2008 (12) TMI 84 - AT - Service Tax

Appeal allowed as no further tax can be collected from intermediaries. Previous rulings upheld, demand dismissed.

The appeal was allowed based on the principle that once sales tax is paid on goods, no further tax should be collected from intermediaries. The decision ... Business Auxiliary Services - service tax on commission/discount - sale of goods - effect of sales tax payment on ancillary service tax liability - reliance on tribunal precedentBusiness Auxiliary Services - service tax on commission/discount - sale of goods - effect of sales tax payment on ancillary service tax liability - reliance on tribunal precedent - Whether the discount retained by the appellant (franchisee) on sale of SIM cards and recharge coupons is taxable as Business Auxiliary Services or is part of a sale of goods transaction on which sales tax paid by BSNL precludes levy of service tax. - HELD THAT: - The Tribunal found that the appellant operated as a purchaser-reseller of SIM cards and recharge coupons and received a discount as its margin on resale. BSNL discharged sales tax on the value charged to the ultimate customer, and that payment of sales tax by BSNL on the transaction exhausts the tax liability in respect of the sale of those goods so that no separate service tax survives on the same transaction in respect of any intermediary. Applying the Tribunal's earlier decision in Shri R. Venkataramanan Vs. CCE, Trichy (Final Order No. 977/08 dated 4.9.08), where identical facts led to the conclusion that the activity was sale of goods and not promotion of BSNL's business falling under Business Auxiliary Services, the present demand under BAS was held unsustainable. The Tribunal emphasised that the lower authority's conclusion that the appellant was promoting BSNL's business was misconceived in light of the appellant having paid full value for the SIM cards and selling them on margin, and noted that Revenue had not challenged the cited precedent.Appeal allowed; demand of service tax under the head Business Auxiliary Services (and the related education cess) in respect of the transactions for the period 07.07.03 to 31.12.04 set aside.Final Conclusion: The Tribunal allowed the appeal, following its prior decision in Shri R. Venkataramanan, and held that the discount/margin retained by the appellant on resale of SIM cards and recharge coupons constituted sale of goods on which BSNL had discharged sales tax; consequently the demand of service tax under Business Auxiliary Services and the allied education cess for the period 07.07.03 to 31.12.04 was quashed. Issues:Demand of service tax under Business Auxiliary Services (BAS) and Repair and Maintenance Service.Analysis:The impugned order affirmed the demand of service tax from the appellants under the head BAS and Repair and Maintenance Service. The appeal challenges the demand of service tax under the head BAS and education cess. The appellants, engaged in the sale of sim cards and recharge coupons as a franchisee of BSNL, were allowed a discount on BSNL's sale price of sim cards and recharge coupons. The lower authorities treated this discount as commission received by the appellants, leading to the raised demand. Penalties were imposed under various sections of the Finance Act, 1994.Reiterating the plea, the Ld. Counsel argued that once BSNL pays sales tax on the value of sim cards and recharge coupons sold to customers, no further liability should exist regarding any associated services. The appellants could only be charged for BAS if they were involved in promoting the sale or service of BSNL. The transactions between BSNL and the appellants were on a principal-to-principal basis, and since BSNL discharged sales tax on the face value of the cards, the discount received by the appellants should not attract sales or service tax.The Tribunal's decision in a similar case was cited by the Ld. Counsel to support their argument, where the demand of service tax under BAS was set aside for an intermediary receiving a discount treated as commission. The Ld. SDR, however, reiterated the reasoning and findings of the impugned order.After considering the case records and submissions, it was established that the payment of sales tax by BSNL on sim cards and recharge coupons fully discharged the tax liability on the transaction. Therefore, no further tax should be collected from an intermediary like the appellants for transactions involving the same goods. Citing previous Tribunal decisions, the Member (Technical) allowed the appeal, as the appellants were not promoting the business of BSNL and the sales tax liability was already discharged by BSNL. The decision was in line with previous rulings, and the appeal was allowed.In conclusion, the appeal was allowed based on the principle that once sales tax is paid on goods, no further tax should be collected from intermediaries. The decision aligned with previous Tribunal rulings and was not contested by the revenue, leading to the dismissal of the demand of service tax under BAS and Repair and Maintenance Service.