By TIOL News Service

MUMBAI, MAY 02, 2018: THESE are Revenue appeals.

The Appellant had provided Recharge Vouchers (RCVs) to distributors at discount on its MRP which was printed on the RCVs whereas service tax was paid on MRP which had resulted in excess payment of service tax by them.

The adjudicating authority sanctioned the refunds. The revenue appeal against this order was rejected by the Commissioner (Appeals), therefore, appeal before CESTAT.

The AR submitted that the telecom service is ultimately provided by the Respondent to the subscriber who has paid MRP printed on RCVs. Accordingly, selling the RCVs to the marketing agencies/ distributors at any discounted price is immaterial insofar as the value of the service for the purpose of computation of applicable service tax is concerned in terms of Section 67 of the Finance Act, 1994.

Furthermore, an identical issue was decided in favour of the Respondent by CESTAT, Mumbai - 2008-TIOL-1511-CESTAT-MUM and the department's appeal has been admitted by the Bombay High Court and thus the correctness of the order of CESTAT is in jeopardy in terms of Supreme Court decision in case of UOI Vs. West Coast Paper Mills Ltd. - 2004-TIOL-14-SC-LMT-LB and the Tribunal's order does not have precedent value.

The respondent submitted that as per Section 67 of the FA the gross value for the purpose of charging service tax is the value of the goods received by the assessee. Reliance is placed on the decision in BPL Mobile Cellular - 2007-TIOL-1108-CESTAT-MAD. It is further submitted that filing of appeal before High Court against the order of Tribunal for the previous period cannot cause hindrance for deciding the present.

The Bench inter alia observed -

++ We find that the period involved in the appeals is June 2006 to October 2006 when Section 67 was in force. In terms of said section the service tax is payable on the gross amount charged by the service provider for such service provided by him. Hence in such case the amount received by the Respondent is the gross amount of value received by them which is only liable for tax.

++ It is only w.e.f. 01.03.2011 [2/2011-ST refers] that an explanation has been added after rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006 clarifying that for the purpose of telecommunication service [Section 65(105)(zzzx)] the value shall be the gross amount paid by the person to whom the service is provided by the telegraph authority. Thus only after insertion of aforesaid explanation in case of service provided by way of recharge coupons or prepaid cards or the like, the value shall be the gross amount charged from the subscriber or the ultimate user of the service and not the amount paid by the distributer or any such intermediary to the telegraph authority. It is, therefore, clear that prior to this period the gross value of the service shall be the value received by the Respondent.

After extracting the Tribunal decision in BPL Mobile Cellular - 2007-TIOL-1108-CESTAT-MAD, the Bench concluded that the issue involved in the present appeal already stands decided in favour of Respondent.

On the ground taken by the AR that appeal has been filed before the Bombay High Court and the same had been admitted, the CESTAT noted that the doctrine of merger is not applicable in the present case as it is for different proceedings,in view of the apex court decision in Kunhayammed vs. State of Kerala - 2002-TIOL-50-SC-LMT-LB and furthermore the Bombay High Court in Mycon Construction Ltd.vs. UOI - 2017-TIOL-568-HC-MUM-CUS has held that mere pendency of appeal before Supreme Court does not take away the binding effect.

The Revenue appeals were dismissed.

(See 2018-TIOL-1392-CESTAT-MUM)