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TMI Blog2015 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... h they were paid by their clients. If the services provided by them to their clients' subscribers were not on behalf of their clients, they (i.e., the appellants) had no reason to provide service to their clients' subscribers and there would be no reason for their clients to pay the appellants for the said service. Indeed, to whom the data/SMSs should be sent, at what time they should be sent, the priority to be attached to them etc. are all decided by the clients and the appellants are merely acting on behalf of the clients. There is an agreement between the appellants and their clients, like an agreement dated 28.08.2006. Under the agreement, the appellants have to give their client a direct SMPP connection through their network. The appellants then have to deliver the SMSs received from the clients to the latter's subscribers for which they get a fee from the clients. The clients also promise not to send any data which consider as objectionable. The terms of the agreement make it clear that the SMS which is being sent to the client's subscriber is only on behalf of the client and the appellants cannot send any material on their own. Thus it is amply clear that the service has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding Short Message Peer to Peer (SMPP) service to various clients but were not paying service tax thereon. The SMPP service inter alia involves sending SMS to customers of their clients on a bulk basis. The said service was provided to a large number of clients and described in their invoices as charges for short messaging enabling software on per SMS basis and peer to peer and person to person basis . As per the product note submitted by the appellants, the nature of SMPP service provided was as under:- (i) Transmit message from an ESME to single or multiple destinations via the Short Message Service Centre (SMSC), (ii) An External Short Message Entity (ESME) may receive messages via the SMSC from other ESME's (e.g. mobile stations) (iii) Query the status of a short message stored on the SMSC. (iv) Cancel or replace a short message stored on the SMSC. (v) Send a registered short message (for which a 'delivery receipt' will be returned by the SMSC to the message originator). (vi) Schedule the message delivery date and time. (vii) Select the message made i.e. datagram or store and forward. (viii) Set the delivery priority of the short message. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2004, CBEC has explained that the activities mentioned in the definition of BAS are those undertaken by the service provider on behalf of the client, in the capacity of agent. The Supreme Court in W.O. Holdsworth Others Vs. State of Uttar Pradesh [1958 SCR 296: AIR 1957 SC 887 : (1958) 33 ITR 472] has held that the expression on behalf of connotes an agency which brings about a relationship as between principal and agent between the parties, one of whom is acting on behalf of the other. CESTAT in the case of Interocean Shipping Co. Vs. CST, New Delhi [2013 (30) STR 244 (Tri. - Del.)] has followed this ruling to interpret the expression on behalf of . (ii) In the impugned order it has been admitted at para 4.7 that there was no agency function by the appellants. As per the terms of the agreement with the clients, the appellants are not responsible for the content of the messages received, carried and delivered by them. Like a courier agency sending parcels, they were only acting as carrier of messages. A courier agency does not provide service to the recipient of the packet on behalf of the sender. He simply provides courier service to the sender of the parcel. Similar is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2007 to the appellants asking them to deposit service tax, referring to internal audit IAR No.5/2007 dated 03.05.2007 and product note supplied by the appellants. (b) Show Cause Notices on 24.10.2007 and 18.09.2008 were issued to the appellants to demand service tax for the subsequent periods 2006-07 and 2007-08. (vii) There was no evidence of an intention to evade payment of service tax by the appellants. Hence penalty is not payable by them. 5. Ld. Departmental Representative, on the other hand, stated that the submissions/contentions of the appellants have been duly dealt with in the adjudication order and added that the impugned Orders-in-Original are sustainable. 6. We have considered the contentions of both sides. As regards contention of the appellants that they were providing telecommunication service which is recognised as a separate service under section 65 (109a) ibid, they not being a telegraph authority were not liable to pay service tax and as they were covered under Telecommunication Service, they cannot be covered under BAS, it is pertinent to point out the inherent contradictions in this contention in-as-much-as the telecommunication service defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 2. Database Technologies: Our SMPP Messaging setup is running on the Oracle as a database. The operating system used for the purpose is Linux. Oracle as a Database provides many advantages such as better table management and greater capacities for storage. This facilitates faster data recovery and rapid command execution. 