Service tax on distributor margin in prepaid voucher sales is unsustainable where the principal already paid tax on full value.

Service tax was treated as unsustainable on the distributor's margin in prepaid voucher sales where the principal had already discharged tax on the full taxable value of the telecom service. The article relies on an earlier Division Bench view that taxing the distributor's margin again would duplicate tax on the same transaction and conflict with the settled valuation approach. It also refers to the exemption framework for selling agents or distributors of SIM cards and recharge coupon vouchers under Notification No. 25/2012-S.T. on 20-06-2012. On that basis, the rectification-rejection orders were liable to be quashed and the writ petitions succeeded.

---

---

Issues: Whether service tax could be levied on the margin earned by distributors on sale of prepaid vouchers when the principal had already discharged service tax on the full value, and whether the impugned orders rejecting rectification petitions could be sustained.

Analysis: The controversy was treated as covered by an earlier Division Bench decision holding that, in such distributor-principal arrangements, the taxable value of the telecommunication service is the full value already subjected to tax by the principal. The reasoning recognised that taxing the distributor's margin again would not alter the taxable service already discharged and would be inconsistent with the established view adopted in the earlier precedent. The decision also noted the relevance of the exemption for selling agents or distributors of SIM cards and recharge coupon vouchers under Notification No. 25/2012-S.T. dated 20-06-2012.

Conclusion: The levy on the distributors' margin was not sustainable, and the impugned orders rejecting rectification were liable to be quashed in favour of the assessee.

Final Conclusion: The writ petitions succeeded and the impugned orders were set aside, with the connected miscellaneous petitions closed.

Ratio Decidendi: Where the principal has already discharged service tax on the full taxable value of the service, a further levy on the distributor's margin in the same transaction is unsustainable, especially where the issue is covered by binding precedent and the relevant activity falls within the notified exemption framework.

---