2015 (1) TMI 226 - AT - Service Tax

In-roaming services - taxability when services are provided from one circle to another circle - Penalty u/s 78 - Held that - What the appellants are doing is only book adjustments between the circles and this is being done because each circle is identified as a profit centre. For the purpose of accounting and for the purpose of identifying the source of income in each circle, the said charges are adjusted between the centres and in reality, according to the appellants there is no service provided and services received in this case. All the circles belong to the same company and therefore when one circle provides in-roaming service to another circle, there is no service element involved. Further, as far as the subscriber is concerned, the circle in which he has been a subscriber which is considered as the home circle charges for the services rendered to him for roaming as well as for usage within the circle. Further it was also submitted that according to the Circular issued by the Board (No. 22/2/97, dated 3-9-1997), in such situations, the service provider can collect the amount from subscriber at one point and pay the Service Tax. - IT cannot be said that there are service provider and service receiver in this case. In this view of the matter, we consider that the appellants have made out a strong prima facie case in their favour for complete waiver. - Stay granted.

Summary

Issues:
Service Tax liability on in-roaming services provided by M/s. Vodafone Essar South Ltd. from different circles, applicability of Service Tax on charges received from other circles, interpretation of Circular issued by the Board, determination of service provider and service receiver relationship, imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The case involved a dispute regarding the Service Tax liability on in-roaming services provided by M/s. Vodafone Essar South Ltd. from various circles. The Appellate Tribunal considered the submissions and records to determine the nature of the transactions between different circles. The appellant argued that the adjustments made between circles were for accounting purposes and did not involve actual provision or receipt of services. It was highlighted that all circles belonged to the same company, and when one circle provided in-roaming services to another, there was no service element involved. The appellant also relied on a Circular issued by the Board, which allowed the service provider to collect amounts from subscribers at one point and pay the Service Tax. Reference was made to a previous case where it was held that when two units of a single corporate entity provide services to each other, there is no service provider and service receiver relationship, thus no levy of Service Tax. The Tribunal found the appellant's reliance on the Circular to be appropriate and agreed that Service Tax paid on roaming services by the home circle covered the charges between circles. It was concluded that there was no service provider and service receiver relationship in this case, leading to a strong prima facie case in favor of the appellant for a complete waiver of dues, resulting in the grant of waiver and stay against the entire amount during the appeal's pendency.

Penalty under Section 78:
Additionally, the Tribunal addressed the imposition of a penalty under Section 78 of the Finance Act, 1994. The appellant's arguments regarding the absence of a service element in the transactions and the non-applicability of Service Tax on charges between circles were crucial in the Tribunal's decision to grant a waiver and stay against the entire dues. This decision was based on the absence of a service provider and service receiver relationship, as well as the Circular issued by the Board, supporting the appellant's position.

In conclusion, the Appellate Tribunal CESTAT Bangalore ruled in favor of M/s. Vodafone Essar South Ltd., granting a waiver and stay against the Service Tax demands during the appeal's pendency. The decision was based on the absence of a service provider and service receiver relationship in the transactions involving in-roaming services provided by different circles of the same company, as well as the applicability of the Circular issued by the Board supporting the appellant's position.