2011 (7) TMI 492 - AT - Service Tax

Taxability of Telephone service provided through leased line (ACSR/copper wire) - held that - In view of the fact that the leased lines provided through ACSR/copper wire provided voice communication, said leased circuits, in our considered view have been rightly held to be covered under the existing entry for telephone service even prior to the period 16-7-01. To that extent the tax demand is justified. The leased line provided through iron wire which is capable of only data communication cannot be brought under the ambit of the entry for telephone service prior to 16-7-01. Cum-tax value - held that - the appellant will be entitled to assessment treating the value received as cum-tax value and therefore, the demand amount would have to be reduced subject to verification. Extended period of limitation - held that - appellant has not shown their bona fide they have not reflected the actual service charges received by them towards the value of the taxable service in their statutory returns and further the Show Cause Notice clearly alleges that there has been suppression with intention to evade on their part and demand has also been raised u/s 73 of the Finance Act, 1994. The service tax law does not make a distinction between the private sector assessee and a public sector assessee and the provisions are equally applicable to both categories of assessees and the law makers have not made special provisions for one category.

Summary

Issues:
Demand of service tax on telephone service provided through leased line, applicability of service tax amendments, non-deposit of service tax by appellant, jurisdictional aspects of Show Cause Notice, taxability of leased circuits provided to canal authorities, applicability of extended period for demand, liability of public sector units for interest and penalties.

Analysis:

1. Demand of Service Tax on Telephone Service Provided Through Leased Line:
The department raised a demand of service tax against the appellant for providing telephone service through leased lines. The appellant argued that the service was taxable only after specific amendments. The Tribunal found that the telephone service was taxable even before the amendments, as the leased lines provided voice communication. However, lines capable of only data communication were not taxable before the specified date.

2. Applicability of Service Tax Amendments:
The appellant contended that the amendments made the service taxable only from a certain date. The Tribunal clarified that the nature of communication provided through the leased lines determined the taxability, not just the date of the amendments.

3. Non-Deposit of Service Tax by Appellant:
The department alleged that the appellant collected service tax from recipients but did not deposit it. The Tribunal directed verification of whether the service tax amount was separately paid by the recipients and allowed adjustments accordingly.

4. Jurisdictional Aspects of Show Cause Notice:
The appellant argued that the Show Cause Notice did not mention the applicability of the extended period for demand. The Tribunal rejected this argument, stating that suppression with intent to evade tax was evident, justifying the demand raised.

5. Taxability of Leased Circuits Provided to Canal Authorities:
The appellant disputed the service tax demand on leased circuits provided to canal authorities, claiming they were only capable of data transmission. The Tribunal directed verification of the nature of these circuits to determine tax liability accurately.

6. Applicability of Extended Period for Demand:
The appellant contended that the extended period could not apply due to being a public sector unit. The Tribunal rejected this argument, emphasizing that the law treats all assessees equally, regardless of sector, and upheld the demand.

7. Liability of Public Sector Units for Interest and Penalties:
The appellant argued against the imposition of interest and penalties on a public sector unit. The Tribunal clarified that interest is mandatory as per statute, irrespective of the sector, and directed a re-quantification of the demand, interest, and penalties.

In conclusion, the Tribunal partly allowed the appeal by remanding the matter for further verification and adjustments based on the findings regarding the taxability of different types of leased lines and the payment of service tax by recipients.