TaxTMI 
TaxTMI 
2015 (12) TMI 1495
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....retailers/dealers and service recipients to whom the notice is providing the taxable service, the full amount off such SIM cards are charged and recovered for provision of services provided or to be provided from the subscribers of such services. Section 67 of the finance Act, 1994 (Hereinafter referred to as 'Act') provides that value of taxable service for the purpose of levy of Service Tax shall be 'gross amount charged' as consideration. In the instant case, subscribers are quite obviously charged in full for such service provided or to be provided by the notice. As such, irrespective of their claim that they are not recovering any amount for such issuance of SIM Cards from their distributors/retailers/dealers, the fact remains that full price of such SIM cards are recovered from the recipient of the services clearly establishing a linkage between service to be provided by the notice to the recipient of such service and gross amount charged for such provision of service in money consideration from them. Thus such gross amount paid by the subscribers for such SIM cards are required to be included in the taxable value for the purpose of levy of Service tax in terms of Sec....
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....ground that the provisions of Section 67 of the Finance Act, 1994, during the relevant period indicates the service tax liability to be discharged on the amount charged for the services rendered. Adjudicating authority did not accept the contentions, confirmed the demand raised along with interest and also imposed penalties. 3. Learned Counsel appearing for the appellant would take us through the records. He would submit that the adjudicating authority has erred in coming to the conclusion that the tax liability arises on the appellant. He would then take us through the provisions of Section 67, as was relevant during the period and submits that the said Section envisages the discharge of service tax liability on gross amount charged by the service provider for the services rendered. It is his submission that the distribution of free recharge voucher was amounting to commission given by them to the dealer; they have already discharged the service tax liability on the amount received from the dealer for the sale of SIM Cards which according to him is not in dispute. He would also submit that the provisions of Section 67 and the Explanation thereof did not include the value ....
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....bility from the subscriber. 4.2 He would submit that since the service tax liability has been borne by the individuals, the appellant herein being a service provider should have discharged the service tax liability. He would emphasise that the impugned order be upheld. 5. We have considered the submissions made at length by both sides and the records. 6. It is an admitted fact that the appellant is discharging the service tax liability under the category of "Telephone Services" on an amount received by them from distributors/dealers for the sale of prepaid SIM Cards; the SIM Cards are sold to the distributors/dealers on MRP and in lieu of the commission payable to them, appellant issues recharge vouchers to that amount which is commission, as free of cost. It is also undisputed that the dealers have recovered the amount as sale of such recharge vouchers from the ultimate subscriber/customer. 6.1 We find that the main issue to be decided in this case is whether during April 2003 to September 2006 distribution of free of recharge voucher attracts service tax liability or otherwise despite the fact that the recharge voucher are given free of cost to the dealers....
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....mount to giving commission to the dealer for the transactions of sale of prepaid SIM Cards for the appellant. It can also be noticed that during the relevant period the Explanation as per the Section 67 of Finance Act, 1994 (herein above reproduced) also do not indicate inclusion in that gross value of any cost towards free distribution made by the service provider. 6.4 We find strong force in the contention raised by the learned Counsel that the provisions of Service Tax (Determination of Value) Rules, 2006, that came into effect from 19.04.2006; Rule 6 discuses about the inclusion/exclusion of commission, for determining the correct value of the services rendered. We perused the said provisions of Rule 6(1) of Service Tax (Determination of Value) Rules, 2006 and note does not include the "Telephone Services" by any stretch of imagination. For the brevity sake we reproduce the Rule 6(1) of Service Tax (Determination of Value) Rules, 2006 which would be only relevance for us post 19.04.2006:- "Rule 6 (1) Subject to the provisions of section 67, the value of the taxable services shall include,- (i) the commission or brokerage charged by a broker on the sale or p....
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....for the services provided by the service provider. 6.6 We also find the learned Counsel is correct to bring to our notice that the CBEC was of the same opinion as can be seen from para 5 of the Circular No. 62/11/2003-ST dated 21.8.2003. We reproduce the same:- "Service rendered free of charge: 5.1 In the context of certain services, a doubt has been raised as to whether service tax will be payable if the service is provided free of charge. 5.2 As per charging section viz. section 66 of the Act, service tax is chargeable at the rate of 8% of the value of taxable service. Thus if the value is zero the tax will also be zero even though the service is taxable." 6.7 In our considered view the ratio of judgement of the Tribunal in the case of BPL Mobile Cellular (supra) on similar set of facts would be applicable. In the case of BPL Mobile Cellular the issue was regarding discharge of service tax on an amount received by the appellant therein for the sale or prepaid SIM Cards to the dealers and distributors; in that case the appellant threrein discharge the service tax liability on actual amount received from the distributors after adjustment of commissi....