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Reach Network India Pvt. Ltd. Versus Commissioner of Service Tax, Mumbai-II

2016 (1) TMI 702 - CESTAT MUMBAI

Interconnection service - Online Information Access and/or Database Retrieval Service - From April 2004 to April 2006 - appellant submitted that the demand which has been raised is for interconnection service which is not taxable as per the Boards Circular dated 09/07/2001. - Held that:- the Board did not want to tax the amounts recovered by an ISP for interconnectivity services. Such a stated stand cannot be overlooked by the adjudicating authority who is functioning under the Board. Be that as .....

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n, Member (J) And C J Mathew, Member (T) For the Appellant : Shri Harish Bindumadhavan, Adv For the Respondent : Shri A K Goswami, Addl. Commissioner (AR) ORDER Per M V Ravindran This appeal is directed against Order-in-Original No: 27/ST-II/RS/2014 dated 26/03/2014 passed by the Commissioner of Service Tax - II, Mumbai 2. Relevant facts of the case are that, on perusal of the financial records of the appellant, the lower authorities, felt that the appellant had not discharged the service tax li .....

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ated 09/07/2001. The adjudicating authority did not agree with the contentions raised, confirmed the demands with interest and also imposed penalties. 3. The learned counsel would take us through the case records. It is his submission that the appellant is an internet service provider (ISP) to various customers. As and when the appellant provides services to his customers directly, they are discharging service tax liability and this issue is not in dispute. It is his submission that as an ISP, a .....

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atabase Retrieval Service. He would draw our attention to paragraph 4 and 6 of the said circular. He would submit that the Board itself had clarified that such tax liability on the interconnectivity services would not arise. He would submit that subsequently from 01/07/2012 internet telecommunication services were brought into service tax net and for the first time internet access services were specifically mentioned in the services which need to be taxed. It is his submission that in view of th .....

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he adjudicating authority. He would submit that the appellant has rendered Online Information Access and/or Database Retrieval Service and provides interconnectivity services to other small time ISPs. The customers who are availing the services provided by small time ISPs are not registered with the appellant. It is his submission that the service tax liability on such charges recovered by the appellant from small time ISPS are correctly covered and liable to be recovered under the category of O .....

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to the appellant. It is the submission that the appellant has conveniently ignored the basic character of a transaction i.e. interconnectivity charges between two ISPs are also rendering of services under the category of Online Information Access and/or Database Retrieval Service. 5. We have considered the submissions made at length by both the sides and perused the records. The facts in this case, during the relevant period i.e. April 2004 to April 2006, appellant was registered as internet se .....

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vice tax. 6. At the outset, we find that the learned Departmental Representative as well as the learned adjudicating authority are arguing against the departments stated stand that interconnectivity charges between two ISPs are not taxable under the category of Online Information Access and/or Database Retrieval Service. We find that the Central Board of Excise and Customs vide Circular No. B.11/1/2001-TRU dated 09/07/2001 when the services were introduced has clarified comprehensively as to the .....

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asis of usage of time (hours). They also provide dedicated lease lines on lump-sump payment basis. Clearly ISPs provide service in relation to on-line information and database access or retrieval. They are an integral part of the internet operations and without their service, the data or information can neither be accessed nor retrieved. They are, therefore, liable to pay service tax on the amount charged from the customers whether on usage time basis or on lease line basis. 5. As regards paid w .....

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g online information and data) are covered in the ambit of service tax. It is clarified that in e-commerce transactions, no service of online information and database access/retrieval is involved. Therefore, e-commerce transactions will not ordinarily be covered under the service tax net. Normally, the web sites do not charge the surfers for information on sale of goods or services offered by them. If at all they do, service tax will be payable on the amount charged for providing the information .....

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