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2023 (3) TMI 332 - AT - Service TaxClassification of services - services availed by the Appellant from Verizon Inc (located outside India) - classifiable as Internet Telecommunication Service or are classifiable as Leased Circuit Service (upto 31 May 2007) and there after Telecommunication Service having been provided by an entity not qualifying to be a Telegraph Authority - Cenvat credit of alleged service tax liability - extended period of limitation - penalty - revenue neutrality - HELD THAT - The issue herein is squarely covered by the precedent ruling of this Tribunal co-ordinate bench in TCS E-SERVE LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI 2014 (6) TMI 655 - CESTAT MUMBAI . In the facts of the said case TCS E-Serve was engaged in providing call centre services collection and sales services and computerised data processing services to various customers in India and abroad were registered with the department of service tax under the category of BAS BSS - This Tribunal held that service tax liability does not arise under Section 66A of the Finance Act if service is not specified under Section 65(105) of the Finance Act. Applying the ratio the Tribunal held that it is not enough that the service provider provides lease services but it should also be a Telegraph Authority as defined in the Act. Unless both the conditions are cumulative satisfied service tax levy is not attracted. Appeal allowed - the question of limitation left open.
Issues:
1. Classification of services availed from Verizon Inc for service tax liability. 2. Entitlement to Cenvat credit and refund, sustainability of demand for extended period, and imposable penalties for revenue neutrality. Classification of services for service tax liability: The appeal addressed the issue of whether services obtained from Verizon Inc outside India are subject to service tax as 'Internet Telecommunication Service' or classified as 'Leased Circuit Service' until May 31, 2007, and thereafter as 'Telecommunication Service'. The Appellant argued that as Verizon Inc did not qualify as a Telegraph Authority under the Indian Telegraph Act, 1885, the services were not liable to service tax. Despite the Appellant's contentions, the Adjudicating Authority upheld the service tax demand, leading to the appeal. Entitlement to Cenvat credit and refund, sustainability of demand for extended period, and imposable penalties for revenue neutrality: The Appellant contended that if service tax applied to services from Verizon Inc, they were eligible for Cenvat credit and refund due to using the services for taxable output services. Being a 100% Export Oriented Software Technology Park Unit, the Appellant argued for revenue neutrality, opposing the invocation of the extended period and penalties. The Appellant cited relevant case laws to support their stance and emphasized that there was no suppression or willful misstatement to warrant penalties. The Appellant also sought the waiver of penalties under Section 80 of the Finance Act, 1994. The Tribunal referred to the precedent ruling in TCS E-Serve Ltd vs. Commissioner of Service Tax, Mumbai 2014(33) STR 641(Tri-Mumbai) to analyze the case. The Tribunal highlighted that service tax liability did not arise if the service did not fall under Section 65(105) of the Finance Act. Citing a ruling of the Hon'ble Andhra Pradesh High Court, the Tribunal emphasized that the service provider must be a 'Telegraph Authority' as defined in the Act for service tax levy to apply. Applying this reasoning, the Tribunal concluded that the services from Verizon Inc did not attract service tax liability as the provider did not meet the necessary criteria. Consequently, the appeal was allowed, and the impugned order was set aside on merits, leaving the question of limitation open. In conclusion, the Tribunal's judgment clarified the classification of services for service tax liability and addressed the entitlement to Cenvat credit, refund, and penalties for revenue neutrality, ultimately ruling in favor of the Appellant based on the non-fulfillment of criteria for service tax levy by the service provider.
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