2008 (7) TMI 46 - AT - Service Tax

Tribunal rules BSNL product sales not subject to Service Tax, aligning with 'sale of goods' concept

Chetan Traders Versus CCE, Jaipur

The Tribunal set aside the demand for Service Tax on the appellant, ruling that their activities of purchasing and selling BSNL products constituted the ... Appellants are authorised franchise of BSNL for marketing of various telecom services such as cellular phones, basic phone connections and customer care and selling of re-charge coupons of BSNL - BSNL had clarified that they had already paid service tax on the sim cards sold to the appellants, this also clearly shows that the BSNL had already discharged their burden and there cannot be double taxation – hence demand raised under “business auxiliary service” is set aside Issues:1. Confirmation of demand of Service Tax on the appellant for providing business auxiliary service.2. Interpretation of the scope of taxable service under the category of business auxiliary service.3. Application of precedent set by the Tribunal in a similar case.Analysis:1. The appellant filed an appeal against the demand of Service Tax, contending that they are authorized franchisees of BSNL for marketing various telecom services and selling recharge coupons. The appellant argued that they purchase service products from BSNL and sell them to customers, earning a predefined commission. The Revenue argued that the appellant's activities fall under the taxable service category of business auxiliary service. The Tribunal referred to a previous case where a similar demand was set aside, stating that the appellant's activities did not constitute business auxiliary service as they were essentially involved in the sale of goods rather than providing a service.2. The Revenue contended that the appellant's role in promoting and marketing BSNL's services falls under the scope of taxable business auxiliary service. However, the Tribunal, based on the previous case's precedent, found that the appellant's activities of purchasing and selling BSNL products did not amount to providing a service but rather constituted the sale of goods. The Tribunal emphasized that the appellant had paid the full value for the products to BSNL and sold them at a profit margin, which aligns with the concept of 'sale of goods' attracting sales tax, not service tax. The Tribunal noted that BSNL had already discharged its service tax liability on the products sold to the appellant, preventing double taxation.3. The Tribunal, following the precedent set in the previous case, set aside the impugned order and allowed the appeal with consequential relief. The Tribunal concluded that the decision in the previous case was fully applicable to the present case, leading to the setting aside of the demand for Service Tax on the appellant. The Tribunal's ruling was based on the interpretation that the appellant's activities did not constitute business auxiliary service but rather fell within the realm of sale of goods, attracting sales tax instead of service tax.