2008 (9) TMI 208 - AT - Service Tax

Lease service applicant is registered under Indian Telegraph Act & leased bandwidth to various customers - Contention of appellant that service provided by one telegraph authority to another is not liable to service tax as service is not provided to a subscriber, is not acceptable because two of the customers of appellant are not registered under Indian Telegraph Act and hence they can not be treated as telegraph authority - prima facie, not a fit case for total waiver stay granted partly

Summary

Issues:
Waiver of pre-deposit of service tax and penalty based on the interpretation of taxable service provided by one telegraph authority to another telegraph authority.

Analysis:
The case involved the applicants seeking a waiver of pre-deposit of service tax amounting to Rs. 2,38,32,070/- and penalty. The applicants were engaged in the transmission of energy through an inter-State transmission system and had established a Broad Band Telecommunication Network on the transmission infrastructure. They leased bandwidth to various customers, including specific companies. The Revenue contended that the lease service provided by the applicants fell under taxable service as per the Finance Act, 1994. The applicants argued that the service provided did not constitute taxable service as it was not provided to a subscriber, relying on their registration under the Indian Telegraph Act, 1885, as a telegraph authority, and the registration of the companies they leased bandwidth to as telegraph authorities as well. They cited a Tribunal decision and a CBEC Circular to support their contention.

The Revenue relied on the terms of the agreements between the applicants and the service providers, highlighting that certain companies were not registered under the Indian Telegraph Act, 1885, as telegraph authorities. Consequently, the Revenue argued that the service provided by the telegraph authority to these companies should be considered taxable as it was provided to subscribers. The Revenue also contested the liability of the two companies under discussion for service tax. The Tribunal observed that the demand was confirmed based on the service provided to various customers, with two customers not being registered as telegraph authorities. Therefore, the Tribunal found that it was not a suitable case for a total waiver of pre-deposit of service tax. The applicants were directed to deposit Rs. 7 lakhs within six weeks, following which the pre-deposit of the remaining amount of service tax and penalty was waived, with compliance to be reported by a specified date.

In conclusion, the Tribunal's decision centered on the interpretation of taxable service provided by one telegraph authority to another telegraph authority, considering the registration status of the parties involved under the Indian Telegraph Act, 1885, and the applicability of service tax in such transactions. The judgment highlighted the importance of compliance with registration requirements and the implications for the liability of service tax in transactions between telegraph authorities.