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2023 (10) TMI 812
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....obile company itself discharged the service tax, the commission which is included in such MRP, no separate demand can be made. He placed reliance on the following judgments:- (a) Moradabad Gas Service - 2013 (31) STR 308 (Tri. Del.) (b) Goyal Automobiles - 2016 (43) STR 268 (Tri. Del.) (c) Dyal Medicos - 2017(49) STR 409 (Tri. Del.) (d) BPL Mobile Cellular Limited- 2007 (8) S.T.R. 546 (Tribunal) (e) Bharti Hexcom Limited - 2019 (24) G.S.T.L. 588 (Tri. - Del.) (f) Vodafone Essar - 2015-TIOL-1173-CESTAT-MUM 3. Shri P. Ganesan, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. 4. On careful consideration of the submissions made by both the sides and perusal of record we find that issue whether the dealer of SIM Card receiving commission from the mobile companies is liable to payment of service tax on such commission when admittedly the principal Mobile Companies discharged the service tax on the gross MRP received from ultimate customer. We find that since the mobile companies admittedly paid the the service tax on gross MRP out of that only commission is paid, deman....
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.... services to the subscribers of the BSNL and always act in the interest of both the BSNL and its subscribers. 9.2 The BSNL may from time to time require the franchisee to carry out customers satisfaction surveys as decided by the BSNL, the cost thereof, any, will be borne by the franchisee. 9.3 The BSNL and the franchisees shall follow model rules as described. In the annexure further responsibility of Franchisee", terms and conditions and commission and incentive policy has been described which is as under : Responsibilities of Franchisee 1.1 Franchisee will generate demand for providing services permitted by BSNL, to franchisee BSNL Franchisee will target both individual and corporation customers. 1.2 Franchisee will receive/attend and rectify complaints and provide after sale services. All forms of complaints on phone and walk in complaints (hardware related billing performance forms complaints on phone and walk in complaints related etc.) will be handled directly by Franchisee. Franchisee shall redress all possible disposals. 1.3 Franchisee will receive advertising material from BSNL for displaying them and distribution to s....
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.... Modem etc. as required and mutually agree upon the cost of such alteration renovation shall be borne exclusively by the franchisee." "Procedure for commission/rewards/marketing expenses claim :- Franchisee will get upfront payment for basic commission, franchisee will retain the basic commission payable to them strictly as per clause 6.7 above and submit the remaining amount collected to the customer service centre, for target achievement and retention bonus due to them, for the duration which ends in the previous month. The claim should be reach the company by 5th of every month and by the 10th of every quarter end." From the above clauses it is clear that the respondents were promoting and marketing the services of BSNL and receiving commission. Consequently the respondents were providing business auxiliary service to BSNL. 14. The question as to what is the taxable value when a telecom operator sells SIM-card of a specified Maximum Retail Price (MRP) at a discounted price to distributors and the distributor sells the cards at MRP to customers was examined by the Tribunal in the case of BPL Mobile Cellular Limited v. CCE - 2007 (8) S.T.R.546 (Tri.-Chen....
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.... on the amount of Rs. 15. 18. Some facts and relevant laws that are to be noted in this context are the following :- (i) It is already held by the Apex Court that the essential nature of the transaction is one of providing service and not of sale of SIM-cards. In the case of SIM-cards there is at least some material involved. In the case of recharge coupons there is no material involved and it is purely a case of marketing service. If distributors are buying sim-cards from BSNL payment should be from distributor to BSNL. In the case before us tax is demanded on payments made from BSNL to distributor. In fact the source of information based on which demands are issued are Form 16A under Income Tax Act issued by BSNL to the distributors evidencing payment of commission to distributors. This is not a case where the distributors first paid for the value of the cards took possession and then sold the cards at a higher price. The argument that it is a case of buying and selling of cards appears to be raised only on the basis that there are MRPs for the cards and it is handed over to the customer against payment of such MRP. However the card by itself is of no use to the....
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....telecom operator can adopt the argument in respect of services rendered to such customers. Such logic will make any VAT system for collecting tax unworkable. During the initial phase of levying service tax when the Cenvat credit scheme was not extended to service tax, this concept that a sub-contractor need not pay tax if the main service provider was paying tax on the value inclusive of the value of service provided by the sub-contractor was initially supported by C.B.E. & C. in circulars like the following : (i) C.B.E. & C. Circular No. B-43/1/97-TRU, dated 6-6-1997 (ii) C.B.E. & C. Circular No. B-43/5/97-TRU, dated 2-7-1997 (iii) C.B.E. & C. Circular No. B-43/7/97-TRU, dated 11-7-1997 (iv) C.B.E. & C. Circular No. B-11/3/98-TRU, dated 7-10-1998 21. But this approach was changed with effect from 23-8-2007 when Circular No. 96/7/2007-S.T., dated 23-8-2007 was issued. The relevant Extracts from this circular reads as under : Reference Code Issue Clarification (1) (2) (3) 999.03/23-8-2007 A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-c....
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....selling agent. 24. 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-S.T., dated 20-6-2012. So the special nature of services in such cases is recognized though only recently. 25. Considering the special nature of the impugned activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers is subjected to tax, I am of the view that there is no case to undo decisions already taken by the Tribunal in this regard. A contrary approach will result in a difference in value that is taxed for mobile telecom service according to the decision of the Apex Court in the case of Commissioner v. BPL Mobile Cellular Ltd. - 2011 (24) S.T.R. J175 (S.C.). I also note that this issue has lost relevance for the future because of exemption under Notification 25/2012-ST-S. No. 29 for this type of service. So I agree with the outcome as recorded by Member (Judicial)." (b) In the case of Goyal Automobiles (supra) the Tribunal has passed the following order:- "6. W....
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.... for discharging liability on the telecommunication service provided by BSNL, such procedure dos (sic) not result in extra realization of Revenue. Considering the special nature of the impugned activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers is subjected to tax, we are of the view that there is no case to undo decisions already taken by the Tribunal in this regard. A contrary approach will result in a difference in value that is taxed for mobile telecom service according to the decision of the Apex Court in the case of Commissioner v. BPL Mobile Cellular Ltd. - 2011 (24) S.T.R. J175 (S.C.). We also note that this issue has lost relevance for the future because of exemption under Notification 25/2012-S.T.-S. No. 29 for this type of service." 9. As commission system and sale methodology in relation to SIM cards is the same as the other two products, we, for the reason elaborated supra, set aside the impugned orders and allow both the appeals with consequential relief." (c) In the case of Dyal Medicos (supra) the principle Bench of this Tribunal passed the following order:- "2. The facts o....