The Delhi High Court has directed the (CESTAT) to hear Tata Teleservices’ appeal against double taxation on prepaid services subject to Rs. 1 crore pre-deposit.
The bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta have permitted Petitioner, Tata Teleservices to file the appeal before CESTAT within four weeks subject to the Petitioner depositing a sum of Rs. 1 crore within four weeks. Subject to the deposit being made the appeal would not be dismissed on the ground of limitation and shall be heard by CESTAT on merits.
The Petitioner, Tata Teleservices is a service provider, which provides cellular mobile services, short message service (SMS), data/internet services and Value- Added Services (VAS). The Show Cause Notice proceedings revolve around prepaid vouchers/packages that the Petitioner provides for availing the services.
The Petitioner submitted that whenever consumers avail its services via a pre-paid voucher/package, they pay a lump sum amount, on which the service charges are deposited by the Petitioner. So long as the consumer has a credit balance on the phone through the prepaid package, which has been purchased, the consumer can avail of the said balance for the purpose of availing VAS including caller tunes, calling packs, ISD packs, combo packs etc.,
The Petitioner pays service tax on the first occasion when the pre-paid package itself is purchased. However, on the basis of available credit balance, if the consumer purchases any VAS service, since the credit balance has already been taxed no service tax is paid by the Petitioner on the second occasion.
The Department contended that since the consumer is availing of the service, even on the second occasion service tax would be liable to be paid on the said transaction.
The show cause notice was issued to the Petitioner and the response was filed by the Petitioner. Subsequently, submissions were made and after hearing the Petitioner, the impugned Order in Original has been passed confirming the demand of service tax to the tune of approx. Rs. 31 crores and imposing equal amount of penalty.
The Petitioner submitted that it is a loss making company and the mandatory pre-deposit amount of 7.5 % of the disputed demand, would be a substantial amount in the present case.
The court while disposing the petition noted that the question as to whether service tax would be liable to be paid on the second occasion when the consumers avail the Value Added Services or similar services on the basis the credit balance, would be a factual issue which have to be considered after examining the manner in which services are provided and charged by the Petitioner.
Case Details
Case Title: Tata Teleservices Limited Versus The Commissioner Cgst Delhi East & Anr.
Case No.: W.P.(C) 1142/2025, CM APPL. 5617/2025&CM APPL. 5618/2025
Date: 28/02/2025
Counsel For Petitioner: Sr. Adv. Tarun Gulati
Counsel For Respondent: Sr. Standing Counsel Arun Khatri
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