9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (3) TMI 1503 - AT - Service TaxTelecommunication Service - Service to oneself - inter unit adjustments - Interconnection Service to their own Landline segment - period 2007 to 2012 - demand of service tax - Held that - The services provided by the appellants to their Landline segment, namely, Interconnect Usage Charges and the consequent collection of Interconnect Usage Charges, have been considered as taxable under the category of Telecommunication Charges defined in Section 65(109a) ibid. While the said definition is an expansive and detailed one, there is no definition of what are Interconnect Usage Charges - Interconnection Usage Charges would only be such charges levied by a service provider on another service provider. This interpretation is further reinforced by the fact that the said Regulations include the definitions of Interconnection Provider as a service provider to whose network interconnection is sought and Interconnection Seeker as a service provider who seeks such interconnection. The disputed services pertain to interconnectivity provided by M/s. BSNL, Cellular Mobile Telephone Services (CMTS) Division and M/s. BSNL, appellants herein to their own landline network. Surely, by no stretch of imagination can these two Divisions of M/s. BSNL be termed as two separate service providers for the purposes of the definitions contained in the aforesaid TRAI Regulations that we have just analyzed, etc. - In the present scenario, most, if not every, service provider extends a gamut of connectivity services like landline connectivity, connectivity on mobiles through GSM, CDMA connectivity, data and voice through optical fibre and so on. A service provider like M/s. BSNL may be providing one or more of these connectivities as may be subscribed to by their subscribers. But the important point to be noted is that when the CMTS Division of BSNL is providing interconnectivity to their Landline Division, the service provider BSNL is only providing service to itself. Thus, it becomes a case of service to oneself. The Tribunal in the case of Precot Mills Ltd. 2006 (2) TMI 25 - APPELLATE TRIBUNAL, BANGALORE has held that when one renders service to oneself, there is no question of leviability of service tax; that there is no client-principal relationship in transactions and service tax is not leviable. Thus, the charges levied by one Division of M/s. BSNL to another and that too by way of debit notes, is only an internal financial adjustment which cannot, by any stretch of imagination, be termed as Interconnection Usage Charges or as a taxable service for the purpose of levying service tax - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Taxability of Interconnection Usage Charges (IUC) between different segments of the same entity. 2. Interpretation of "service" under Section 65(105)(zzzx) of the Finance Act, 1994. 3. Applicability of service tax on self-service. 4. Invocation of extended period of limitation and imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Taxability of Interconnection Usage Charges (IUC) between different segments of the same entity: The appellants, providing services under the category of 'Telephone Cellular Mobile Services', were also rendering Interconnection Services to their own Landline segment and receiving income from 2007 to 2012. The Department contended that service tax was due on these amounts. However, the appellants argued that these services were provided to their own Landline segment, part of the same entity, M/s. BSNL, and thus not taxable. The Tribunal referenced the Telecom Regulatory Authority of India (TRAI) regulations and CBEC Circular No. 91/2/2007, which clarified that IUC is payable by one service provider to another, not within the same entity. The Tribunal concluded that the interconnectivity services between the Cellular Mobile Telephone Services (CMTS) Division and the Landline Division of BSNL could not be considered as services between two separate service providers but rather as self-service, thus not liable for service tax. 2. Interpretation of "service" under Section 65(105)(zzzx) of the Finance Act, 1994: The Tribunal examined whether the services provided by the appellants to their Landline segment fell under the definition of "Telecommunication Service" as per Section 65(105)(zzzx) of the Finance Act, 1994. The appellants argued that the definition required the service provider and receiver to be two different persons, which was not the case here. The Tribunal agreed, noting that the term "person" in the context of service tax implied distinct legal entities, as supported by various Tribunal judgments. The Tribunal held that the services provided within the same entity (BSNL) did not constitute taxable services under the said section. 3. Applicability of service tax on self-service: The Tribunal reiterated the principle established in previous cases, such as Precot Mills Ltd. Vs. C.C.E., Tirupati, that service tax is not leviable when services are rendered to oneself. The Tribunal noted that the CMTS Division and the Landline Division of BSNL were part of the same corporate entity, and any internal financial adjustments, such as debit notes, did not constitute taxable services. The Tribunal emphasized that there must be a client-principal relationship for service tax to be applicable, which was absent in this case. 4. Invocation of extended period of limitation and imposition of penalties under Sections 77 and 78 of the Finance Act, 1994: The Department argued that the appellants deliberately withheld information about inter-segment income to evade tax, justifying the invocation of the extended period of limitation and imposition of penalties. The appellants countered that they were under a bona fide belief that no service tax was due on such inter-segment income, given the scrutiny by the Comptroller and Auditor General of India and internal auditors. The Tribunal found merit in the appellants' argument, concluding that the demands were unsustainable and the extended period of limitation and penalties were not justified. Conclusion: The Tribunal held that the charges levied by one Division of BSNL to another were internal financial adjustments and could not be termed as "Interconnection Usage Charges" or taxable services. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential benefits as per law.
|
