Trading of SIM cards and recharge coupons was not a separate taxable service; dealer incentives did not create extra service tax liability.

Sale and distribution of SIM cards and recharge coupons was treated as trading activity, not a separate taxable service under business auxiliary service, because the telecom operator had already discharged service tax on the full MRP value. Receipt of incentives and discounts, and the existence of a dealer agreement, did not change the character of the activity or create an independent service tax liability for the dealers. The demand for service tax and education cess was therefore held unsustainable and was set aside.

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Issues: Whether the distribution and sale of SIM cards and recharge coupons, along with receipt of incentives and discounts, constituted taxable service under business auxiliary service.

Analysis: The activity was held to be covered by earlier decisions treating sale/distribution of SIM cards and recharge coupons as trading activity, where the telecom operator had already discharged service tax on the full MRP value. The mere existence of a dealer agreement and receipt of incentives did not alter the character of the activity so as to create a separate service tax liability on the dealers.

Conclusion: The demand of service tax and education cess was not sustainable and was set aside in favour of the assessee.

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