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TMI Blog2008 (1) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... Advice of transfer"(Debit note)" issued by the Accounts Officer of other circle of BSNL which is not a proper document for taking credit in terms of Rule 9(1) of the Cenvat Credit Rules, 2004. (b)Credit is taken on the strength of photocopies of documents. (c) Credit was availed on the strength of documents, which were not in the name of the assessee. Therefore, it appeared that the credit so taken on the strength of the improper documents was not in accordance to provisions of Cenvat Credit Rules, 2004. Since the credit amounting to Rs. 58,32,295/- was not availed on the basis of proper duty paying document and manner of the credit taken was not in accordance with the provisions of Cenvat Credit Rules, 2004, the credit so availed does not appear to be admissible and required to be recovered from the assessee in terms of provisions of Rule 14 of the Cenvat Credit Rules, 2004. By contravention of the above-mentioned provisions of the Cenvat Credit Rules, the assessee also appeared to have rendered themselves liable for penalty under sub-rule (3) of Rule 15 of the Cenvat Credit Rules, 2004. 3. It has further been observed that the assessee are collecting service charges by two wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f clarification issued in this Circular and imposition of new levy from 16-7-2001 the service tax on "interconnectivity usage charge" are leviable. Therefore the assessee were required to pay an amount of Rs. 2,48,17,933/- on "interconnection usage charge" but they failed to pay the amount of service tax. In view of above it appears that Service tax amounting to Rs. 2,48,17,933/- is leviable on the "interconnection usage charge" in terms of Sections 66 and 67 of the Act and the same is recoverable from the assessee in terms of Section 73 of the Act with interest. It therefore appears that the assessee had suppressed the above taxable value from department by way of non-declaration of the same in their ST-3 returns filed by them during the said period with an intention to evade the payment of Service tax. Thus it appeared that provisions of Section 73 of the act are invocable in the instant case for extended period. It also appears that above act of non payment of Service Tax by the assessee and suppression of taxable value has rendered themselves liable for penalty under Sections 76 and 78 of the Act. 5. As per proviso (i) to explanation (1) of Section 67 of Finance Act, 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss @10.2 % = 2,68,04,757/-. 8. From the above it appeared that the above said amount was received by the assessee after making telephone connection as advance for the service to be provided which are liable to be included in the taxable value and chargeable to service tax in terms of Section 67 of Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 as referred above. It appeared that there was short levy of service tax to the tune of Rs. 2,68,04,767/- which is liable to be recovered from the assessee in terms of Section 73 of the Act along with interest. It appears that the assessee suppressed the above taxable value from department by way of non-declaration of the same in the ST-3 return filed by them during the said period with an intention to evade the payment of Service tax. Thus it appears that provisions of Section 73 of the Act are invocable in the instant case for extended period. It also appears that above act of non-payment of Service Tax by the assessee and suppression of taxable value has rendered themselves liable for penalty under Sections 76 and 78 of the Act. 9. Statement of Shri Gourav Mishra, Authorised representative of the assessee was recorded o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 75 of the Act; (ii) Penalty should not be imposed upon them under Section 76 of the Act for non-payment of service tax; (iii) Penalty should not be imposed upon them under Section 78 of the Act for suppression of taxable value from the department. IV. (i) Service Tax not paid by them amounting to Rs. 2,68,04,767/- (As referred to in Para 5 above) should not be recovered from them with interest in terms of Sections 73 and 75 of the Act; (ii) Penalty should not be imposed upon them under Section 76 of the Act for non-payment of service tax; (iii) Penalty should not be imposed upon them under Section 78 of the Act for suppression of taxable value from the department. 11. Defence : The assessee - the General Manager, Telecom District, M/s. Bharat Sanchar Nigam Ltd., Ambedkar Chowk, Near High Court, Jabalpur (M.P.) submitted their reply to the Show Cause Notice vide letter Ref. No. GMTD JB/AO Cash/S. Tax/5, dated 31-10-2006 wherein they submitted that : A.(i) The BSNL happens to be a company and its books of account must exhibit factual state of affairs. Accordingly the purchasing authority has debited goods and excise duty proportionately to this office for taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t nomenclature. D. They further submitted that the deposit which happens to be the liability of the BSNL does not come within the purview of the gross amount charged for taxable services. The deposit does not create generation of services. It is an assurance given by the subscriber to ensure the payment of the bills. It is also adjustable and refundable in case the subscriber is found to be defaulter. (ii) After providing connection amount equivalent to six bi-monthly billing periods is transferred to advance rental deposit which is for all practical purpose is an liability towards the BSNL and which does not help in creation of service. Hence, the question of payment of service tax does not arise. 12. Record of personal hearing : Shri Kamal Khemuka, Advocate of the assessee appeared for personal hearing held on 25-9-2007 and submitted a written brief reiterating thereunder that :- 1. That the allegation levelled in the SCN 79, dated 10-10-06 that Cenvat credit does not appear to be correct on the strength of documents which are not proper in terms of Rule 9(1) is totally incorrect and baseless, the Cenvat credit amounting to Rs. 58,32,295/- availed by the assessee on proper d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest earned on such initial deposits will not attract service tax. Again as per clause (b) of the inclusive part of the explanation to Section 67 the value of taxable service shall include any adjustment made from the initial deposit made by the subscriber. The amount stand as deposited does not bear any service provided by the assessee and hence the SCN issued may kindly be withdrawn or uncalled for. That without prejudice to the aforesaid preliminary submission/objection the assessee submits para wise reply as under :- As regard para 1 of the SCN the noticee submitted that - The assessee has duly complied with the Rule 9 which defines the documents and accounts - (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor as the case may be on the basis of any of the following documents namely :- (a) an invoice issued by - (i) A manufacture for clearance of- (I) inputs or capital goods from his factory or depot from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer; (II) input or capital goods as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed merely on the basis of that it is not a proper document for taking credit in terms of Rule 9(1) of the Cenvat Credit Rules, 2004 & credit is taken on the strength of photocopies of documents is only a misunderstood the Cenvat Credit Rule 9(1) which clearly spell for Cenvat credit and Cenvat credit shall not be denied on the grounds that any of the documents mentioned in sub-rule (i) does not contain all the particulars required to be contained therein under these rules, if such documents contains advice assessable value, name and address of the factory or warehouse or provide of input service. 