2008 (7) TMI 54 - AT - Service Tax

Services of interconnectivity to others cellular operators/ mobile operators and basic telephone service providers - such services was not taxable in any of the existing taxable services prior to Finance Bill, 2007 when new definition of telecommunication service was incorporated vide clause 104 of Section 65 - Inasmuch as the period in the present appeal is prior to 2007, the appellants were not required to pay any tax

Summary

Issues:
1. Confirmation of demand of service tax for providing interconnectivity services to other operators.
2. Classification of services as taxable under Section 65 of the Finance Act, 1994.
3. Interpretation of Tribunal decisions and Board's Circular regarding taxable services related to interconnectivity.

In the judgment by the Appellate Tribunal CESTAT AHMEDABAD, the issue revolved around the confirmation of the demand of service tax against the appellant for providing interconnectivity services to other operators. The Tribunal referred to a previous decision in the case of M/s Reliance Telecom Ltd. Vs. CST, Ahmedabad, and a Board's Circular to support its decision. The impugned order classified the services as taxable under Section 65 of the Finance Act, 1994, under the category of "leased circuit services."

The Tribunal analyzed the Tribunal's decision in the case of M/s. Reliance Telecom Ltd. and another case, M/s. Fascel Ltd. Vs. CST, Ahmedabad, to determine the nature of interconnection usage charges. It was established that such charges for interconnectivity services do not fall under the category of "leased circuit services." The Board's Circular clarified that these services were not taxable before the Finance Bill of 2007, which introduced a new definition of "telecommunication service." The inclusion of Interconnect Usage Charges (IUC) in the definition made it a taxable service. As the period in question in the present appeal was before 2007, the appellants were not liable to pay any tax. Consequently, the impugned order was set aside, and the appeal was allowed.

The judgment highlights the importance of interpreting Tribunal decisions and official Circulars to determine the taxability of specific services under the relevant legal provisions. In this case, the clarification provided by the Board's Circular played a crucial role in establishing that the services in question were not taxable during the period under consideration. The Tribunal's reliance on previous decisions and legal provisions demonstrates the meticulous approach taken in resolving complex tax disputes and ensuring compliance with the law.