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TMI Blog2019 (3) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... erconnection is sought and Interconnection Seeker as a service provider who seeks such interconnection. The disputed services pertain to interconnectivity provided by M/s. BSNL, Cellular Mobile Telephone Services (CMTS) Division and M/s. BSNL, appellants herein to their own landline network. Surely, by no stretch of imagination can these two Divisions of M/s. BSNL be termed as two separate service providers for the purposes of the definitions contained in the aforesaid TRAI Regulations that we have just analyzed, etc. - In the present scenario, most, if not every, service provider extends a gamut of connectivity services like landline connectivity, connectivity on mobiles through GSM, CDMA connectivity, data and voice through optical fibre and so on. A service provider like M/s. BSNL may be providing one or more of these connectivities as may be subscribed to by their subscribers. But the important point to be noted is that when the CMTS Division of BSNL is providing interconnectivity to their Landline Division, the service provider BSNL is only providing service to itself. Thus, it becomes a case of service to oneself. The Tribunal in the case of Precot Mills Ltd. [2006 (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Demand confirmed: Service tax of ₹ 19,18,95,836/- with interest. Penalties imposed: under Sections 77 and 78 of the Finance Act, 1994. (Appeal No. ST/40123/2014) (ii) General Manager, M/s. BSNL Ltd., Thanjavur Impugned Order: O-in-O No. 17/2013-ST dated 20.12.2013 Period of dispute: June 2007 to March 2012 Demand confirmed: Service tax of ₹ 2,05,80,048/- Penalties imposed: under Sections 77 78 ibid. (Appeal No. ST/40496/2014) (iii)M/s. BSNL (Landline Services), Trichy Impugned Order: O-in-O No. 01/2014-ST dated 10.01.2014 Period of dispute: October 2007 to March 2012 Demand confirmed: Service tax of ₹ 2,00,50,089/- Penalties imposed: under Sections 77 78 ibid. (Appeal No. ST/40713/2014) 3. When the matter came up for hearing, on behalf of the three appellants, Ld. Advocate Shri. S. Durairaj made oral and written submissions which can be broadly summarized as under : (i) Interconnected Usage Service provided by one telegraph authority to another, was brought into the tax net with effect from 01.06.2007 by covering services provided to any person by the telegraph authority in relation to Telecommunication Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order. He also made oral and written submissions which can be broadly summarized as under : (i) Appellants have contended that the service provided by them is a service to self. However, as per Section 68 of the Finance Act, 1994, with regard to the payment of service tax every person providing taxable services to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed . . Hence, every person providing taxable service to any person is liable to pay service tax. (ii) Further, in terms of Section 65(105)(zzzx) of the Act taxable service means any service provided or to be provided to any person by the telegraph authority in relation to Telecommunication Service. It is therefore clear that for services to be taxable under the above category, the following conditions will have to be satisfied : a. The service should be provided by a telegraph authority; b. The service should be in relation to Telecommunication Service; c. The service should be provided to any person . (iii) The term person has not been defined in the Finance Act, 1994 as it existed prior to 01.07.2013 or in any Allied Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory returns, to be filed with the jurisdictional Range Office. However, the appellant had deliberately failed to disclose the material facts to the knowledge of the Department. The non-payment of service tax was brought out only by the verification conducted by the Department and hence, this case merits invocation of extended period of limitation and penalty under Section 78 of the Finance Act, 1994. 5. Heard both sides and have gone through the facts. 6.1 The services provided by the appellants to their Landline segment, namely, Interconnect Usage Charges and the consequent collection of Interconnect Usage Charges, have been considered as taxable under the category of Telecommunication Charges defined in Section 65(109a) ibid. While the said definition is an expansive and detailed one, there is no definition of what are Interconnect Usage Charges. 6.2 The Telecom Regulatory Authority of India vide their Notification dated 29.10.2003 have issued The Telecommunication Interconnection Usage Charges Regulation, 2003 (hereinafter referred to as The Regulation ) which supersedes the earlier Regulation dated 24.01.2003 (1 of 2003) and its amendments dated 27.03.2003 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rconnected, subscribers of one network are able to seamlessly communicate with those of another network or access the services offered by other networks. Without an effective interconnection, the market would develop as discrete islands and economic benefits associated with market expansion and liberalization would be limited. For competition to develop and the market to evolve efficiently, it is essential that subscribers of one network communicate with those of another network. 2. In a broader sense, the term interconnection refers to the technical and commercial arrangement under which service providers connect their equipment, networks and services to enable their subscribers to have access to the subscribers, services and networks of other service providers. Interconnection is the lifeline of telecommunications. It is one of the foundations of viable competition which in turn is the main driver for growth and innovation in telecommunications markets. Good interconnection arrangements promote efficient infrastructure development, providing incentives for operators to build networks and use other networks. B. Interconnection Usage Charges (IUC) 3. Interconnec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be providing one or more of these connectivities as may be subscribed to by their subscribers. But the important point to be noted is that when the CMTS Division of BSNL is providing interconnectivity to their Landline Division, the service provider BSNL is only providing service to itself. Thus, it becomes a case of service to oneself. 8.2 The Tribunal in the case of Precot Mills Ltd. (supra) has held that when one renders service to oneself, there is no question of leviability of service tax; that there is no client-principal relationship in transactions and service tax is not leviable. The relevant portion of the decision is reproduced as under : 5. We have gone through the records of the case carefully. While dropping the proceedings against the appellants, the Asst. Commissioner in his order dated 27-6-2002 has taken into consideration the following facts :- (i) The service provider and the service receiver belong to the same Corporate entity known as Precot Mills Ltd. with a single certificate of incorporation. (ii) Share holding is for the Corporate body and balance sheet is prepared for the whole entity and not unit-wise. (iii) For service tax to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any valuable consideration for services rendered by one unit of the appellant to the other unit, in view of the fact that the each unit is part of the same legal entity which is the appellant. To put it differently, when one renders service to oneself, as in the present case, there is no question of leviability of service tax. The Asst. Commissioner s order is correct and legal. Hence we do not find any merit in the impugned orders of the Commissioner which ignore the main point that there is no client relationship in the present transactions. In these circumstances, no penalty is leviable. Thus we allow the appeal with consequential relief. 8.3 The ratio laid down in Precot Mills Ltd. (supra) has been followed/relied by the Tribunal in a number of subsequent decisions, for eg. : Followed in 2007 (8) S.T.R. 527 (Tri. Kolkata); Followed in 2010 (19) S.T.R. 424 (Tri. Chennai); Relied in 2010 (20) S.T.R. 847 (Tri. Kolkata); Followed in 2012 (27) S.T.R. 53 (Tri. Del.); Relied in 2012 (27) S.T.R. 145 (Tri. Del.); Relied in 2013 (30) S.T.R. 502 (Tri. Del.); Relied in 2013 (32) S.T.R. 113 (Tri. Ahmd.); Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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