2017 (6) TMI 1025 - AT - Service Tax

Business Support Service - appellant was providing interconnection link facility to various basic telephone service providers, infrastructure and space and was charging infrastructure charges, port charges, rent for space etc - Revenue was of the view that the appellant was liable to pay Service Tax on these charges with effect from 1.5.06 under the category of a new service Business Support Service under section 65(104c) - Held that - such interconnected facility is not provided on its own by the appellant but is a mandatory direction to all the telecommunication companies so as to facilitate interconnection of various service providers. It is also to be noted that such charges have been recovered by the appellant from other basic telephone service providers and not telephone subscribers. CBEC vide their Circular dated 12.3.2007 clarifies to the effect that IUC will not be liable to pay service tax under the category of telephone services since it is not a charge recovered by the telegraph authorities for providing of telecommunication services to the subscriber. This clearly takes the IUC outside the service tax levy as far as telephone service is concerned. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Business Support Service under section 65(105)(c) of the Finance Act, 1994 for telecommunication services provided by the appellant.

Analysis:
The appellant, a telecommunication service provider, was providing interconnection link facility, infrastructure, and space to basic telephone service providers and charging various fees. The revenue claimed that the appellant was liable to pay Service Tax under the category of "Business Support Service" from 1.5.06. The original authority and Commissioner (Appeals) upheld the demand. The appellant appealed against this decision.

The Tribunal noted that the appeal was previously disposed of but was challenged in the High Court, which directed a fresh consideration. The appellant argued that the charges collected were for interconnection link facility and were not covered under Business Support Services. The Circular by CBEC clarified that Inter Connection Usage (IUC) charges were not liable for Service Tax under telephone services.

The Revenue contended that the charges were for providing services under "space and infrastructure," falling under Business Support Services. However, the Tribunal observed that the charges were for facilitating interconnection with the BSNL network, not provided independently by the appellant. The CBEC Circular confirmed that IUC charges were not subject to service tax under telephone services.

The Tribunal analyzed the definition of Business Support Service under section 65(105)(c) of the Finance Act, 1994, which includes infrastructural support services. It concluded that the appellant did not provide services falling under Business Support Services, as the charges were for interconnection link and infrastructural support, not covered by the definition.

Therefore, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the charges collected by the appellant were not within the scope of Business Support Services, as clarified by the CBEC Circular.