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2015 (6) TMI 543 - AT - Service TaxBusiness Auxiliary Service - appellants were providing Short Message Peer to Peer (SMPP) service to various clients but were not paying service tax thereon - Held that:- Telecommunication service defined under Section 65(109a) requires that the services, inter alia, is rendered by a person, who has been granted a licence under the first proviso to sub-section (1) of Section 4 of Indian Telegraph Act, 1985 and the appellants not having been granted such a licence are not covered thereunder. Consequently, the appellants' contention that as they are covered under Telecommunication Service, they cannot be covered under BAS is totally invalid [even if the contention that being covered under Telecommunication Service would necessarily mean they were not covered under any other taxable service earlier is presumed (without admitting) to be valid]. There is hardly any doubt that the appellants were providing service to their client's subscribers on behalf of their clients for which 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 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. Section 67(2) of Finance Act, 1994 allows cum-tax benefit only if the gross amount charged for the service is inclusive of service tax payable. In the light of the admitted fact that the price charged by the appellants did not include any service tax, the cum tax benefit cannot be extended to them. - however, penalty u/s 78 is set aside - Decided partly in favour of assessee.
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