2008 (7) TMI 81 - AT - Service Tax

Admissibility of the exemption u/not. no. 3/94 which exempts Departmentally run public telephones for local calls & Guaranteed public telephone operating only for local calls - matter is most complex & conflicted - terms such as local calls, local area, Exchange, guaranteed public telephone etc. are highly technical Dept. of Telecommunication is the appropriate authority to resolve the conflict & clarify the impugned terms matter remanded - issues like time bar, penalty are kept open

Issues Involved:
1. Admissibility of exemption under Service Tax Notification No. 3/94-ST dated 30.6.1994.
2. Definition and interpretation of "guaranteed public telephone."
3. Definition and interpretation of "local calls."

Detailed Analysis:

1. Admissibility of Exemption under Service Tax Notification No. 3/94-ST:

The primary issue is the admissibility of the exemption under Service Tax Notification No. 3/94-ST dated 30.6.1994. The notification exempts certain taxable services from the whole of Service Tax, specifically mentioning departmentally run public telephones for local calls (Sr. No. 12) and guaranteed public telephones operating only for local calls (Sr. No. 13). The appellants, M/s Bharat Sanchar Nigam Ltd., Sangli, argued that their Coin Box Public Call Offices (PCOs) should be exempt under this notification.

2. Definition and Interpretation of "Guaranteed Public Telephone":

The appellants contended that their PCOs qualify as guaranteed public telephones since the private party guarantees minimum revenue as per the agreement. However, the Commissioner disagreed, stating that the term "guaranteed" refers to facilities guaranteed to the public, not the minimum guaranteed money paid by the PCO holder. The judgment notes that there was no evidence of specific facilities being guaranteed to the public, thus the benefit of exemption under Sr. No. 13 was not available.

3. Definition and Interpretation of "Local Calls":

The term "local calls" was another point of contention. The appellants argued that calls from Coin Box PCOs are local calls since STD and trunk calls are not available. However, the Commissioner held that calls to mobile phones on roaming could also be made, which do not qualify as local calls. The Commissioner relied on the Indian Telegraph Rules, 1951, which define local calls as calls within the same exchange system. The appellants countered this by citing TRAI notifications and technological advancements, arguing that the definition of local calls should be updated to reflect current practices.

Commissioner's Observations:

The Commissioner observed that since no definition of "local calls" is provided in the service tax law, the definition in the Indian Telegraph Rules, 1951, should be used. The Commissioner noted that the Indian Telegraph Rules have statutory value and govern telecommunication services. Despite technological advancements, these rules have not been amended, and their relevance cannot be disregarded.

Tribunal's Decision:

The Tribunal acknowledged the complexity of the issue due to rapid technological advancements in telecommunications. It emphasized the need for the Department of Telecommunication to clarify the meanings of "local calls" and "guaranteed public telephone" in the context of the case. The Tribunal set aside the impugned order and remanded the case back to the Commissioner with directions to seek clarification from the Department of Telecommunication through the Department of Revenue, Ministry of Finance. The Tribunal also suggested that the Department of Revenue consider amending Notification 3/94-ST to reflect technological changes.

Conclusion:

The appeal was allowed by way of remand, with the Commissioner directed to obtain necessary clarifications and pass appropriate orders in accordance with the law. The Tribunal kept all connected issues like time bar and penalty open for further consideration.

Administrative Directions:

The Registry was directed to send a copy of the order to the Secretary, Revenue, Department of Revenue, Ministry of Finance, and the Secretary, Department of Telecommunications for information and necessary action.

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