2018 (4) TMI 1244 - AT - Service Tax

Management, Maintenance and Repair Services - POPOS Rules - Definition of INDIA - revenue has contended that part of cable system lies within 12 nautical miles of land mass of India and hence the service of MMS has been partly performed in India and hence taxable - demand was set aside on the ground that it has not been established in SCN by any cogent evidence or by way of statement of any person that the MMS Service has been performed in India. Held that - in the SCN it is nowhere appearing as to how the services were performed in India by M/s Flag telecomm. Even the notice does not define as to what restoration services were performed. It has only been assumed that the restoration work has been performed in India - when the allegation of the show cause notice itself does not lead to the conclusion that M/s Flag has carried out any restoration work in India, in that case there cannot be any service tax liability on the Appellant. Part demand pertains to period prior to 18.04.2006 i.e the date on which Section 66A was enacted in Finance Act, 1994. Since there was no provision to charge service tax on services received from outside India, there cannot be any demand even on merits on services received before 18.04.2006. Once the demand under the category of MMRS itself has held to be not sustainable, in that case the subject demand is also not sustainable. The whole issue involved is revenue neutral. Even assuming that if the service tax was payable, the same was available to the Respondent as cenvat credit. Time limitation - Held that - the nature of services was in the knowledge of the revenue since 2008 as appearing in the regular correspondence with the revenue. In such case when the facts were in the knowledge of the department there is no ground to raise demand by invoking extended period of limitation - demand is time barred. Demand not sustainable - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Taxability of services received under the Capacity Sales Agreement (CSA) and Service Operation and Maintenance Agreement (SOMA).
2. Classification of services as "Support Service of Business or Commerce" or "Management, Maintenance and Repair Services" (MMRS).
3. Applicability of service tax on services received prior to 18.04.2006.
4. Invocation of extended period of limitation for raising the demand.

Detailed Analysis:

1. Taxability of Services under CSA and SOMA:
The Respondent, Reliance Communications Ltd (RCL), entered into agreements with M/s Flag Telecomm (FT) for receiving international network transport and data services. The revenue contended that these agreements constituted "Support Service of Business or Commerce" and "Management, Maintenance and Repair Services" (MMRS), thereby attracting service tax under Section 66A of the Finance Act, 1994. However, the adjudicating authority set aside the demand, citing CBEC Clarification and the fact that services were rendered outside India. The Tribunal upheld this decision, noting that the revenue did not challenge the dropping of the demand under the category of "Support Service of Business or Commerce," thus it attained finality.

2. Classification of Services:
The revenue argued that the services provided by FT enabled RCL to offer "Leased Circuit" or "Telecommunications Services" to clients, thus classifying them as "Support Service of Business or Commerce." The Respondent countered that the services fell under "Leased Circuit Services" or "Telecommunication Services" and were not taxable as FT was not a telegraph authority under the Indian Telegraph Act. The Tribunal agreed with the Respondent, relying on definitions and circulars that supported the classification of services under "Telecommunication Services" rather than "Business Support Services."

3. Applicability of Service Tax Prior to 18.04.2006:
The Respondent argued that no service tax was payable on import of services prior to 18.04.2006, the date when Section 66A was enacted. The Tribunal concurred, stating that there was no provision to charge service tax on services received from outside India before this date, thus setting aside the demand for the period before 18.04.2006.

4. Invocation of Extended Period of Limitation:
The revenue invoked the extended period of limitation to raise the demand, alleging suppression of facts. The Respondent contended that the nature of services was known to the revenue since 2008 through regular correspondence. The Tribunal found no grounds for invoking the extended period, as the facts were within the department's knowledge. Consequently, the demand for the longer period was deemed time-barred.

Conclusion:
The Tribunal upheld the adjudicating authority's decision, dismissing the appeal filed by the revenue. It concluded that the services provided by FT under CSA and SOMA were not taxable under the claimed categories, and any demand for periods prior to 18.04.2006 was unsustainable. Additionally, the invocation of the extended period of limitation was unjustified, rendering the demand time-barred. The judgment emphasized the importance of accurate service classification and adherence to statutory timelines for raising tax demands.