Agarwal Traders Vs Commissioner (Appeals) Central Excise Respondent & CGST (CESTAT Delhi)
Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Delhi has set aside an order that confirmed a service tax demand against Agarwal Traders, a dealer for Vodafone Digilink Ltd. The dispute concerned the period of April to June 2012, during which Agarwal Traders was engaged in the supply and sale of SIM cards and top-up recharges. A show cause notice had been issued, alleging that the appellant failed to discharge service tax liability on discounts, commissions, and incentives received from Vodafone for marketing, selling, and distributing its products. The Deputy Commissioner initially confirmed the demand, a decision subsequently upheld by the Commissioner (Appeals), who concluded that the activities fell under “Business Auxiliary Service” as the appellant acted as a “Commission Agent” on a principal-agent basis.
However, the CESTAT, in its review, noted that the legal position on this matter had been settled by multiple prior judgments. The learned authorized representative for the department fairly conceded that the issue was in favor of the appellant. The Tribunal relied on a Division Bench decision in Chotey Lal Radhey Shyam v. Commissioner of Central Excise and Service Tax, Lucknow, which was upheld by the Allahabad High Court. This precedent established that if service tax had already been paid by the principal (e.g., BSNL in that case) on the sale of SIM cards and recharge coupons to the franchisee, demanding it again from the franchisee would amount to impermissible double taxation. Furthermore, the Chotey Lal Radhey Shyam ruling clarified that the relationship between such a dealer and the telecom company was on a principal-to-principal basis, not an agency, and the dealer’s activity was primarily trading, not rendering a taxable “business auxiliary service.” Citing this and other subsequent Tribunal decisions in M/s. True Telecom vs. CST, Raipur and M/s. Ascent Poly Films Pvt Ltd. vs. CCE, Delhi, the CESTAT concluded that the Commissioner (Appeals) was not justified in confirming the service tax demand. Consequently, the appeal was allowed, and the impugned order was set aside.
