SIM card sales margins and commissions exempt from service tax under Business Auxiliary Services

CESTAT Chennai ruled that service tax cannot be levied on margins/discounts/commissions received by the appellant for SIM card sales under Business Auxiliary Services. The Tribunal followed precedent from CESTAT Mumbai in M/S. Patwari Electricals case, which held that SIM card purchase and sale transactions do not attract service tax liability. CESTAT Ahmedabad's decision in Messrs Hari Om Marketing case and Allahabad HC's ruling in Commissioner Central Excise v. M/S Chotey Lal Radhey Shyam supported this position. The impugned order was set aside and appeal allowed.

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Issues Involved:
The issue involves whether the margin/discount/commission received by the appellant for the sale of SIM cards is subject to levy of service tax under Business Auxiliary Services.

Summary:
The appellant, an authorized distributor of pre-paid SIM cards for a telecom company, was alleged by the Department to be liable for service tax on the commission received. After a Show Cause Notice and subsequent appeals, the Original Authority confirmed the demand, interest, and penalties. The appellant contended that various decisions had settled the issue in favor of distributors not being liable for service tax on such commissions.

The Tribunal considered precedents where it was held that the amount earned by the appellant from the sale of SIM cards does not attract service tax under Business Auxiliary Services. The Tribunal referenced cases such as M/s. Patwari Electricals Vs. Commissioner of Central Excise, Customs & Service Tax, Aurangabad and M/s. Hari Om Marketing Vs. Commissioner Central Excise and Service Tax, Vadodara-I to support its decision. The Tribunal emphasized that the commission received by the appellant was included in the gross sale price of SIM cards, which had already suffered service tax, therefore no separate service tax could be demanded on the commission.

The Tribunal also cited judgments from the High Court of Aurangabad and the Hon'ble High Court of Allahabad to reinforce its decision. The Tribunal ultimately set aside the impugned order and allowed the appeal of the appellant, stating that the issue was settled in favor of the assessee based on the decisions cited. Consequently, the demand for service tax was deemed unsustainable, and the appeal was allowed with consequential reliefs, if any, as per law.

(Order dictated and pronounced in open court)

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