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2019 (12) TMI 556 - AT - Service TaxTelephone service - public telephone operating only for local calls - Meaning and scope of "Local Calls" - nature of calls made to mobile service operators - Benefit of exemption notification 03/94 (ST) dt.30.06.1994 (Sl.No.12 & 13) - Whether the appellant is entitled to the benefit of exemption notification 03/94 (ST) dt.30.06.1994 (Sl.No.12 & 13) which is available to only telephones used for local calls, in respect of those telephones which were used for long distance calls as well as calls to mobile phones? - HELD THAT:- There is an individual telephone exchange and a number of exchanges are grouped together as an exchange system. Calls can be made from within the exchange or to other exchanges within the exchange system or to lines connected to other exchange systems. It is not the case of the appellant that the entire Andhra Pradesh is a single exchange system. There were several exchange systems in the state and through the public telephones in question, a call can be made to any line in any of the exchange systems throughout the states. Clearly, in terms of the Indian Telephone Rules, 1951, this cannot be called a local call and a phone used for such calls cannot be called as telephone meant for local calls only. Further, mobile networks also do not form part of the exchange system in the aforesaid definition. Therefore, calls made to mobile networks also cannot be called as local calls. In the absence of any contrary definition of local calls anywhere, we have no choice but to hold that the appellant is not entitled to the benefit of exemption notification which was available for public telephones to be used for local calls - on merits the demand is sustainable. Extended period of limitation - HELD THAT:- From the SCN, the intention to evade payment of service tax is not very evident. No doubt the appellant has wrongly availed exemption notification 03/94 (ST) in respect of these services and as the department dealing with the telephones, the appellant should have known better than anybody else what local calls are. They should also have known that they have enlarged the scope of the public telephones to make calls to mobiles and to the entire state of Andhra Pradesh - the revenue has not established the case to invoke extended period of limitation - extended period cannot be invoked. Penalties - HELD THAT:- The appellant were extremely careless in not paying service tax on the disputed services but we are unable to accept that there is a positive effort to suppress the facts or an intention to evade payment of service tax - the penalty under Section 78 imposed upon the appellant is also not sustainable - however, Penalties under Section 76 & 77 are upheld and need to be recomputed as necessary. The demands are upheld on merits for the normal period of limitation along with interest - the penalties under Section 76 & 77 are upheld and may be recomputed as necessary - appeals are remanded to the original authority for the limited purpose of computation.
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