2013 (12) TMI 1016 - AT - Service Tax

Demand of service tax - Telecommunication service - For providing telephone service to customers while they roam abroad the appellants took service from foreign operators outside India - Revenue demanded tax on receipt of service from foreign operators - Held that - C.B.E. & C. has clarified vide letter F.No. 354/148/2099-TRU, dated 16-7-2009 that even for services liable to tax under Section 66A the charging section is Section 66. Section 66A is only for the purpose of casting the responsibility to pay tax. Firstly the service should be taxable as per provisions of Section 66, that is firstly, the requirement of Section 65(105)(zzzx) has to be satisfied. We further note that this issue has been specifically clarified by C.B.E. & C. vide Circular No. 137/21/2011-S.T., dated 15-7-2011, with reference to telecommunication service . Charging section is Section 66 and therefore, for such service to be taxable the service has to be provided by a telegraph authority. It is not sufficient that the recipient is a telegraph authority even in situations covered by Section 66A. Further when the clarifications issued by C.B.E. & C. as pointed out above are taken into account, there is prima facie no merits in the contention of Revenue - Stay granted.

Summary

Issues:
1. Whether service tax is applicable on services received by the appellant from foreign operators prior to 1-6-2007.
2. Whether the recipient of service is liable to pay tax under Section 66A.
3. Clarification on the charging section for services liable to tax under Section 66A.

Issue 1: The dispute in this case revolves around the applicability of service tax on services received by the appellant from foreign operators before 1-6-2007. The Revenue sought to charge service tax under telephone services [section 65(105)(b)] for the period up to June 2007 and under telecommunication service [65(105)(zzzx)] from 1-6-2007 onwards due to a change in the definition of services. The appellant argued that the service provider did not fall under the definition of a "telegraph authority" as required by the Finance Act, 1994. The Commissioner (Appeals) acknowledged that the service provider was not a "telegraph authority" before 31-5-2007, making the demand unsustainable for that period. However, for the subsequent period, the Commissioner held that the impugned service would be covered by the definition of taxable service under the new telecommunication service category. The appellant contended that even after 1-6-2007, taxable service should still be provided by a "telegraph authority" as per Section 65(105)(zzzx), making the demand unsustainable for the entire period.

Issue 2: The learned AR argued that the appellant, as the recipient of service, is liable to pay tax under Section 66A, which treats the recipient as if they had provided the service in India. However, the tribunal noted that for services liable to tax under Section 66A, the charging section is Section 66, and Section 66A only determines the responsibility to pay tax. The tribunal referred to clarifications by C.B.E. & C. stating that the service must first be taxable under Section 66, satisfying the requirements of Section 65(105)(zzzx). The tribunal found merit in the appellant's argument that the charging section is Section 66, emphasizing that the service must be provided by a telegraph authority for it to be taxable, even in cases covered by Section 66A.

Issue 3: The tribunal considered the clarification by C.B.E. & C. through Circular No. 137/21/2011-S.T., which emphasized that the charging section for services liable to tax under Section 66A is Section 66. Taking this into account, the tribunal concluded that there was no merit in the Revenue's contention. Consequently, the tribunal granted a waiver of pre-deposit of dues arising from the impugned order for the admission of the appeal and ordered a stay on the collection of such amounts during the pendency of the appeal. The judgment was pronounced in open court on 17-4-2012.