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2016 (1) TMI 823 - CESTAT MUMBAI

2016 (1) TMI 823 - CESTAT MUMBAI - 2016 (42) S.T.R. 1048 (Tri. - Mumbai) - Taxability of SMS termination service rendered by the appellant to other telecom operators - whether under the Point of Taxation Rules, 2011 service tax is payable on the SMS termination service rendered by the appellant to other telecom operators with whom neither a contract for service has been signed nor any consideration has been received. - SMS termination charges are payable by the originating telecom operators to t .....

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the appellant for payment of termination charges nor they paid any such charges for the termination services received from the appellants. - Held that:- From the explanation to the Rule 6 of POT Rules, it is clear that in the present case the same does not apply. This is because the provision of service is not determined periodically in terms of any contract, which requires service receivers to make any payment. As there is no such contract requiring service receiver to make any payment, th .....

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issued. Where invoices were not issued within fourteen days of the completion of the service, the point of taxation was to be the date of such completion. - It is apparent that the point of taxation will be when the invoice for the service provided is issued. - Date of Invoice versus date of demand letters issued by the appellants - Held that:- The demand letters complied with the substantive provisions of Rule 4A and therefore, may be considered as invoices. Formal invoices were not i .....

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or taxable value in the service tax returns filed with the department. Failure to fulfill this legal obligation cast on the service provider, is a case of suppression of facts especially when the appellant had raised demand letters on the service receivers quantifying the charges payable for the services rendered by the appellant. - Demand of service tax confirmed invoking extended period of limitation - Decided against the assessee. - Appeal No. ST/85566/2015 - Final Order No. A/85001/201 .....

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operators. The present case relates to one particular service viz., SMS termination service rendered by the appellant to other telecom operators. For this services the appellant charges SMS termination charges which is a charge payable by the originating telecom operators (whose subscriber sends an SMS) to the terminating telecom operators (in whose network the SMS is delivered or terminated). Thus, the SMS termination charges are payable by the originating telecom operators to the terminating t .....

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ppellant for payment of termination charges nor they paid any such charges for the termination services received from the appellants. i) Aircel Cellular Ltd. (Aircel Cellular) ii) Tata Teleservices Ltd., iii) Reliance Communicaitons Ltd. and Reliance Telecom Ltd., iv) Loop Mobile (India) Ltd., (Loop Mobile) v) Sistema Shyam Teleservices Ltd., (SSTL) vi) Mahanagar Telephone Nigam Ltd., (MTNL) Proceeding against the appellants were initiated for not paying service tax on the SMS termination servic .....

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ty for payment of service tax did not arise under Rule 9 of the Point of Taxation Rules, 2011 as they stood during the relevant time. 3. Heard both the sides. 4. The case of the appellant is that TRAI regulations allowed SMS termination charges to be under "forbearance" meaning thereby that TRAI had not notified any interconnection charges and the service provider was free to fix any charge. Appellant had informed the telecom operators to enter into an agreement with them and specified .....

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ication No. 38/2012-ST dated 20/06/2012 in terms of Rule 2 (c) of the Point of Taxation Rules, 2011 (hereinafter referred as POT Rules). Further, in terms of proviso to Rule 3 (b) in case of continuous supply in service, the point of Taxation arises on completion of each such event specified in the contract which requires receiver of service to make the payment to the service providers. In their case, the event has not arise because neither there is a contract nor payment of consideration has ar .....

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h specifically introduces the concept of Annual Tax Point applicable to continuous supply service. In Indian law, he states no such tax point has been introduced. On valuation of the service, he submits that the Commissioner has wrongly applied the provisions of Section 67 (iii) of the Act and Rule 3 of the Valuation Rules. He further contends that the demand letters issued by the appellant cannot be considered as invoice and referred to CBEC Circular No. 166/1/2013 dated 01/01/2013 in this rega .....

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the service in question is notified, the point of taxation is governed by Rule 6 (as it stood during the relevant period). Rule 6 provides the point of taxation to be the time when the invoice is issued or if the invoice is not issued within fourteen days of the completion of the service, the point of taxation shall be the date of such completion. She argues that the demand letters clearly indicated that the appellant was charging for the services provided and all the particulars required in an .....

