Home Case Index All Cases Service Tax Service Tax + AT Service Tax - 2019 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (8) TMI 324 - AT - Service TaxLeased Circuit Services/ Telecommunication Services - Reverse Charge Mechanism - remittances made by the appellant as monthly rentals charged by foreign internet service providers for procuring bandwith - HELD THAT - Such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act - no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable. Demand of service tax - rental charges charged by the appellant from its customers for the rent of its wireless routers/ radio - HELD THAT - Admittedly, this activity qualify as deemed sale of goods as the said activity tantamount to transfer of right to use these goods . Admittedly, in the transaction, the goods in question were delivered by the appellant and the effective possession and control of the goods have been given. Thus, the said activity amounts to sale, on which admittedly appellant have paid VAT / sale - no service tax is payable by the appellant on the rental of wireless/ router or radio. Demand of service tax - rental/ lease charges (Interconnectivity Charges), charged by the appellant from other ISP for the rent/ lease of its optical fibre cables - HELD THAT - It is a service provided by one Telegraph authority to another - Service Tax under the provisions of lease circuit service or telecommunication service is exigible only when service is provided by a Telegraph authority to a subscriber. This has also been clarified by the CBEC vide Circular No. B/11/1/2001-TRU - no service tax payable. Online Information and Database Access or Retrieval Services - amounts received by the appellant for the sale of domain names to various customers - HELD THAT - Demand of Interest and penalties - HELD THAT - The transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods - Domain name are akin to trade mark, making them the property of the person who owns it - service tax not attracted. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Levy of service tax on monthly rentals charged by foreign internet service providers for procuring bandwidth. 2. Levy of service tax on rental charges for wireless routers/radios provided to customers. 3. Levy of service tax on rental/lease charges for optical fiber cables provided to other ISPs. 4. Levy of service tax on amounts received for the sale of domain names. 5. Imposition of interest and penalties under respective provisions. Issue-Wise Detailed Analysis: 1. Levy of Service Tax on Monthly Rentals Charged by Foreign Internet Service Providers for Procuring Bandwidth: The appellant argued that foreign internet service providers, FLAG Atlantic and REACH, do not qualify as "telegraph authorities" under the Indian Telegraph Act, 1885. As such, they cannot be said to have provided "leased circuit services" to the appellant. The tribunal agreed, holding that foreign service providers are not telegraph authorities under Indian law, and therefore, no taxable service is rendered by them. Consequently, no service tax is payable on the monthly rentals charged by these foreign providers. 2. Levy of Service Tax on Rental Charges for Wireless Routers/Radios Provided to Customers: The appellant contended that the rental of wireless routers/radios constitutes a "transfer of right to use goods," which is a deemed sale and not subject to service tax. The tribunal concurred, noting that the possession and control of the routers were transferred to the customers, amounting to a sale on which VAT was paid. Thus, no service tax is payable on the rental charges for the wireless routers/radios. 3. Levy of Service Tax on Rental/Lease Charges for Optical Fiber Cables Provided to Other ISPs: The appellant argued that the provision of optical fiber cables to other ISPs is a service provided by one telegraph authority to another, which is not subject to service tax. The tribunal supported this view, referencing CBEC Circular No. B/11/1/2001-TRU and previous tribunal decisions, including Reliance Telecom, which clarified that service tax is only applicable when services are provided by a telegraph authority to a subscriber. Therefore, no service tax is payable on the rental/lease charges for optical fiber cables provided to other ISPs. 4. Levy of Service Tax on Amounts Received for the Sale of Domain Names: The appellant maintained that the sale of domain names is a transaction in property akin to the sale of goods, and not a provision of service. The tribunal agreed, citing the Tata Sons Limited case, which held that domain names are property similar to trademarks and their sale constitutes a sale of goods. Therefore, no service tax is payable on the amounts received for the sale of domain names. 5. Imposition of Interest and Penalties: Given that the tribunal ruled in favor of the appellant on all substantive issues, the imposition of interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994, was not upheld. Conclusion: The tribunal allowed the appeal of the appellant on all four issues. The impugned order was set aside, and the appellant was entitled to consequential benefits in accordance with the law. The question of limitation was left open as the appeal was decided on merits. (Order pronounced on 05.08.2019).
|