2008 (3) TMI 255 - AT - Service Tax

Interconnectivity Usage Charges (IUC) Board Circular No. 91/2/07-S.T., dated 12-3-2007 has clarified that Service tax is not leviable on the interconnectivity usage charges and it is also clarified that the charges are required to be added from the date of passing of the Finance Bill, 2007 period in question pertains to the earlier period - Therefore in terms of the said circular, the appellants are not required to discharge service tax on these charges collected by them stay granted

Summary

Issues:
Service tax liability on Interconnectivity Usage Charges; Benefit of Circular No. 91/2/07-S.T. dated 12-3-2007; Stay application and waiver of pre-deposit.

Analysis:

Service Tax Liability on Interconnectivity Usage Charges:
The case involved a Public Sector Undertaking (PSU) appealing against the confirmation of service tax and penalties by the Commissioner of Central Excise Trivendrum. The investigating officers found that the PSU had suppressed the value of taxable service by not showing or paying service tax on Interconnectivity Usage Charges. The appellant argued that the issue had been clarified by Circular No. 91/2/07-S.T., stating that service tax is not leviable on such charges until 2007. The Tribunal reviewed the circular and determined that the charges in question did not require service tax payment for the period before the Finance Act, 2007. Consequently, the stay application was allowed, and recovery was stayed until the appeal's disposal.

Benefit of Circular No. 91/2/07-S.T. dated 12-3-2007:
The Circular clarified the levy of service tax on interconnection services and the incorporation of Interconnectivity Usage Charges (IUC) in the definition of "Telecommunication service" under the Finance Act, 2007. It specified that the charges were taxable from the enactment of the Finance Bill, 2007, and not for the period in question. The Tribunal acknowledged the applicability of the Circular to the case, leading to a favorable decision for the appellant based on the Circular's provisions.

Stay Application and Waiver of Pre-deposit:
The Tribunal granted the stay application, waiving the pre-deposit requirement and staying the recovery of the disputed amount until the appeal's final disposal. The Tribunal emphasized that the Revenue was prohibited from recovering the amounts even after 180 days from the order's passing, in line with relevant Supreme Court and High Court judgments. The matter was scheduled for final hearing on a specified date due to the significant revenue involved.

In conclusion, the Tribunal's decision favored the appellant based on the clarification provided in Circular No. 91/2/07-S.T., exempting them from service tax liability on Interconnectivity Usage Charges for the relevant period. The stay application was allowed, ensuring the waiver of pre-deposit and staying the recovery, with the case set for a final hearing on a later date due to the substantial revenue implications.