Brief Facts of the case:
The respondents were engaged in providing telecommunication services were registered with the Service Tax authorities at Mumbai and were discharging service tax liabilities. Respondents were providing prepaid services to their subscribers of cellular phone services and collected payment for such services through prepaid cards and recharge vouchers. The prepaid cards and recharge vouchers were sold in physical form through distributors, retailers and electronically. MRP is printed on these SIM cards and recharge coupons.
It was alleged in the show‐cause notice that there was a short payment of tax as the respondent had not taken the correct value for discharging the service tax liability. The respondent paid the service tax on the amount received from dealers on sale of recharge coupons and SIM cards instead of paying the same on MRP.
The SCN was challenged by the assessee before the Commissioner (Appeals), who decided the case in favour of revenue. Being aggrieved by the decision of Commissioner(Appeals) , Revenue approached to this tribunal.
Contention of the Assessee:
Learned Counsel appearing on behalf of the respondent submitted that the very same issue was raised before the coordinate bench of the Tribunal in the case of BPL Mobile Cellular Ltd. wherein it held in favour of the assessee and the findings of the Tribunal in that case was subsequently confirmed by the Hon’ble Supreme Court.
Thus, for the coupons and SIM cards sold through distributors the assessee is liable to pay service tax only on gross amount charged for the telecommunication services from the distributors and not on MRP.
Contention of the Revenue:
Learned Counsel for the Revenue submitted that the respondent sells the recharge coupons and SIM cards directly to the subscribers and considered the entire amount mentioned as MRP; for discharge of service tax liability is correct and undisputed .
However, the service tax liability on the recharge vouchers and SIM cards sold through distributor, the respondent considered the amount received by them from such distributors for discharging the service tax liability instead of MRP of SIM cards & coupons, is being objected by the department.
The Revenue submitted that since the provision of service is between subscriber and telecom company where the distributor is merely acting as intermediary ,therefore, the taxable value is MRP as the subscriber received benefit to the extent of MRP and it is irrelevant that what amount he pays to distributors to purchase SIM cards and vouchers.
Decision of Tribunal:
The tribunal considered the rival contentions and observed that Section 67 of the Finance Act, 1994 state the value of any taxable service shall be the gross amount charged by the service‐provider for such service rendered by him. In instant case, the amount charged by the assessee (service‐provider) is the amount received by them from dealers/distributors and nothing extra was charged by the appellants. Admittedly, Service tax was paid on this amount. There are a few elements specified in the Explanation to Section 67, as includible in the value of taxable service but no such element provided for telecommunication service.
It is true that the service rendered by the assessee by way of sale of pre‐paid SIM cards through distributors was ultimately received by the subscribers. However, where the law prescribes the value of taxable service to be the gross amount charged by the service‐provider, Service tax can be levied on that amount only.
Thus, service tax applicable for the coupons and SIM cards sold through distributors on the gross amount received from the distributors and not on MRP.
Appeal of Revenue is dismissed.
(Analysed by our team member CA Saurabh Chokhra)