2015 (9) TMI 733 - AT - Service Tax

Leased circuit service - leasing of dark fibre cables - telegraph authority. - leasing of space on microwave towers - Business Auxiliary service - Penalty u/s 78 - Held that - Leasing of tower space does not fit under any limb of the definition of Business Auxiliary Service quoted above. The adjudicating authority s observation that lease of tower space also promotes the service provided by the cellular telephone operator is not based on any sound logic or rationale. Further there is nothing in the Finance Act, 1994 to even suggest that there was a transplant of any part of BAS into telecom service with effect from 1.6.2007 which by implication means that the service was not taxable under Business Auxiliary Service prior to 1.6.2007. Thus we are of the view that the demand of ₹ 74,27,181/- confirmed under Business Auxiliary Service on the amount received for lease of tower space on its microwave towers to various cellular operators is not sustainable. - Decided in favor of assessee. Leased circuit service - The appellant has conceded that it has been granted a licence under Section 4(1) of Indian Telegraph Act, 1885). So it is clearly a telegraph authority as defined under Section 65(111) of Finance Act, 1994. It thus becomes clear that the dedicated dark fibre cable link was provided to a subscriber by a telegraph authority and therefore all the requirements of Section 65(105))(zd) (according to which the taxable service is to subscriber by a telegraph in relation to a leased circuit ) are clearly satisfied inasmuch as leased circuits were provided by the appellant, whose is a telegraph authority, to a subscriber. Thus the demand pertaining to leased circuit service is clearly sustainable on merit. - Decided against the assessee. Extended period of limitation - Held that - for the assessee as the appellant, it could not have been a bona fide belief on its part that the service rendered did not fall under leased circuit service because there was no scope of any confusion or ambiguity in that regard. Further, the appellant did not timely provide the information sought and had to be issued repeated reminders. Therefore we are of the view that the appellant is guilty of suppression of fact and therefore the extended period has rightly been invoked and mandatory penalty is clearly imposable. - Decided against the assessee.

Summary

Issues:
1. Confirmation of service tax demand under leased circuit service and business auxiliary service for the period 2003-2006.
2. Appellant's contentions regarding the nature of services provided and applicability of service tax.
3. Interpretation of leased circuit service and business auxiliary service definitions.
4. Analysis of the demand under business auxiliary service for leasing tower space.
5. Assessment of suppression of facts and imposition of penalty.

Confirmation of Service Tax Demand:
The appeal was filed against the order confirming a service tax demand of Rs. 1,76,10,648 for the period 2003-2006. The demand was upheld for leased circuit service and business auxiliary service. The appellant had leased dark fiber cables and tower space to telecom operators without paying service tax, leading to the confirmation of the demand.

Appellant's Contentions:
The appellant argued that they did not lease circuits as a telegraph authority and leased dark fiber, not covered under leased circuit service. They contended that leasing tower space did not fall under business auxiliary service. The appellant claimed no wilful misstatement or suppression of facts on their part.

Interpretation of Service Definitions:
The definition of leased circuit and subscriber under the Finance Act was crucial in determining the applicability of service tax. The appellant, being a telegraph authority under the Indian Telegraph Act, provided dedicated dark fiber cable links to subscribers, satisfying the requirements of leased circuit service. However, the leasing of tower space did not fit under the definition of business auxiliary service.

Analysis of Tower Space Leasing:
The adjudicating authority classified the leasing of tower space under business auxiliary service before 1.6.2007. However, the Tribunal found that leasing tower space did not promote services provided by telecom operators, making the demand of Rs. 74,27,181 under business auxiliary service unsustainable.

Suppression of Facts and Penalty Imposition:
The Tribunal upheld the demand under leased circuit service due to the appellant's registration and clear provision of leased circuits. The appellant's failure to provide timely information and repeated reminders indicated suppression of facts, justifying the imposition of a mandatory penalty.

In conclusion, the Tribunal partially allowed the appeal by setting aside the demand under business auxiliary service for tower space leasing but upheld the demand under leased circuit service along with interest and penalty.