Custom, Excise & Service Tax Tribunal
M/S Rail Tel Corporation Of India Ltd vs Cce (Adj.) New Delhi on 24 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing/Order : 24.7.2015
Appeal No. ST/668/2009-CU(DB)
(Arising out Order-in-Original No. 21/PKJ/CCE/ADJ/2009 dated 25.5.2009 passed by the Commissioner, Central Excise (Adjn), New Delhi)
For Approval & Signature :
Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
M/s Rail Tel Corporation of India Ltd. Appellant
Vs.
CCE (Adj.) New Delhi Respondent
Appearance:
Shri N.K. Gupta, Advocate - for the Appellant
Shri Harsh Bhargava, C.A.
Shri Rajeev Tandan, D.R. - for the Respondent
Coram : Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
F. Order No. 52578/2015
Per R.K. Singh :
Appeal is filed against order-in-original dated 25.5.2009 in terms of which service tax demand of Rs.1,76,10,648/- for the period 2003-2004 to 2005-2006 was confirmed along with interest. Penalty under Section 78 of the Finance Act, 1994 was also imposed. The said demand has been confirmed under two services :
(i) Leased circuit service Section 65(60)/(105)(zd) of the Finance Act, 1994 Rs.1,01,82,467/-.
(ii) Business Auxiliary service 65(19) /(105)(zzb) ibid Rs.74,27,181/-.
The adjudicating authority has held that the appellant had leased dark fibre cables but did not pay service tax under the leased circuit service. Similarly, it leased towers space on its microwave towers for installation of equipment of various cellular telephone operators which was held to be covered under Business Auxiliary Service on which no service tax was paid. The Commissioner also held that the appellant was guilty of suppression of facts inasmuch as it never disclosed rendition of the services while there was no ambiguity with regard to the taxability thereof, although it was registered under leased circuit service category which clearly showed that it was aware about the said taxable service and was not unaware of the law relating thereto.
2. The appellant has contended that:
(i) It was not leasing any circuit as telegraph authority.
(ii) The circuit was not leased to any subscriber but was given to other telegraph operators and therefore it was not covered under the scope of Section 65(105)(zd) ibid.
(iii) What was leased was dark fibre or unlit fibre which is an unused optical fibre. It explained that dark fibre exists because most of the cost of installing cables is in the civil engineering work and therefore additional support fibres which may not be immediately required are put to cater to future requirements.
(iv) It was given a licence to lease dark fibres not as a telegraph authority, although it conceded that it had been granted a licence under Section 4(1) of the Indian Telegraph Act, 1985.
(v) It was just optical fibres without any apparatus on its either side which was leased and therefore it could not be called leased circuit.
(vi) As regards the service tax demanded under Business Auxiliary Service, it is stated that it was leasing tower space to other telecom service providers and this service was not covered under Business Auxiliary Service.
(vii) With effect from 1.6.2007 they are paying service tax on tower lease charges under telecommunication service.
(viii) There was no wilful mis-statement or suppression of facts on its part.
3. The ld. DR on the other hand stated that the services are covered under the respective (two) taxable services and the extended period is invokable because in spite of there being no ambiguity and the appellant being duly registered under leased circuit service, it did not pay service tax on dark fibre and did not timely provide the data in spite of repeated reminders.
