Case Law Details
S. R. Medical Agencies Vs Commissioner of Central Excise (CESTAT Chandigarh)
Introduction: In a significant ruling, the Central Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh addressed the issue of service tax on commission received from Bharat Sanchar Nigam Ltd. (BSNL).
Background of the Case: The case revolves around S. R. Medical Agencies, an authorized distributor/franchisee of BSNL. The Commissioner of Central Excise issued a notice demanding service tax on the commission earned by the appellant. The demand was based on the argument that the services provided by the appellant to BSNL fell under the category of “Business Auxiliary Service” as defined in Section 65(19) of the Finance Act, 1994.
Appellant’s Defense: The appellant vehemently contested the demand, stating that they were not liable to pay service tax on the commission received. They argued that BSNL had already discharged service tax on the total value of prepaid mobile connections/recharge coupons, which included the appellant’s commission. Therefore, taxing the commission separately would amount to double taxation.
CESTAT’s Decision: CESTAT Chandigarh, after considering various precedents and legal arguments, ruled in favor of the appellant. The tribunal held that commission received by the distributor, which forms part of the maximum retail price (MRP) on which service tax has already been paid by BSNL, should not be subject to additional service tax. They emphasized that such double taxation is not warranted.
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