2024 (10) TMI 825 - AT - Service Tax

Classification of service - Telecommunication Services or Support Services for Business or Commerce - providing transporter service - short payment of service tax - recovery of service tax with interest and penalty - Extended period of limitation. Whether the services provided by M/s Intelsat to the respondent fall under the category of Telecommunication Services as claimed by the respondent and which were exempted before June 2012; or the services are operational/infrastructural support for their output service which fall under the category of Support Services for Business or Commerce as alleged by the department? HELD THAT - The transponder service means the supply of satellite capacity to be managed by the customer i.e. the respondent in the present case. M/s Intelsat on some satellite in the space having a certain capacity i.e. transponder capacity and out of the said transponder capacity available on the said satellite, they allocate some capacity to their customers for a consideration. The ld. Commissioner in the impugned order has also examined all the submissions made herein before us by the ld. Counsel for the respondent and after examining all the submissions, the ld. Commissioner has held that the services provided by M/s Intelsat are Telecommunication Services which are not taxable during the relevant period. The decision of the Tribunal in the case of Ushodaya Enterprises Pvt Ltd 2020 (3) TMI 457 - CESTAT HYDERABAD , relied upon by the ld. AR, is not applicable in the present case as in that case the main issue involved was whether the hiring/leasing space in a satellite amounts to sale or deemed sale and is subject to service tax under Support Services of Business or Commerce ; whereas, in the present case the issue is whether the services rendered by the respondent fall under the category of Telecommunication Services or not. Thus, the ld. Commissioner has given detailed reasoning to hold that the impugned services fall under the definition of Telecommunication Services and not under Support Services of Business or Commerce and we do not find any infirmity in that. Extended period of limitation - HELD THAT - The extended period under proviso to Section 73(1) of the Act can be invoked only if the service tax was not paid or levied by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or Rules with intent to evade payment of service tax. The department has not established any ingredients which are required to invoke the extended period. It is noted that even if assuming that the respondent was liable to pay the service tax on transponder services under Business Support Services , they would still be eligible to take the credit of the same as theses services being input services were utilized by respondent to provide output services i.e. teleport services. Hence, mala fide intention to evade the tax cannot be attributed to the respondent. Therefore, extended period of limitation cannot be invoked as the situation would have been revenue neutral. There is no infirmity in the impugned order - Appeal of Revenue dismissed.

Summary

Issues Involved:

1. Classification of services provided by M/s Intelsat to the respondent: whether they fall under 'Telecommunication Services' or 'Support Services for Business or Commerce'.
2. Applicability of service tax on the services provided by M/s Intelsat.
3. Invocation of the extended period of limitation for service tax demand.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services:
The core issue in the judgment is the classification of services received by the respondent from M/s Intelsat. The respondent argued that the services fall under 'Telecommunication Services', which were exempt from service tax when not provided by a telegraph authority. The Revenue contended that these services should be classified under 'Support Services for Business or Commerce'. The Tribunal examined the agreements and found that the transponder services provided by M/s Intelsat involve the allocation of satellite capacity, which the respondent uses to provide uplinking services to broadcasting agencies. The Tribunal agreed with the respondent that these services are indeed 'Telecommunication Services' and not 'Support Services for Business or Commerce', as they are specifically covered under 'Telecommunication Services' according to the Finance Act, 1994.

2. Applicability of Service Tax:
The Tribunal noted that 'Telecommunication Services' are taxable only when provided by a telegraph authority as defined under the Indian Telegraph Act, 1885. M/s Intelsat, being a foreign entity without a license under this Act, does not qualify as a telegraph authority. Therefore, the services provided by M/s Intelsat to the respondent are not taxable under the 'Telecommunication Services' category. The Tribunal relied on previous judgments and Board clarifications, reinforcing that services not provided by a telegraph authority cannot be taxed under 'Telecommunication Services'.

3. Invocation of Extended Period of Limitation:
The Tribunal found that the extended period of limitation under Section 73(1) of the Finance Act, 1994, can only be invoked in cases of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax. The Tribunal observed that the department failed to establish any such intent on the part of the respondent. The respondent had a bona fide belief that the services were not taxable and had been regularly filing returns. The Tribunal also noted divergent views in similar cases, which supported the respondent's belief and negated any allegation of suppression or fraud.

4. Imposition of Penalties:
Given the Tribunal's findings that the services were not taxable and there was no willful suppression of facts, the imposition of penalties under Sections 76, 77, and 78 was deemed unwarranted. The Tribunal emphasized that penalties are not applicable when the demand itself is not sustainable.

Conclusion:
The Tribunal upheld the decision of the Adjudicating Authority, confirming that the services received by the respondent from M/s Intelsat are classified under 'Telecommunication Services' and are not taxable since M/s Intelsat is not a telegraph authority. The Tribunal dismissed the Revenue's appeal, finding no merit in the allegations and affirming that the extended period of limitation and penalties were not applicable. The decision was pronounced on 16.10.2024.