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od July 2011 to September 2012. The issue in this case is whether under the Point of Taxation Rules, 2011 service tax is payable on the SMS termination service rendered by the appellant to other telecom operators with whom neither a contract for service has been signed nor any consideration has been received. Under Section 66 of the Finance Act, service tax is leviable on various services. Under Section 66 (B) which was brought into force with effect from 01/06/2012, service tax is levied on all .....

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is provided or to be provided continuously under a contract for a period exceeding three months, or where the Central Government, by a notification in the Official Gazette prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition." Thereafter with effect from 01/04/2012 the definition was amended to read as: "(c) "continuous supply of service" means any service which is provided or agreed to be provided continuo .....

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where the Central Government by a notification prescribes a particular service to be a "continuous supply of service". The telecommunication service has been notified as "continuous supply of service" under Notification No. 38/2012-ST dated 20/06/2012. We may now ascertain the Point of Taxation in the present case. Prior to 01/04/2012 the point of taxation was determined under Rule 6. For convenience, the Rule is re-produced below: "6. Determination of point of taxation .....

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before the time specified in clause (a) the time when he receives such payment to the extent of such payment. Explanation 1: For the purpose of this rule, where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision o .....

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the determining point is date of issue of invoice. The fact remains that service was provided under a contract; the absence of consideration clause in the contracts does not come in the way of determining the point of taxation under Rule 6 (a). Undoubtedly therefore, in the present case the service is provided when the invoice is issued. Where invoices were not issued within fourteen days of the completion of the service, the point of taxation was to be the date of such completion. With effect .....

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hat the point of taxation will be when the invoice for the service provided is issued. 7.1 This leads as to the next point of contention between the two sides. The contention of the AR is that the demand letters issued by the appellant should be treated as invoice. The AR relies on the judgments in the case of Banmore Cables & Conductor vs. CCE, Indore - 2012 (278) ELT 503, CCE vs. Jalaram Plastic Pack - 2014 (34) STR 66 to support her case and states that when assessees want to avail Cenvat .....

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the appellant to various telecom operators, we find that they contained all the details required in an invoice. The demand letters give the name and address of the service provider as well as the service receivers. The description and value of service provided is also mentioned by the appellant in the demand letter. As regards the service tax payable, we are of the view that once the value is known as well as the rate of tax, the actual amount of service tax payable becomes quite obvious. The d .....

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No.144 (supra), where invoices cannot be issued within fourteen days (30 days from 1/4/2012) of the service as required under Service Tax Rules because certain auxiliary activities are to be completed, the period of fourteen days is to be taken from the date of completion of auxiliary activities to enable the service provider to be in a position to issue invoices. He also referred to Board Circular No. 166/1/2013-ST dated 01/01/2013 which clarifies that demand letters for insurance policies, not .....

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We do not agree with the reliance placed on the other circular because that relates to letters issued for soliciting furtherance of insurance policy, etc. Whereas the present case is entirely different. In the present case, the service is well defined and has already been provided. 7.3 The learned Advocate contended that the demand under Section 73 (1) invoking extended time period is not valid because, in their letter addressed to DGCEI on 22/12/2010, it was intimated that under the Telecom Re .....

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rtain operators agreed to sign the Agreements and paid the charges. In the present case the operators neither signed the Agreement nor paid the charges. Therefore, the appellant issued demand letters. It is clearly been brought out in para 23 of the impugned order that the appellant never declared the provision of service rendered or taxable value in the service tax returns filed with the department. Failure to fulfill this legal obligation cast on the service provider, is a case of suppression .....

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nvoices. But in terms of Rule 57 CC(4) (a), duty was required to be paid at 25%. In this context it was held that there was no deliberate act with intent to evade duty because the fact of paying duty in terms of Rule 57CC (1) was declared by the assessee. The facts in the present case are entirely different. Here the appellant, being a registered service provider, failed to declare the service rendered in the ST returns. Department cannot be expected to know that this service was provided, in th .....

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wrong provision of law i.e. Section 67 (1) (iii) read with Rule 3 of the Valuation Rules, Section 67 (1) and Rule 3 are reproduced below: "67. Valuation of taxable services for charging service tax: (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall- (i) in case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such serv .....

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e consideration received is not wholly or partly consisting of money, shall be determined by the service provider in the following manner:- (a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration; (b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the eq .....

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