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2026 Supreme(Online)(Mad) 46316
IN THE HIGH COURT OF JUDICATURE AT MADRAS
G. Jayachandran, Shamim Ahmed, JJ
M. Sivasankar – Appellant
Versus
Commissioner Of Central Excise – Respondent
WP No.12738 of 2007 | WP No.12739 of 2007 | WP No.12740 of 2007
For the Appellants/Petitioners: A. Thiagarajan
For the Respondents: R.P. Pragadish
The court established that double taxation on the same service is impermissible; once the principal telecom service provider has remitted service tax on the entire face value of a SIM card, a subsequent demand for service tax from a franchisee on the same transaction is legally void.
Headnote:The case involves challenges under Art. 226 of the Constitution against demands for service tax on commission earned from the sale of SIM cards. The petitioners contended that the principal telecom service provider had already paid service tax on the full face value of the SIM cards, rendering further demands on the franchisees as double taxation. The Court determined that assessing authorities had previously concluded no further tax was due, and consistent with judicial precedent, confirmed that once tax is discharged on the entire face value by the principal, no secondary liability arises for franchisees. The central issue was whether service tax could be levied upon a franchisee for the same transaction for which the principal service provider has already remitted the tax. The Court's ratio decidendi rests on the principle that the law does not permit double taxation for the same service. Relying on settled legal positions, the Court clarified that where the entire face value of the SIM card is subjected to tax at the primary level, any subsequent demand on the commission earned by the intermediary is legally impermissible. The Writ Petitions are allowed and the impugned Orders-in-Original are quashed.
| Table of Content |
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| 1. challenge against service tax demands on franchisee commissions. (Para 1 , 2 , 3) |
| 2. prohibition of double taxation on the same value. (Para 4 , 5) |
(Order of the Court was made by Dr.G.Jayachandran J.)
These three Writ Petitions, filed under Article 226 of the Constitution of India, seek a Writ of Certiorari to quash the respective impugned Orders-in- Original passed by the second respondent, namely: Order Nos. 40 & 41 of 2006 dated 30.11.2006 (File C.No.V/STC/30/7/2006) in W.P. No. 12738 of 2007; Order No. 42 of 2006 (ST) dated 30.11.2006 (File C.No.V/STC/30/25/2006) in W.P. No. 12739 of 2007; and Order No. 8 of 2006 (ST) dated 29.12.2006 (File C.No.V/BAS15/59/2006-ST-Adj) in W.P. No. 12740 of 2007.
2.Since the issue involved in all these Writ Petitions is identical, they are being disposed of by this common order.
3.These three petitions are preferred by the franchises of Bharat Sanchar Nigam Limited (BSNL). The petitioners are aggrieved by impugned orders, demanding service tax/service charge for the sale of SIM cards on a commission basis. The primary grievance of the petitioners is that this demand is raised despite the fact that the service tax on the entire face value of the SIM cards has already been fully remitted to the department by the telecom service provider, BSNL, itself. In fact, for the assessment year 2005-06, after the issuance of a show-cause notice and upon receipt of the reply from the petitioner, the assessing officer had dropped further action. The assessing authority was fully satisfied that the telecom service provider had paid service tax on the entire face value of the SIM card, concluding that there was no necessity to demand further service tax from the franchise. However, the appellate authority in that case, and the assessing authority in the subsequent assessment years, took a contrary view, holding that the writ petitioner is liable to pay service tax as well as a penalty. Challenging these assessment and demand orders, the petitioners have approached this Court by filing W.P. Nos. 12738, 12739, and 12740 of 2007.
4.This Court recently had an opportunity to consider a similar issue in Civil Appeal No. 3591 of 2011. Following the authoritative judgments of the Hon'ble Supreme Court and the judgment of the Hon'ble Allahabad High Court, we have explicitly held that there cannot be double taxation for the same service. Once service tax has been collected from the principal telecom service provider, namely BSNL, on the entire face value of the SIM card, a subsequent demand by the department for service tax from the franchise on the very same transaction is legally impermissible.
5.Therefore, following the settled legal position and the ratio laid down in the aforementioned judgments, we have no hesitation to quash the impugned orders of demand.
6.Accordingly, all the three Writ Petitions (W.P. Nos. 12738, 12739, and
12740 of 2007) are allowed, and the impugned Orders-in-Original are hereby quashed. Consequently, the connected miscellaneous petitions are dismissed.
No costs.
