TaxTMI 
TaxTMI 
2013 (6) TMI 339
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....ssion to the appellants. The service tax demand involved in these cases is the tax demanded on such commission paid by BSNL to the appellants. 3. The Counsel for appellants submits that the demand for service tax from the distributor, on a value on which service tax has been already paid by BSML, amounts to double taxation of the same value and hence the demand is not maintainable. 4. The Counsel for appellants submits that question whether service tax is payable on the commission paid by BSNL out of value of services for which BSNL has already paid service tax has been under dispute before the Tribunal in the past and the Tribunal has held that demand for tax on commission' paid by BSNL is not maintainable, Some of these decisions are the following: (i) Chetan Traders v. CCE [2008] 17 STT 318 (New Delhi-CESTAT) (ii) Hindustan Associated Traders v. CCE [Final order Nos. 673 & 674 of 2007, dated 7-6-2007] (iii) South East Corpn.v. CCE& ST [2009] 22 STT 446 (Bang.-CESTAT) (iv) Karakattu Communications v. CCE [2009] 21 STT 384 (Bang.-CESTAT) 5. The Ld A. R, for Revenue submits that activities of the appellants as seen from the contract clearly brings out that serv....
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.... 9.1 The Distributor shall maintain a suitable organisation for the marketing and distributor of products and services in the allocated territory from his outlet(s). 9.2 The BSNL may from time to time require the distributor to carry out customer satisfaction surveys as decided by the BSNL, the cost thereof if any will be borne by the distributor." 9.7 (a) That the Distributor shall not have any authority to store, sell or transfer or in anyway dispose of the merchandise except as provided in this Agreement (b) that the BSNL shall be liable to the quality and genuineness of the goods sold by the Distributor," "10.2 The BSNL may provide the marketing material to the Distributor. This may include but not limited to, information brochures, poster, inserts special giveaways, mailers (target-segment-specific) sales kits, folders, subscription forms, receipt books, stickers etc. 10.3 The BSNL will endeavour to activate a cellular connection within 24 hours of receipt of documents indicating completion of booking formalities and realization of booking account," "19. Payment terms: Basic Commission: The basic commission payable is as per Annexure B, BSNL reserves the r....
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....ition the ld. A. R. for Revenue submits that the adjudication orders are passed in accordance with law and are maintainable. 10. We have considered arguments on both sides, 11. From the above clauses it is clear that the appellants were promoting and marketing the services of BSNL and receiving commission. Consequently the appellants were providing business auxiliary service as defined in section 65(19) (ii) of Finance Act, 1994 to BSNL. 12. The Hon'ble Apex Court held in the case of Idea Mobile Communication Ltd. (supra) that the transaction is one of providing service and not of sale of sim cards. Sale of recharge coupons also is under dispute in this case. In the case of recharge coupons the scope for dispute on this issue is much less because there is hardly any material involved in the transaction. Nevertheless for sake of convenience such transactions is being referred to as "sale" in this order as referred to by the appellants because the transaction has a colour of sale. Nothing about taxability is to be inferred by use of this word in the remaining part of this order. 13. The question as to what will be the nature of transaction when a distributor sells sim....
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....liary service rendered by distributor to BSNL in marketing the service of BSNL. 17. As explained above, BSNL is paying service on MRP of the cards and paying commission to distributors out of MRP realized. In such a situation, collecting service tax on MRP of sim card from BSNL and collecting service tax again on that part of the amount paid by BSNL to the distributor out of MRP realized, puts the parties to these transactions at a doubly disadvantageous position as compared to the value taxed in the case of BPL Mobile because BPL Mobile was paying tax only on the discounted price of the card and there is no evidence to show that the value of service rendered by those distributors was being subjected to tax. 18. Against the above background the prime arguments of the appellant-distributors in these case are the following,- (i) The distributor is buying and selling sim cards and there is no service involved in the activity of the distributor, (ii) BSNL has paid service tax on the entire value of Rs. 500 including Rs. 15 paid to the distributor. So there is no case for demanding service tax again on the amount of Rs. 15. 19. Some facts and relevant laws that are to be ....
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....d argument in view of the decision of the Apex Court in the case of Idea Mobile Communications Ltd (supra) and for the reason that the essential character of the transaction is not of sale. 21. The second argument adopted was that demanding tax on a part of such value again in the hands of the distributor amounts to double taxation. The argument that tax should not be demanded in situations where somebody else has paid tax on the taxable value of a service is not an argument that can be accepted normally. If this argument is adopted, a taxpayer "X" in a VAT chain can argue that the next person "Y" who uses the service as input will be paying tax and X need not pay tax. In a VAT chain it is difficult to identify who is the ultimate consumer who is not paying further tax. Taking the case of telecommunication service if the customer is a person who does not pay service tax on any of his activities a telecom operator cannot adopt this argument. But if the customer is an industrialist he is eligible for credit of service tax to be paid by him. So a telecom operator can adopt the argument in respect of services rendered to such customers, Such logic will make any VAT system for collec....
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.... sells the cards through the distributor and collects money from customers through the distributor and then pays to the distributor out of consideration received by them from their customers on which consideration service tax is first discharged by BSNL. That is to say the transactions of both the parties are essentially one and payment on the full value of service occurs earlier than payment of commission to the distributor. Further payment of tax on full value of service rendered by the principal, that is BSNL, is easily verifiable unlike in the case of services rendered by many other sub-contractors for other type of services. 24. Some services which are on similar footing as sale of sim cards or recharge coupons by distributors are services provided by,- (a) sub-broker to a stockbroker; (b) mutual fund agent to a mutual fund or asset management company; (c) selling or marketing agent of lottery tickets to a distributer or a selling agent. 25. Interestingly the above services as also the services of selling agent or a distributor of SIM cards or recharge coupon vouchers have been exempted from service tax vide entry No. 29 in Notification 25/2012-ST dated 20-06-12....