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2026 Supreme(Online)(Mad) 46309
IN THE HIGH COURT OF JUDICATURE AT MADRAS
G. Jayachandran, Shamim Ahmed, JJ
Kavee Marketing – Appellant
Versus
Commissioner Of Central Excise And Service Tax – Respondent
CMA No. 3591 of 2011|MP No.1 of 2011
For the Appellants/Petitioners: Ramya Nurali Kumaran
For the Respondents: K.Mohanamurali
Service tax cannot be levied on the commission earned by a franchisee for the sale of SIM cards if the telecom service provider has already discharged the service tax liability on the full face value of said cards, as it constitutes double taxation.
Headnote:The appellant, a franchisee of a telecom service provider, challenged the demand for service tax on commission earned from the sale of SIM cards. The appellant contended that the telecom service provider had already paid service tax on the full face value of the SIM cards, making the additional demand unsustainable and leading to double taxation. The court observed that the appellant acted as a purchase-and-sale distributor rather than providing 'Business Auxiliary Service'. The primary issue was whether service tax could be levied on commission components when the principal entity had already discharged the service tax liability on the gross value of the products. Relying on settled legal precedents, the court reasoned that activities involving the purchase and sale of SIM cards where service tax is already paid on the full value do not constitute a distinct taxable service, thus precluding the possibility of double taxation under the Customs Act, 1962. The court allowed the appeal, setting aside the orders of the appellate tribunal and restoring the original order favorable to the appellant.
| Table of Content |
|---|
| 1. factual background regarding service tax disputes on sim card commission. (Para 1 , 2 , 3 , 4) |
| 2. contentions regarding double taxation and applicability of legal precedents. (Para 5 , 7 , 8) |
| 3. court's findings on the non-sustainability of tax on commission post-taxation of gross value. (Para 9 , 10) |
(Judgment of the Court was delivered by Dr.G.Jayachandran J.)
The present Civil Miscellaneous Appeal is filed by a trader who operates as a franchisee for Bharat Sanchar Nigam Limited (hereinafter referred to as the 'Telecom Service Provider'). The appellant is engaged in the sale of SIM cards on a commission basis on behalf of the said Telecom Service Provider.
2.The respondent department issued a Show Cause Notice to the appellant, demanding service tax on the commission earned from the sale of SIM cards. The appellant resisted the notice, contending that the service tax is already collected on the full face value of the SIM cards and remitted to the department by the Telecom Service Provider. It was further contended that, as a franchisee, the appellant is not liable to pay service tax again on the commission component.
3.The said contention was accepted by the Adjudicating Authority, and the Order-in-Original was passed on 09.03.2006, containing the following observations:
“FINDINGS AND ORDER I have carefully gone through the case records, written reply o the assesee and oral submission made before me by Sri Promod Kumar Chowdhary at the time of personal hearing and found that the show cause notice-has been issued to the appellant has no merit since the BSNL themselves have taken the responsibility of paying the Service Tax on the total value of the SIM cards (including Commission for acting on behalf of BSNL). The appellant is acting at the instance of BSNL and BSNL has paid the S. Tax on the total value of the SIM cards. Hence, the question of demanding S. Tax and payment of S. Tax do not arise.
There is no breach of any rule in any ORDER: In view of the aforesaid discussion I drop further proceedings.”
4.The Order-in-Original was initially upheld; however, the Department preferred an appeal before the Commissioner of Central Excise (Appeals). The Appellate Authority, after considering the Department's contentions and relying upon the judgment of the Hon’ble Kerala High Court in CCE vs. M/s. Idea Mobile Communication Ltd. [2009-TIOL-318-HC-KERALA-ST], remanded the matter back for fresh consideration.
5.The present appeal is before us on the ground that the Tribunal (CESTAT) failed to appreciate that the judgment in the Idea Mobile case is factually distinguishable. The appellant contends that the cited case pertains to the levy of service tax on activation charges by a telecom service provider, and not the commission earned by a franchisee. It is further contended that since service tax has been fully paid on the face value of the SIM cards, any further demand for service tax on the commission would result in double taxation. 6.At the time of admission, this Court framed the following substantial questions of law:
(i) whether the respondent tribunal was right in taking note of the order of a different High court which is in favour of the revenue when the same issue is pending before the jurisdictional high court and interim orders are in force against the revenue ?
(ii) If the order of an statutory authority is running contrary to a subsequent decision whether the appellate authority would be right in directing the lower authority to consider the subsequent judgment, without deciding the matter by itself on the basis of the subsequent decision, y affording an opportunity of the applicability of the subsequent decision and its correctness of the subsequent decision?
7.The learned counsel appearing for the appellant submits that the issue is no longer res integra in view of the authoritative pronouncement of the Tribunal in the case of Martend Food & Dehydrates Pvt. Ltd., [(2013) 29 STR 634 (Tri.)] decided by the Apex C
