit, so they were not promoting or marketing another's services within Business Auxiliary Service. It also noted that BSNL had already discharged service tax on the SIM cards, and the proposed levy would amount to double taxation. On these facts, the service tax demand and penalty were held unsustainable.

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Issues: Whether the activity of purchasing BSNL post-paid and pre-paid SIM cards and reselling them on a profit margin amounted to Business Auxiliary Service so as to attract service tax and penalty under the Finance Act, 1994.

Analysis: The appellants had purchased the SIM cards on outright basis, paid the full value to BSNL, and resold them in the market. The activity was found to be a transaction of purchase and sale for profit, not an agency or commission-based service of promoting or marketing another's services. The Tribunal also noted that BSNL had already discharged service tax on the SIM cards sold to the appellants, and the impugned levy would, in the circumstances, result in double taxation. On these facts, the finding that the appellants were rendering marketing or distribution services within Business Auxiliary Service was held to be unsustainable.

Conclusion: The levy of service tax and the penalty were not justified and the assessee succeeded.

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