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2019 (8) TMI 324

..... bandwith - HELD THAT:- Such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act - no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable. Demand of service tax - rental charges charged by the appellant from its customers for the rent of its wireless routers/ radio - HELD THAT:- Admittedly, this activity qualify as deemed sale of goods as the said activity tantamount to ‘transfer of right to use these goods’. Admittedly, in the transaction, the goods in question were delivered by the appellant and the effective possession and control of the goods have been given. Thus, the said activity amounts to sale, on which admittedly appellant have paid VAT / sale - no service tax is payable by the appellant on the rental of wireless/ router or radio. Demand of service tax - rental/ lease charges (Interconnectivity Charges), charged by the appellant from other ISP for the rent/ lease of its optical fibre cables - HELD THAT:- It is a service provided by one Telegraph .....

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..... n lease to other Internet Service Providers (ISP). In such cases, the other ISP use the fibre cable of appellant to provide Internet Services to their customers. In this regard, the appellant charges certain rental/ lease charges from the ISPs. 6. The appellant has been purchasing domain names from ICANN accredited Registrars, such as Directi Internet Solutions P. Limited. These domain names are further sold to the appellant s customers, for which it charges a price. 7. The appellant is registered with the Service Tax Department and have been filing regular returns and depositing the admitted tax on self assessment basis. Pursuant to audit by the Revenue of the appellant s record, show cause notices were issued as follows: Description Category of service SCN dt. 8.2.2008 (period 1.1.2002-13.12.2007) SCN dt. 19.04.11 (period 1.1.2008-31.03.11) SCN dt. 24.12.2012 (period 1.4.2011-31.03.2012) Total Under LCS for foreign remittance made Leased Circuit Service/ Telecommunication service 11277193 23836092 0 35113285 Under LCS for wireless radio rental Leased Circuit Service (Section 65(105)(zd)/ Telecommunication service (Section 65 (109a) 581890 1316954 9854 1908698 Under LCS for lease .....

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..... through internet. It was held, that without these routers, a customer will not have access to the Appellant s network. Consequently, it was held that the leasing of wireless router/radio would be taxable under leased circuit/telecommunication services. (iii) That the leasing of optical fibre/duct to other ISPs, also tantamount to leased circuit/telecommunication services because these ducts provide link for availing telecommunication services. It has been held that these fibres act as a bridge, that provides connectivity between two points. (iv) That the domain names are tools to reach another person through a computer network. It is a dedicated link between two different locations to transmit data and includes all types of information processed on a computer network. Therefore, the same is liable be taxed under category of computer network services/online information & database access or retrieval services . (v) That the Best Judgment undertaken in terms of Section 72 of the Act, is just & proper. (vi) That extended period of limitation was held applicable as the bifurcation of the tax demand pertaining to the periods under SCN-I & SCN-II was unavailable to the Ld. Co .....

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..... 33) STR 641 (Tri-Mum) d. Infosys Ltd. vs. CST, 2014 TIOL 409 (Tri-Bang) 11. As regards demand on the rental charges charged by the appellant from its customers towards the rent of its wireless routers/ radio, under the category of leased circuit service/ telecommunication services the learned Counsel submits- 11.1 The Appellant has entered into an agreement with various Indian Customers wherein it provides wireless routers on rent. The routers remain under the possession and control of the customers during the period of the agreement, and in return, the Appellant charges monthly rentals. The Appellant discharges service Tax on the internet services, however no service tax is discharged on the monthly rentals. The impugned OIO has confirmed the demand of service tax on monthly rentals under the category of leased circuit services . 11.2 It is submitted that the demand is not sustainable for the following reasons: The transactions between the Appellant and its customers tantamount to transfer of right to use goods , which is construed as a deemed sale on which no service tax is leviable. In this regard, the Appellant places reliance on the case of Bharti Telemedia Limited vs. State o .....

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..... rvices or online information and database access or retrieval service ( OIDAR ). It is submitted that this demand is not sustainable for the following reasons: i. The first SCN issued to the Appellant on 08.02.2008 proposes the recovery of demand under computer network services , which is not a category of service provided under the provisions of Section 65 of the Act. Given this, the demand itself in not sustainable on the ground of vagueness; ii. By issuance of domain names, no online information or data has been accessed or retrieved by the customers. Sale of domain names does not involve any provision of information or data . Further, the impugned OIO also fails to examine as to how domain names are in the nature of information for the levy of service tax, under OIDAR services; and iii. Issuance of domain names is in the form of a transaction of sale of goods. This is because domain names have, as on date, achieved the sanctity on the same lines as trademarks , making them the property of the person who owns them (Tata Sons Limited vs. Manu Kosuri ILR (2001) I Delhi 236). Given this, no service tax can be levied on the sale of domain names. 13.1 Further, learned Counsel submits .....

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..... hat appellant is engaged in the business of providing internet services. Their clients have executed an agreement with them to avail internet bandwith through radio connectivity and have requested them to install radio at its site for connectivity. The agreement is for a period of three years subject to the condition that their client shall avail internet bandwith for a minimum period of one year. The client holds the equipment as bailee/ trusty of appellant, and is obliged at all times to protect the appellant for its absolute ownership right over the equipment. The client cannot transfer / sell or sublet the equipment. Equipment remains the exclusive property of appellant. On the cessation of services from appellant, client shall promptly return the equipment to appellant. Client is required to pay initial set up fee of ₹ 30,000/- for connection of 512 KVPS. Further, the client has to pay additional set up fee as may be specified by appellant, for upgrading the internet bandwith. In case of default by the client, appellant is entitled to stop the service of internet bandwith and also have the right to retain the possession of the equipment. Further, appellant have got the r .....

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..... So far the demand with respect to sale of domain name is concerned, a domain name is required to give an address to a website on the internet, as no data transaction can take place without having a website address. Providing of its domain name is also related to assess the computer network , as domain name is to be linked to internet address by writing computer code. Thus, domain name has integral connection or nexus with data transcribed and thus forms part of OIDAR service. 15.7 Learned Authorised Representative further urges that extended period of limitation have been rightly invoked in the facts and circumstances of the case. Alternatively, he states in any case demand for normal period may be upheld. 16. Having considered the rival contentions and after perusal of the record, we hold as follows: (i) So far the first issue of levy of service tax on the monthly rentals charged by the foreign internet service provider for procuring bandwith, under reverse charge mechanism, we hold that such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority u .....

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