2017 (9) TMI 359 - AT - Service Tax

Business auxiliary service - reverse charge mechanism - considerations paid to the foreign telecom service provider who provides telecom service to the subscriber of the appellant during their visit outside India - Held that - There is no dispute that the services provided by the foreign telecom Co. is squarely covered by the tax entry telecommunication service . However, the tax liability could not be brought in only for the reason that the said provider of service in foreign country is not a Telegraph Authority as required under Finance Act - the telecommunication service liable to tax has been exhaustively defined and admittedly, the services now under consideration are specifically covered in the said tax entry. The Board has examined the international practice with reference to roaming services vide Circular dated 03.01.2007. It was held that services to inbound roamers is delivered and consumed in India and hence, it is not an export of service. It was further clarified that international practice treats the telephone service provided to an inbound roamer by the visited network, for purpose of taxation, in the same manner as a telephone service provided to any home subscriber. Appeal allowed - decided in favor of appellant.

Issues:
1. Liability of appellant to pay Service Tax on reverse charge basis under the category of "business auxiliary service" for payments to foreign telecom service provider.
2. Whether services provided by the foreign mobile operator to roaming subscribers fall under the category of provision of service on behalf of the appellant.
3. Interpretation of statutory definitions and tax liability enforcement in the context of telecom services provided by a foreign telecom partner.
4. Comparison with decisions of Hon'ble Kerala High Court and Tribunal rulings regarding taxability of similar services under different tax categories.
5. Examination of international practice and VAT implications on roaming services provided by foreign telecom partners.

Analysis:
1. The appeal challenged the order of the Commissioner of Service Tax, New Delhi, regarding the appellant's liability to pay Service Tax on reverse charge basis under the category of "business auxiliary service" for payments made to a foreign telecom partner providing roaming services to the appellant's subscribers outside India. The Revenue contended that such payments were taxable under Business Auxiliary Services.
2. The Revenue argued that the foreign telecom partner provided services on behalf of the appellant to its subscribers during visits abroad, making the appellant liable for tax under reverse charge mechanism. The Original Authority confirmed tax liability for the period 2006-07 to 2011-12, considering services like tele-services, speech telephony, SMS, etc., as falling under customer care services provided on behalf of the appellant.
3. The appellant's counsel argued that services provided by the foreign mobile operator for roaming subscribers constituted telecom services as per statutory definitions, and tax liability could not be enforced due to the provider not being a Telegraph Authority under the Indian Telegraph Act, 1885. Reference was made to a Board Circular regarding similar situations involving leased circuit services.
4. Reference was made to a decision of the Hon'ble Kerala High Court and Tribunal rulings to support the argument that services specifically covered under one tax category cannot be taxed under a different category solely based on a broad definition. The comparison was drawn with a case involving banking services and tax liability under different tax entries.
5. The Tribunal analyzed the international practice regarding roaming services, noting that services to inbound roamers were treated similarly to services provided to home subscribers for taxation purposes. Considering the specific definitions and clarifications by the Board, the Tribunal held that the impugned order was not legally sustainable and set it aside, allowing the appeal.

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