4. We have considered the contentions of both sides. As regards the leasing of space on microwave towers is concerned, the adjudicating authority has confirmed the demand by observing as under :
M/s Rail Tel were also providing space in their Microwave Towers for installation of the equipments of various Cellular Telephone Operators, M/s Rail Tel are realizing their service charge for lease of tower space from their clients. They are helping in promotion or marketing of service provided by their clients, i.e. the Cellular Telephone Operators, M/s Rail Tel are providing maintenance for the tower and when the tower space is leased out, it include the part of the maintenance cost. This could not be held as renting of commercial property. Thus, leasing of tower space is supplementing and promoting the service provided by the Cellular Telephone Operators. It is also admitted that after 1.6.2007, M/s Rail Tel are discharging service tax on this service under Telecommunication service and not under renting of immovable property. However, leasing of tower space also promote the service provided by the Cellular Telephone Operators. Thus, prior to its coverage under the more specific category Telecommunication service w.e.f 1.6.2007, this service would appropriately be classified under Business Auxiliary Service. Thus, it is clear that M/s Rail Tel were providing service of providing tower space to Cellular Telephone Operators which was taxable under the category Business Auxiliary Service prior to 1.6.2007. It is evident from finding of the adjudication authority that it does not dispute that the Service tax with effect from 1.6.2007 on the amount received for leasing of tower space is being remitted by the appellant under tele communication service. It, however, has stated that prior to 1.6.2007 service would be classifiable under Business Auxiliary Service (BAS). The definition of BAS given in Section 65(19) of the Finance Act, 1994 is reproduced below :
Business Auxiliary Service means any service in relation to,
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) promotion or marketing of service provided by the client; or
(iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or (Explanation: for the removal of doubts, it is hereby declared that for the purposes of this sub-clause inputs means all goods or services intended for use by the client;)
(v) production or processing of goods for, or on behalf of the client; or
(vi) provision of service on behalf of the client; or
(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods. We find that leasing of tower space does not fit under any limb of the definition of Business Auxiliary Service quoted above. The adjudicating authoritys observation that lease of tower space also promotes the service provided by the cellular telephone operator is not based on any sound logic or rationale. Further there is nothing in the Finance Act, 1994 to even suggest that there was a transplant of any part of BAS into telecom service with effect from 1.6.2007 which by implication means that the service was not taxable under Business Auxiliary Service prior to 1.6.2007. Thus we are of the view that the demand of Rs.74,27,181/- confirmed under Business Auxiliary Service on the amount received for lease of tower space on its microwave towers to various cellular operators is not sustainable.
5. Coming to the leased circuit service, it is admitted that the appellant had leased dark fibre cables. The leased circuit is defined under Section 65(60) of the Finance Act, 1994 is as under :-
Leased Circuit means a dedicated link provided between two fixed locations for exclusive use of the subscriber and includes a speech circuit, a data circuit or a telegraph circuit. Subscriber is defined under Section 65(104) ibid is as under :
Subscriber means a person to whom any service of a telephone connection or a facsimile (FAX) or a leased circuit or a pager or a telegraph or a telex has been provided by the telegraph authority. Thus, it is evident that any person to whom the service of leased circuit is rendered gets covered under the scope of definition of subscriber provided such service is rendered by telegraphic authority. Telegraph authority has been defined in Section 65(111) is as under:
Telegraph authority has the meaning assigned to it in clause (6) of section 3 of the Indian Telegraph Act, 1885 and includes a person who has been granted a licence under the first proviso to sub-section (1) of section 4 of that Act. The appellant has conceded that it has been granted a licence under Section 4(1) of Indian Telegraph Act, 1885). So it is clearly a telegraph authority as defined under Section 65(111) of Finance Act, 1994. It thus becomes clear that the dedicated dark fibre cable link was provided to a subscriber by a telegraph authority and therefore all the requirements of Section 65(105))(zd) (according to which the taxable service is to subscriber by a telegraph in relation to a leased circuit) are clearly satisfied inasmuch as leased circuits were provided by the appellant, whose is a telegraph authority, to a subscriber. Thus the demand pertaining to leased circuit service is clearly sustainable on merit.
6. We find that the appellant had registered itself under leased circuit service and as has been analysed above the impugned service rendered clearly and unambiguously fell under the scope of leased circuit service. Thus for the appellant who operates in this field and was even registered for leased circuit service, and therefore was not unaware thereof. Bonafide belief is not some sort of hallucinatory belief. It is a genuine belief of a reasonable person operating in an appropriate environment. Thus for such as assessee as the appellant, it could not have been a bona fide belief on its part that the service rendered did not fall under leased circuit service because there was no scope of any confusion or ambiguity in that regard. Further, the appellant did not timely provide the information sought and had to be issued repeated reminders. Therefore we are of the view that the appellant is guilty of suppression of fact and therefore the extended period has rightly been invoked and mandatory penalty is clearly imposable.
7. In the light of the above analysis, we partly allow the appeal only to the extent that the demand of Rs.74,27,181/- confirmed under Business Auxiliary Service in relation to leasing of space on its microwave towers and the mandatory equal penalty relating thereto is set aside. The demand of Rs.1,01,82,467/- along with interest and equal mandatory penalty (Rs. 1,01,82,467/-) are upheld.
(Justice G. Raghuram) President (R.K. Singh) Member (Technical) RM 1