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TMI Blog2019 (8) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods have been given. Thus, the said activity amounts to sale, on which admittedly appellant have paid VAT / sale - no service tax is payable by the appellant on the rental of wireless/ router or radio. Demand of service tax - rental/ lease charges (Interconnectivity Charges), charged by the appellant from other ISP for the rent/ lease of its optical fibre cables - HELD THAT:- It is a service provided by one Telegraph authority to another - Service Tax under the provisions of lease circuit service or telecommunication service is exigible only when service is provided by a Telegraph authority to a subscriber. This has also been clarified by the CBEC vide Circular No. B/11/1/2001-TRU - no service tax payable. Online Information and Database Access or Retrieval Services - amounts received by the appellant for the sale of domain names to various customers - HELD THAT:- Demand of Interest and penalties - HELD THAT:- The transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods - Domain name are akin to trade mark, making them the property of the person who owns it - service tax not attracted. Appeal allowed - decided in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008-31.03.11) SCN dt. 24.12.2012 (period 1.4.2011-31.03.2012) Total Under LCS for foreign remittance made Leased Circuit Service/ Telecommunication service 11277193 23836092 0 35113285 Under LCS for wireless radio rental Leased Circuit Service (Section 65(105)(zd)/ Telecommunication service (Section 65 (109a) 581890 1316954 9854 1908698 Under LCS for lease of fiber cable Leased Circuit Service (Section 65(105)(zd) Telecommunication service 844800 1319451 0 2164251 Under computer network service for domain name charges Computer Network Service/ Online information and database access or retrieval service (Section 65 (105)(zh) 388962 817136 165444 1371542 TOTAL 13092845 27289633 175298 40557776 8. The aforemention demands were raised under each of the show cause notices, the details are: (a) Demand was raised under Section 66A (RCM) of the Finance Act, 1994 on the remittances made by the appellant as monthly rentals charged by foreign internet service providers for procuring bandwith under the category of 'Leased Circuit Services/ Telecommunication Services'. (b) Demand was raised on the rental charges charged by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on a computer network. Therefore, the same is liable be taxed under category of 'computer network services/online information & database access or retrieval services'. (v) That the Best Judgment undertaken in terms of Section 72 of the Act, is just & proper. (vi) That extended period of limitation was held applicable as the bifurcation of the tax demand pertaining to the periods under SCN-I & SCN-II was unavailable to the Ld. Commissioner. (vii) That Appellant was held liable under Section 76, 77 & 78 of the Act, for non-payment of service tax under the taxable heads of services. 10. Learned Counsel for the appellant have made the following arguments groundwise: (i) As regards demand made on the remittances made by the appellant, as monthly rentals, charged by foreign internet service provider for procuring bandwith, under the category of leased circuit service / telecommunication services. 10.1 The appellant have entered into an agreement with FLAG Atlantic and REACH for procuring bandwith on undersea cables, laid between several countries for rendering internet services. In lieu of these services, the appellant was paying monthly rentals for the period 2002-03 to 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has confirmed the demand of service tax on monthly rentals under the category of 'leased circuit services'. 11.2 It is submitted that the demand is not sustainable for the following reasons: The transactions between the Appellant and its customers tantamount to 'transfer of right to use goods', which is construed as a 'deemed sale' on which no service tax is leviable. In this regard, the Appellant places reliance on the case of Bharti Telemedia Limited vs. State of Tripura, 2015-VIL-227-TRI wherein it was held that when the possession and control of goods has been passed, it would amount to transfer of right to use. Reliance is also placed on Circular No. 334/1/2008-TRU dated 29.02.2008 which explains the scope of transfer of right to use goods; The demand is not sustainable under 'lease circuit services' for the reason that by provision of router on lease, the Appellant has not provided any 'dedicated link to a subscriber'. Thus, the definition provided under Section 65(60) of the Act is not satisfied. 12. So far the demand raised on rental/ lease charges (enter connectivity charges) charged by the appellant from other ISP, under agreement for the rent/ lease of its optical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain names are in the nature of information for the levy of service tax, under OIDAR services; and iii. Issuance of domain names is in the form of a transaction of sale of goods. This is because domain names have, as on date, achieved the sanctity on the same lines as 'trademarks', making them the property of the person who owns them (Tata Sons Limited vs. Manu Kosuri ILR (2001) I Delhi 236). Given this, no service tax can be levied on the sale of domain names. 13.1 Further, learned Counsel submits that by way of alternative arguments, appellant are entitled to cum tax benefit as admittedly they have neither charged nor collected service tax on the disputed transaction. It is further urged that from the allegation made in the show cause notice, no case of suppression of facts, falsification of record or any malafide is alleged nor found. Thus, the demand is barred for the extended period of limitation, particularly for the period October, 2002 to October, 2006 and January, 2008 to September, 2009. Further, under the facts and circumstances, no penalty is imposable under Section 76 and 78 of the Act. 14. Opposing the appellant, learned Authorised Representative for Revenue urges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the cessation of services from appellant, client shall promptly return the equipment to appellant. Client is required to pay initial set up fee of ₹ 30,000/- for connection of 512 KVPS. Further, the client has to pay additional set up fee as may be specified by appellant, for upgrading the internet bandwith. In case of default by the client, appellant is entitled to stop the service of internet bandwith and also have the right to retain the possession of the equipment. Further, appellant have got the right to inspect during continuation of the agreement inspect the premises where the equipment is kept, for satisfying all the conditions and maintenance of the equipment. 15.3 Thus, from the aforementioned stipulation in the agreement, it is evident that charges under the agreement relate to "internet data services", as well as separately for router rental. Therefore, a dominant character of the service under this agreement had a particular speed classifiable under leased circuit service upto 01.06.2007 and telecommunication service thereafter. The router rental is only an incidental part of the service. 15.4 As regards the demand on rental/ lease charges "interconnectivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny case demand for normal period may be upheld. 16. Having considered the rival contentions and after perusal of the record, we hold as follows: (i) So far the first issue of levy of service tax on the monthly rentals charged by the foreign internet service provider for procuring bandwith, under reverse charge mechanism, we hold that such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act. Accordingly, we hold that no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable. (ii) The next issue is regarding service tax on rental charge by the appellant from its customers/ subscribers towards rent of its wireless routers/ radio. Admittedly, this activity qualify as deemed sale of goods as the said activity tantamount to 'transfer of right to use these goods'. Admittedly, in the transaction, the goods in question were delivered by the appellant and the effective possession and control of the goods have been given. Thus, the said activity amounts to sale, on which adm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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