3. Network Protocols: As mentioned the service itself runs over the SMPP and SS7 protocols which are standards for the SMS delivery across the globe. Using this service data from any part of the world is processed to form short message which is submitted to server over the IP. The application again processes it to extract the necessary information which can finally be delivered to user in the form of SMS. To sum up, it is a complete process of exchanging any type of data over computer systems and technology involved is quite . similar to the one used for exchange of Electronic mails. Thus, it is evident that SMPP service does not merely involve transmitting SMS; it supports a full featured set of two way messaging functions described above. It is also seen from the Product Note that SMPP service also has the following key features:- i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication between computer systems.) Eg: 'G' = 47 (in hex) = 01000111 'r' = 72 (in hex) = 01110010 Combining = 0100011101110010 ('Gr' as submitted by ESME's) On receiving this data, SMS Gateway first determines the location and IMSI for recipient's number by querying its home operator. And once Gateway has got the location information and IMSI, it performs the following operation on data received from ESME. As SS7 communication doesn't allow wastage of any resources, mobile handsets interpret compressed data. So, gateway performs 7-bit to 8-bit compaction on data, so that no bit remains wasted and then sends this binary data to handset. After compression 'Gr' as sent to mobile station by SMS Gateway is '010001111-111001', the two blank spaces will have first two-bits of next character. So the total 16 bits of data for 'Gr' has been compressed to 14-bits represented by 'Gr'. The above example highlights only one of the many procedures performed by SMS Gateway on the data received from TCP/IP world to make it understandable to SS7 world. As per the Product Note, the appellants sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the appellants are merely acting on behalf of the clients. There is an agreement between the appellants and their clients, like an agreement dated 28.08.2006. Under the agreement, the appellants have to give their client a direct SMPP connection through their network. The appellants then have to deliver the SMSs received from the clients to the latter's subscribers for which they get a fee from the clients. The clients also promise not to send any data which consider as objectionable. The terms of the agreement make it clear that the SMS which is being sent to the client's subscriber is only on behalf of the client and the appellants cannot send any material on their own. Thus it is amply clear that the service has been rendered by the appellants on behalf of the clients and is therefore clearly covered under the scope of BAS as the appellants have rendered service in relation to provision of service on behalf of the clients. 9. The appellants also pleaded that the amount received by the appellants should be treated as cum tax amount and the demand has to be confirmed on that basis (if at all) and cited the judgement of the Supreme Court in the case of CCE Vs. Maruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the absence of the same, it is not possible for the department to ascertain the exact nature of such services for concluding whether the same are exempted from payment of service tax or are liable to service tax. This fact came to the notice of the department only at the time of audit of the unit by the department. Thus, this shows that notice has fraudulently suppressed the material fact of providing the services of SMPP Messages to various customers on behalf of his clients with the intention to evade service tax. The adjudicating authority has dealt with this issue in para 4.10 of the impugned order, which is reproduced below:- 4.10 Now I come to the last issue. Is the extended period of limitation applicable? The notice was and is a service tax payer. In fact they have been paying service tax on Business Auxiliary Service. Their claim is that there has been no suppression because they had mentioned in their ST-3 return that they are also providing exempted services. I would have accepted this argument if they had mentioned type of exempt service. Mere mention that they were providing exempt services does not enable the department to ascertain whether the service is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sustain the charge of suppression of facts merely because they did not give the details (detailed description) of the exempted services, especially when there is no such legal requirement and also in the light of the fact that the appellants had mentioned in the ST-3 Returns the quantum of amount of the exempted services provided. In the case of Gopal Zarda Udyog Vs. Commissioner of CCE, Delhi - 2005 (188) E.L.T. 251 (SC) the Supreme Court observed that mere failure or negligence on the part of the manufacturer does not attract the extended period. In case of CCE Vs. Chemphar Drugs Liniments - 1989 (40) E.L.T. 276 (SC), the Supreme Court held that something positive other than mere inaction or failure on the assessee's part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. Thus, we are of the view that the allegation of suppression of facts cannot be sustained in the given circumstances. Further, with regard to the demand pertaining to July, 2004 to March, 2006 for which the Show Cause Notice was issued on 04.04.2009, when there had been other Show Causes Notices issued for subsequent period on 24.10.2007 and 18.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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