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TMI BlogLEASING OF TELECOMMUNICATION NETWORK BY ONE TELEGRAPH AUTHORITY TO ANOTHER TELEGRAPH AUTHORITY WILL NOT ATTRACT SERVICE TAX.X X X X Extracts X X X X X X X X Extracts X X X X ..... LEASING OF TELECOMMUNICATION NETWORK BY ONE TELEGRAPH AUTHORITY TO ANOTHER TELEGRAPH AUTHORITY WILL NOT ATTRACT SERVICE TAX. - By: - Mr. M. GOVINDARAJAN - Service Tax - Dated:- 21-11-2011 - - Telecommunication service is under the purview of service tax. After the entry of private operators in the telecom industries it is used to lease the network of one telegraph authority to another telegraph authority to share the network for some consideration. The question to be discussed in this article is whether such leasing of network by one telegraph authority to another telegraph authority for sharing the network in the course of providing output service will attract service tax with reference to decided case law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Power Grid Corporation of India Limited V. Commissioner of Service Tax, New Delhi 2011 (24) STR 307 (Tri. Del) the appellant is a holder of Infrastructure Provider Category II licence under first proviso to Indian Telegraph Act, 1885. The appellant company leased out bandwidth available on this network for transmission of telecommunication signal to various customers including M/s Bharti Infotel Ltd., M/s Converges, M/s Data Access India Limited and Daksh e services Private Limited. The Department is of the view that leasing of telecommunication network provided by the appellants to its customs is taxable service in terms of Section 65 (105) (zd) of Finance Act, 1994 . The said section provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat any service provided to a subscriber by the telegraph authority in relation to leased circuit. Sec. 65 (104) of the Act defines the term subscriber as a person to whom any service of a telephone connection or a facsimile (FAX) or leased circuit or a pager or a telegraph or a telex has been provided by the telegraph authority. The appellant submitted the following before the Tribunal: The appellant is a registered under Sec. 4 of Indian Telegraph Act, 1885 as telegraph authority; M/s Bharti Infotel Ltd and M/s Data Access India Limited are also registered as telegraph authority; Therefore the network leased by one telegraph authority to another telegraph authority is not liable to service tax as the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice is not provided to subscriber; The Kerala High Court in PCO V. Telecom authority held that no telegraph authority can be treated as subscriber of another telegraph authority in relation to the link established between one telegraph authority and another telegraph authority; The CBEC circular No. 91/2/2007-ST , dated 12.03.2007 clarified that the interconnection service provided by one telegraph authority to another telegraph authority was not taxable service; The definition of leased circuit by Section 65 (60) is a dedicated link between two fixed locations for exclusive use of the subscriber and includes a speech circuit, data circuit or a telegraph circuit; By the definition the appellant submitted the following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The link provided by them is not a dedicated link because the same cable was used by different clients by sharing the bandwidth; Thus the link is not dedicated to any user as envisaged in the definition; The appellant is not providing a link between two fixed locations in as much as the services are terminated at different places as desired by their customers and not at the beginning and end of a leased line; The service provided is not for the exclusive use of any one subscriber. The demand of the department is time barred as there was no suppression of facts and the dispute involves interpretation of legal provisions; There was no intention to evade payment as they are in the bona fide belief that the network is not covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the definition for leased circuit ; Even if they are liable to tax, the tax calculated in the order-in-original is incorrect; The Department submitted the following: The services provided by the appellant comes under the definition of leased circuit ; The definition of leased circuit has two parts one is means-part and the other is includes-part ; While considering the includes-part all the contents of means-part should be just ignored; The appellant provides the data circuit specified in the includes-part and therefore whether or not the circuit was dedicated or link provided between two fixed locations or for exclusive use , it will still fall under the definition of leased circuits ; After h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing both parties the Tribunal held that the adjudicating authority has extended the logic of means-part and includes-part. The adjudicating authority has conceived a definition for motor cycle as per his imagination to argue out his point. The definition of motor cycle is as a road vehicle with two wheels driven by an engine, with one seat, for the driver and space for a passenger behind him and includes a bicycle with a motor wheel attachment. The Tribunal did not accept the conclusion of the Adjudicating authority on the above logic. The definition of the term motor cycle as conceived by him is not from any statute book or not even from any eminent legal authority. If there is a legal intent to cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bicycle with a motor wheel attachment it will be covered as a separate part in the definition and not by an includes-part in the definition of motor cycle as conceived by the Adjudicating Authority. In any definition the means-part gives the meaning of the entry. But there can be some grey areas where there can be doubt whether the means-part will cover a particular item. To through light on such a grey area an includes-part is used. What is included has to broadly satisfy the requirements of a means-part . Something not fitting into any of the parameters of the means-part is not normally included in the includes-part . Since no actual example of such legislation or such an interpretation by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y authority is produced the Tribunal disagreed with the interpretation canvassed at leased in the matter of the definition of leased circuit under discussion. Once this is ruled against the Department the entire demand fails. As held by the tribunals a telegraph authority receiving interconnecting service cannot be considered as a subscriber . On this ground also the claim fails. In respect of interconnection provided to M/s Converges and M/s Dakshe Services who were not registered as telegraph authority the service tax is liable to be collected. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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