2023 (12) TMI 48 - AT - Service Tax

Classification of service - business auxiliary service or Telecommunication services? - providing international roaming facilities to the subscribers of the appellant travelling to foreign countries - HELD THAT - The payment of roaming charges was made by the Appellant to FTOs for providing connectivity services to their subscribers when they are abroad. We find that the services are appropriately classifiable as Telecommunication Service . During the relevant period, only telecommunication services provided by a 'Telegraph Authority' to a person was taxable. In the instant case, FTOs located abroad providing the connectivity services would not fall within the ambit of 'Telegraphy Authority' as defined under Section 65(111) of the Finance Act, 1994 read with Section 3(6) of the India Telegraph Act, 1885. Accordingly, it is observed that the charges paid for the services rendered by the FTOs cannot be taxed under head Business Auxiliary Service on the Appellant. The issue is no longer res-integra as the issue has been settled by the decision of the CESTAT, New Delhi in case of one of the Appellant's group Companies, viz. VODAFONE ESSAR MOBILE VERSUS C.S.T., DELHI 2017 (9) TMI 359 - CESTAT NEW DELHI . The Tribunal in the aforesaid ruling was considering whether roaming services provided by foreign telecom company can be taxable under the head business auxiliary service wherein the Tribunal has observed There is no dispute that the services provided by the foreign telecom Company is squarely covered by the tax entry telecommunication service . The facts and circumstances of the case cited above are similar to the case on hand and the ratio is applicable for the present case on appeal. In light of the aforesaid decisions, we hold that the demand confirmed in the impugned order under the category of Business Auxiliary Service on the Appellant is not sustainable. Since the demand is not sustainable consequently, demand of interest and penalty is also not sustainable. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issue in this case is whether the Appellant is liable to pay service tax under the head "business auxiliary services" on roaming charges paid to foreign telecom operators for providing services to the subscribers when they are outside India.

Summary:

Service Tax Demand Classification:
The Appellant, engaged in providing telecommunication services, received a Show Cause Notice demanding service tax under "business auxiliary services" for international roaming agreements with foreign telecom operators. The Ld. Commissioner confirmed the demand, but the Appellant contended that the services should be classified as "Telecommunication services" and not under "Business Auxiliary Service."

Legal Precedents:
The Appellant referred to previous rulings by CESTAT, New Delhi, and CESTAT, Mumbai, which held that roaming services provided by foreign telecom companies cannot be taxed under "business auxiliary service." The Tribunal emphasized that only telecommunication services provided by a 'Telegraph Authority' were taxable during the relevant period.

Decision and Rationale:
After considering the arguments and precedents, the Appellate Tribunal observed that the services provided by foreign telecom operators to the Appellant for connectivity services during international roaming are rightly classifiable as 'Telecommunication Service.' The Tribunal noted that foreign telecom operators do not fall under the definition of 'Telegraph Authority' as per the Finance Act, 1994. Therefore, the charges paid for these services cannot be taxed under "Business Auxiliary Service" on the Appellant.

Conclusion:
Based on the settled legal position and previous rulings, the Tribunal held that the demand under "Business Auxiliary Service" was not sustainable. Consequently, the demand for interest and penalty was also set aside. The impugned order was overturned, and the appeal filed by the Appellant was allowed.

Judgment Date: 30.11.2023