2015 (4) TMI 863 - AT - Service Tax

Waiver of pre deposit - Telecommunication Service - service rendered by the applicant to their customers abroad for which they have paid the amount to the foreign telecom operators - Reverse charge mechanism - Held that - Following decision of Vodafone Essar Digilink Ltd. Vs. Commissioner of Central Excise, Jaipur 2013 (12) TMI 1016 - CESTAT NEW DELHI - Stay granted.

Summary

Issues:
1. Liability to pay service tax under reverse charge mechanism for telecommunication services provided to customers abroad.
2. Interpretation of Sections 66 and 66A of the Finance Act, 1994 in relation to taxable services.
3. Applicability of Business Auxiliary Service for the demand raised by Revenue.
4. Granting of waiver of predeposit and stay on recovery during the appeal process.

Analysis:
1. The dispute in this case revolves around the liability of the applicants to pay service tax under the reverse charge mechanism for providing "Telecommunication Service" to customers abroad. The Revenue contends that the service falls under "Business Auxiliary Service" as per Section 66A of the Finance Act, 1994. The adjudicating authority upheld the demand of service tax, interest, and penalty.

2. The Tribunal considered the clarification provided by C.B.E. & C. that Section 66 is the charging section even for services taxable under Section 66A, with the latter only assigning the responsibility to pay tax. It was emphasized that the service must first be taxable under Section 66, satisfying the requirements of Section 65(105)(zzzx). The Tribunal also noted a specific clarification by C.B.E. & C. regarding "telecommunication service." The Tribunal found merit in the appellant's argument that the service must be provided by a telegraph authority for it to be taxable under Section 66, even in cases covered by Section 66A.

3. Referring to a similar case involving Aircel Cellular Ltd., where the matter was remanded, the Revenue argued that the demand in the present case was raised under Business Auxiliary Service. However, the Tribunal found that the present case aligns with the decision of the stay order and final order in previous cases, leading to the grant of a waiver of predeposit and a stay on recovery during the appeal process.

4. Considering the developments in another case where the appeal was disposed of and the matter remanded, the Tribunal scheduled the hearing for a specific date. The Tribunal granted the stay application, allowing the waiver of predeposit and halting the recovery process during the appeal period.