2013 (5) TMI 28 - AT - Service Tax

Cenvat Credit of Service Tax paid to BSNL on Access Deficit Charges (ADC) - a facility or a service - Held that - Not in agreement with the argument of dept. that BSNL is providing only a facility and not any service to the appellant. After classifying the facility provided by BSNL as Telecom services and collecting the service tax under such head, Revenue cannot turn around and argue that that this is not a service. Even otherwise, the service provided by BSNL to the appellant is a Telecom service as defined in section 65 (109a) of Finance Act, 1994. Since this service is required by the appellant for providing output services to appellant s customers, it is obviously an input service as per definition at Rule 2 (l) of Cenvat Credit Rules, 2004. Therefore the appellant is entitled to take Cenvat credit on such services. In favour of assessee. Demand of Service Tax on account of common recharge facility with M/s.Aircel Ltd., Coimbatore & Demand of Service Tax under reverse charge on amounts paid to foreign telecom companies for international outbound roaming service - Held that - Remand the matter to the respondent-Commissioner i.e. Commissioner of Service Tax, Chennai who has already examined similar matter to give a detailed finding whether the issue involved in this appeal is in any way different from the one already adjudicated by Order-in-Original No.68/2011 dt. 30.11.2011 and pass appropriate orders keeping in view the Apex Court s decision in the case of Jayaswals Neco Ltd. (2006 (1) TMI 133 - SUPREME COURT OF INDIA).

Summary

Issues:
1. Denial of Cenvat Credit of Service Tax paid to BSNL under Access Deficit Charges (ADC)
2. Demand of Service Tax on account of common recharge facility with M/s. Aircel Ltd., Coimbatore
3. Demand of Service Tax under reverse charge on amounts paid to foreign telecom companies for international outbound roaming service
4. Reversal of Cenvat credit on removal used capital goods

Analysis:

Issue 1: Denial of Cenvat Credit
The appellant, a mobile telecom operator, sought Cenvat credit for service tax paid to BSNL for connecting customers. The department contended that BSNL's service was not an input service but a facility. The tribunal disagreed, stating BSNL's service falls under Telecom services, making it an input service eligible for Cenvat credit. The appeal was allowed in favor of the appellant.

Issue 2: Demand of Service Tax on Common Recharge Facility
The appellant argued against the demand for service tax on sales of SIM cards and recharge coupons, stating that service tax was already paid by Aircel Ltd. The tribunal noted a reciprocal arrangement between the companies, rejecting the duplication of tax demand. The matter was remanded to the Commissioner for further examination in line with previous decisions.

Issue 3: Demand of Service Tax under Reverse Charge
Regarding service tax on amounts paid to foreign telecom companies, the appellant argued that the foreign operator was not covered under the definition of Telecommunication service during the relevant period. The tribunal remanded the issue to the Commissioner for detailed findings, considering previous decisions and relevant legal provisions.

Issue 4: Reversal of Cenvat Credit on Capital Goods
The appellant admitted the demand for reversal of Cenvat credit on used capital goods, which was paid and appropriated. The tribunal upheld the order-in-original for this issue.

Additional Note:
In a separate appeal, issues related to service tax under reverse charge on import of services were discussed. The tribunal remanded the matter to the adjudicating authority for a fresh decision, considering legal provisions and previous orders.

This comprehensive analysis covers the key issues addressed in the judgment, detailing the arguments presented by both parties and the tribunal's decisions on each matter.