The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) of Bangalore, recently ruled that the sale or distribution of SIM cards on behalf of telecom operators, such as BSNL, does not attract service tax under the category of ‘Business Auxiliary Services’.
The assessee/ appellant in the case is Venkateswara Consumer Supplies.
The appeal arose from an earlier order issued by the Commissioner of Central Excise, Bangalore. The dispute revolved around the appellant’s role in the sale and distribution of BSNL SIM cards and whether this activity should be categorized as a taxable service under Business Auxiliary Services for the period from April 2004 to January 2009.
The Tribunal, comprising Dr. D.M. Misra, Member (Judicial), and Mrs. R. Bhagya Devi, Member (Technical), heard the case on September 13, 2024. During the hearing, the appellant’s counsel referred to a recent decision of the Tribunal in Magnum Vision vs. CST, Bangalore, where the same issue was decided in favor of the assessee. The counsel urged the Tribunal to consider this precedent while deciding the current case.
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The revenue, represented by Mr. M.A. Jithandra, Assistant Commissioner (AR), stood by the findings of the Commissioner and argued that the service tax liability should be upheld.
After considering the submissions and reviewing the records, the Tribunal noted that the matter had been conclusively settled in the Magnum Vision case. It was established in that case that the sale of SIM cards by dealers on behalf of telecom operators, such as BSNL, does not attract service tax under the Business Auxiliary Services category. The Tribunal held that since BSNL had already discharged service tax on the full MRP value of the SIM cards, there was no further service tax liability on the dealers involved in their distribution.
In its ruling, the Tribunal referenced several prior judgments, including the decision of the Supreme Court in 2015 (37) STR J132 and the Madras High Court’s decision in Bharti Televentures Ltd.: 2015 (40) STR 221 (Mad.). The Tribunal also cited previous CESTAT rulings, including CCE Vs. Moradabad Gas Services: 2013 (31) STR 308 (Tri. Del.), which held that telecom operators paying service tax on SIM cards precludes further liability for distributors.
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The Tribunal further stressed that any incentives or discounts received by the appellant in the course of their trading activity did not constitute taxable services, as had been upheld in earlier cases such as Kerala Publicity Bureau Vs. CCE: 2008 (9) STR 101 (Tri. Bang.) and P. Gautam & Co. Vs. CST: 2011 (24) STR 447 (Tri. Ahmd.).
Based on the aforementioned case laws and decisions, the Tribunal ruled in favor of the appellant, setting aside the impugned order passed by the Commissioner. The appeal was allowed, granting consequential relief to the appellant in accordance with the law.
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