2011 (6) TMI 586 - AT - Service Tax

Whether the service provided by the appellant as a visiting network service provider shall be treated as exempt service and Cenvat credit shall be limited to 35% - Held that - in the case of Idea Cellular Ltd. (2009 (2) TMI 91 - CESTAT NEW DELHI). Visiting network service is exempted service for which admissibility of Cenvat credit shall be limited to 35% in respect of each return period when Cenvat credit is claimed for set off. Accordingly, liability of the appellant is to be recalculated giving set off on Cenvat credit limiting to 35% in respect of each return period. The adjudication accordingly shall end in re-computing service tax demand. Whether non-disclosure of such fact in the return shall amount to suppression - penalty - Cenvat credit of a higher amount was unduly claimed - appellant disclosed that it was under bona fide belief that service provided by the appellants as visiting network service provider was exempt and not taxable Held that - Failure to make such disclosure in return or submitting entire fact by any letter accompanying its return appears to be a case of wilful suppression. assessee had paid service tax correctly in terms of provisions of the Act and Rules made thereunder such declaration becomes faulty in absence of bona fide statement either on the return or made through a letter accompanying the return. penalty levied under Section 76 is confirmed. Appeal is allowed

Summary

Issues:
1. Whether the service provided by the appellant as a visiting network service provider shall be treated as exempt service and Cenvat credit limited to 35%?
2. Whether non-disclosure of such fact in the return shall amount to suppression?

Analysis:
1. The appellant argued that the issue of taxability for visiting network service providers was settled by a previous Tribunal decision. They contended that Cenvat credit admissibility should be determined for each return period and not for the whole year's tax liability. The appellant claimed that the proceedings were time-barred as they had disclosed the working method to the department in their returns. They relied on circulars to support their position that roaming telecom service is not taxable in the hands of visiting network service providers. On the other hand, the Revenue argued that the consideration received for the appellant's service was in relation to taxable telecom service, even though it was exempted from service tax. The Revenue contended that the appellant had not disclosed the exempted nature of the service in their returns, depriving the Revenue of legitimate dues. The Revenue asserted that this non-disclosure amounted to suppression under Section 73(1) and justified the levy of penalties.

2. The Tribunal acknowledged that the restriction of Cenvat credit to 35% was settled in a previous decision. They directed the recalculating of the appellant's liability to limit Cenvat credit to 35% for each return period. The Tribunal limited the demand in adjudication to this extent. Regarding the levy of penalties, the Tribunal found that the appellant's failure to disclose the exempted nature of the service in their returns constituted wilful suppression. The Tribunal confirmed the penalty under Section 76 and directed a review of the penalty under Section 78 based on the re-computed tax payable. The Tribunal emphasized that false declarations in returns regarding payment of service tax correctly called for penalties, and interest under Section 75 was deemed payable on the tax due. The appeal was allowed only to the extent of recalculating the liability for Cenvat credit and confirming the penalties imposed.