Commission on DTH recharge vouchers is not separately taxable where service tax is paid on the MRP.

M/s. Kanna Marketers distributed activation and recharge vouchers of DTH operator Sun Direct and received commission from the operator for such distribution. The vouchers bore a predetermined maximum retail price (“MRP”), which included the distributor’s commission and applicable taxes. Sun Direct had discharged service tax on the entire MRP, including the commission component.

The Department nevertheless treated the commission as consideration for Business Auxiliary Services rendered by the appellant to the DTH operator and issued a show-cause notice demanding service tax, interest, and penalties. The adjudicating authority confirmed the demand and imposed an equivalent penalty under Section 78 of the Finance Act, 1994; the Commissioner (Appeals) upheld the demand and penalty. The appellant challenged that portion of the appellate order before the Tribunal.

1. Whether the appellant was liable to pay service tax under the category of Business Auxiliary Services on the commission received for distributing DTH activation and recharge vouchers when service tax had already been paid by the DTH operator on the vouchers’ full MRP.

2. Whether the interest and equivalent penalty imposed under Section 78 of the Finance Act, 1994 were sustainable.

The Tribunal applied the service-tax regime under the Finance Act, 1994, including the taxable category of Business Auxiliary Services and Section 78 concerning penalty for suppression or related defaults.

It relied principally on Kumar’s Electronics v. CC, Madurai, 2019 (29) GSTL 463 (Tri.-Chennai), which held that where service tax has already been discharged on the MRP of SIM cards, recharge coupons, or similar vouchers, the distributor need not pay service tax separately on the commission forming part of that MRP, since a further levy would amount to double taxation.

The Tribunal also followed the reasoning in G.R. Movers, affirmed by the Allahabad High Court, and the subsequent Madras High Court decision in Commissioner v. Bharat Cell, as cited in the judgment.

The Kumar’s Electronics decision further recognised that the issue was revenue-neutral because the principal operator could avail CENVAT credit if tax were separately paid on the commission.

The Tribunal found the facts to be identical to those in Kumar’s Electronics: the appellant received commission for distributing DTH recharge vouchers, while the DTH operator had already paid service tax on the entire MRP, which included the commission.

Applying the established principle that tax cannot be levied again on a commission component already included in the value on which tax has been discharged, the Tribunal held that a separate demand on the appellant would result in double taxation.

The fact that the earlier cases concerned telecom SIM cards or recharge coupons, rather than DTH vouchers, was held immaterial because the underlying valuation and taxation principle was the same.

Since the substantive service-tax demand failed, the consequential interest and equivalent penalty under Section 78 also could not survive.

The demand under Business Auxiliary Services, along with interest and the equivalent penalty, was set aside. The appeal was allowed with consequential relief in accordance with law.