2019 (4) TMI 1269 - AT - Service Tax

Classification of services - laying optical fiber cables as per contract executed with various telephone Companies - whether classified under Site Formation Clearance Services or under Erection, Commissioning or Installation Services? - abatement in terms of Notification No.1/06 ibid - Circular dated 24.05.2010 - HELD THAT - The activities of laying cables under or along side road is one such activity, which has been clarified as not taxable under any clause of sub-clause 105 of Section 65 of the Finance Act, 1994. It is not in dispute that the activity undertaken by the appellant is towards laying of optical fiber cables under or along side road. Consequently, no liability for service tax will arise on the activity in terms of Circular dated 24.05.2010 - Appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of services for service tax payment, eligibility for abatement under Notification 01/2006-ST, applicability of service tax on laying optical fiber cables.

Analysis:
1. Classification of Services: The appellant was engaged in laying optical fiber cables under a contract with various companies. The dispute arose regarding the classification of services provided by the appellant. The appellant had initially classified the services under "Site Formation Clearance Services" and availed abatement under Notification 01/2006-ST. However, the Revenue contended that the services should be classified under "Erection, Commissioning, or Installation Services" which would not be eligible for abatement under the said notification.

2. Abatement Under Notification 01/2006-ST: The appellant claimed abatement under Notification 01/2006-ST for the services classified as "Site Formation Clearance Services." The Revenue argued that the services should be classified differently, and hence, the abatement claimed by the appellant was not applicable. The adjudicating authority upheld the denial of abatement and demanded differential service tax from the appellant.

3. Applicability of Service Tax on Laying Optical Fiber Cables: The crux of the dispute was whether the activity of laying optical fiber cables by the appellant was liable for service tax payment. The appellant had registered with the Department, paid service tax, and filed ST-3 Returns for the relevant periods. The Revenue insisted that the services provided by the appellant fell under a different category, making them ineligible for the abatement claimed by the appellant.

4. Clarification through Circular No.123/5/2010-TRu: The Tax Research Unit of the Ministry of Finance issued a circular clarifying the taxable status of various activities, including laying cables under or along the road. The circular dated 24.05.2010 specified that such activities would not be taxable under any clause of the Finance Act, 1994. The appellant's activity of laying optical fiber cables fell under this clarified category, absolving them from the liability of paying service tax.

In conclusion, the Appellate Tribunal held that the activity of laying optical fiber cables by the appellant was not liable for service tax payment based on the clarification provided in the circular. The demand for service tax was deemed unjustified, and the appeal was allowed in favor of the appellant.