1.4 That the assessee has rightly availed the Cenvat credit amounting to Rs. 58,32,295/- according to Rule 9(1) and on proper document. There is no violation as stipulated in SCN. Hence the SCN issued may kindly be withdrawn accordingly. 1.5 That the Cenvat credit was taken on capital goods on the very basis of office memorandum issued by the input services distributors distributing Cenvat credit among its various office. 1.6 That all the purchases are made by BSNL through its CGM office at Bhopal and then goods supplied to various offices located in MP according their requirement. Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided between the basic/cellular telephone providers and the BSNL/MTNL. This enables the private basic telephone operators or the mobile service provider to access BSNL telephone lines and vice versa. This interconnection can be through a cable owned by the BSNL : in which case a monthly/annual rent is charged. If the cable has been laid/provided by the private basic/cellular telephone service provider no rental is charged by BSNL. As alleged in the SCN that "interconnection usages charges" are nothing but charges for providing "leased circuits services" in the light of clarification issued by the CBEC vide their Circular No. 46/09/2002-S.T. They emphasized that the contention of the department is wrong according to the circular dated 8th August, 2002 as "interconnectivity linked charges" are concerned these are nothing but charges for providing leased circuits. This service has been brought under the coverage of service tax w.e.f. 16-7-2001 while issuing Boards clarification dated 14-3-2001 it was inter alia intimated that this service was not taxable. However, since Board's clarification dated 14-3-2001 stands modified accordingly. The words used in the circular is interconn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :- (a) an invoice issued by - (i) a manufacturer for clearance of - (I) inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer; (II) inputs or capital goods as such; (ii) an importer; (iii) an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002; (iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or (b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Superintendent (Service Tax) Central Excise Division Jabalpur vide his letter C. No. RST/JBP/AGMP/2007/122, dated 7-1-2008 submitted as under :- "It has been verified that the credit was taken on the strength of advices of transfer (Debit Note) issued by the Account Officer of other Circle of BSNL. On verification it is found that the invoices are in the name of CAO, Telecom Circle, Bhopal but consignee is Telecom Circle Jabalpur and the Cenvat Credit was passed on to the telecom circle Jabalpur on the basis of debit notes for availing credit. As per Cenvat Credit Rules in these cases CAO Telecom Circle Bhopal was required to issue invoices in the name of the telecom circle Jabalpur. Therefore the documents are not proper for taking credit." Thus the verification report submitted by the Range Officer clearly indicates that the assessee has availed Cenvat credit on the basis of improper documents and in this situation Cenvat credit availed by the assessee during the relevant period cannot be allowed. 13.4 Regarding the second charge i.e., interest on delayed payment I find that as per Rule 6(1) of the Service Tax Rules the service tax on the value of the taxable services rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, a subscriber in respect of telephone service is the person who avails of telephone connection. While providing service of interconnection usage, no service of telephone connection is provided to recipient telegraph authority. No doubt it is a service in relation to a telephone connection; however, as long as service is not provided directly to a subscriber (as mentioned above) the service may not fall in the category of telephone service. Therefore IUC would not be taxable under the category of telephone service. Opinion of Law Ministry/Attorney General has also been obtained in the matter. Law Ministry and Attorney General have opined that IUC is not taxable in any of the existing taxable service. However, vide Finance Bill, 2007, a new definition of 'Telecommunication Service' has been incorporated vide clause (104) of Section 65 of the Finance Act, 1994 and IUC has been specifically incorporated in the definition of "telecommunication service' to make it a taxable service. Further any service provided or to be provided to any person, by a telegraph authority in relation to telecommunication service has been made taxable. This amendment will come into effect from a da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question (question No. 4) as to whether they are paying service tax on the "after connection deposit" being charged from the customers. The reply given by the authorised representative in a negative way justifying the reasons that these deposits are refundable amounts and are not charged against any service thus not leviable to service tax. I find force in the above submission of the assessee and logically it would be appropriate that any type of security deposit/initial deposit cannot be charged to service tax since these amounts are liable to be refunded to the customers if so desired for not availing the services or can be adjusted towards the default charges made by the customers during any period. Thus I think it would be proper to charge service tax in respect of any adjustment of default amount by a customer from the security deposit/initial deposit etc. In this connection I have also come across Rule 6(1)(ii) of the Service Tax (Determination of Value) Rules, 2006 whereunder it is mentioned that "subject to the provisions of Section 67, the value of the taxable services shall include - the adjustment made by the telegraph authority from any deposit made by the subscriber a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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