2018 (7) TMI 1005 - AT - Service Tax

Valuation - telecommunication services - inclusion of amount of discount extended to PCO operators - Department however took the view that while arriving at the taxable value for discharge of service tax on the bills raised on PCO operators BSNL should take into account the discount extended to PCO operators and since service is provided to the user/caller that the taxable value has to be arrived by including such discount. Held that - The issue stands decided in appellant own case BHARAT SANCHAR NIGAM LTD. VERSUS CCE MADURAI AND VICE-VERSA 2018 (3) TMI 1007 - CESTAT CHENNAI where placing reliance in the case of Bharti Infotel Ltd. 2005 (7) TMI 3 - CESTAT New Delhi it was decided that such commission / discount cannot be included in the value for levy of service tax. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Calculation of service tax on telecommunication services provided by the appellant to PCO operators.
2. Inclusion of discount given to PCO operators in the taxable value for service tax purposes.
3. Interpretation of Notification No. 2/2011 regarding the determination of taxable value for telecommunication services.

Analysis:
1. The appellant, a telecommunication service provider, offered services through Public Call Offices (PCOs) maintained by operators appointed by BSNL. Initially, charges were at a fixed rate per Metered Call Unit (MCU), including service tax. Post June 1, 2008, BSNL revised its tariff structure, billing PCO operators at defined rates based on call volume, along with service tax. The dispute arose when the Revenue Department contended that BSNL should consider the discount extended to PCO operators while calculating the taxable value for service tax, leading to a differential demand of service tax. The adjudicating authority upheld the demand, prompting the appeal.

2. The appellant argued that the issue was resolved in their favor by a previous decision of the Chennai Bench of the Tribunal, which held that the commission/discount given to PCO operators should not be included in the taxable value for service tax purposes. The Revenue Department also acknowledged the Tribunal's previous decision favoring the appellant. The Tribunal examined the relevant legal provisions and the previous decisions, concluding that the discount given to PCO operators should not be included in the taxable value. The Tribunal referred to Notification No. 2/2011, which clarified the determination of taxable value for telecommunication services, emphasizing that the total amount paid by the PCO user should be considered for service tax purposes. However, since the notification was effective from March 1, 2011, and the case pertained to a period before that, the demand for service tax on the entire amount collected by PCO operators was deemed unsustainable.

3. Relying on the legal provisions, previous decisions, and the specific notification, the Tribunal set aside the impugned order confirming the demand for service tax. The appeal was allowed, emphasizing that the taxable value for service tax purposes should not include the discount given to PCO operators, as per the established legal principles and the relevant notification in force during the relevant period.