BSNL Paid Service Tax including Commission on Marketing Received by Distributor: CESTAT Sets aside Service Tax demand on Distributor [Read Order]

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not demandable when BSNL has paid service tax on the commission for marketing received by the assessee and set aside the demand of service tax on the distributor.

Lovely Traders, the appellant challenged the impugned order dated 14/15.1.2010 passed by the Commissioner (Appeals) wherein the Commissioner (Appeals) has rejected the appeal of the appellant.

The appellant is a franchisee of BSNL for providing the service of promotion and marketing and distribution of various products of BSNL for which they were receiving the commission and were not paying service tax thereon. 

The department issued a show cause notice to the appellant for a demand of Rs.77,578/-  for the period 1.9.2006 to 31.3.2007 which was confirmed ex-parte vide Order-in-Original dated 19.12.2008.  On appeal, the Commissioner (Appeals) upheld the Order-in-Original.

It was submitted by the appellant that he is not liable to pay service tax on the commission received by them. Further submitted that BSNL has discharged service tax liability on a full value equal to MRP (maximum retail price) which was inclusive of the appellant’s discount/ commission and hence they are not liable to pay service tax.

The appellant has produced a certificate on record which was issued by BSNL wherein they have certified that the maximum retail price of prepaid mobile connections/recharge coupons on which service tax has been discharged during the period 1.7.2003 to March 2007 includes commission/discount paid to their authorised distributor/franchisee. 

It was viewed that the impugned order has built its foundation on the assumption that appellants render “business auxiliary service” about SIM cards and are hence liable to tax on the commission earned by them.

The two-member bench comprising Mr S S Garg, (Judicial) and Mr P Anjani Kumar, (Technical) allowed the appeal and set aside the impugned order since BSNL had already deposited service tax on commission received by the appellant, which was clear from the certificate produced by them on record. 

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates