Custom, Excise & Service Tax Tribunal
) Aircel Cellular Ltd vs ) Commissioner Of Service Tax, Chennai on 5 April, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal Nos.ST/S/213/11 & ST/304/2011
ST/S/219/11 & ST/313/2011
[Arising out of Order-in-Original No.30/2010 dt. 28.12.2010 passed by the Commissioner of Central Excise, Chennai-III and Order-in-Appeal No.21/2011-ST dt 21.2.2011 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Coimbatore respectively]
For approval and signature :
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? :
3. Whether the Members wish to see the fair copy of the order ? :
4. Whether Order is to be circulated to the Departmental authorities ? :
1) Aircel Cellular Ltd.
2) Aircel Ltd. Appellant
Versus
1) Commissioner of Service Tax, Chennai
2) Commissioner of Central Excise (ST), Coimbatore Respondent
Appearance:
Shri K.S. Venkatagiri, Advocate For the Appellant
Shri P. Arul, Superintendent, (AR) For the Respondent
CORAM :
HonbleShri P.K. Das, Judicial Member
HonbleShri Mathew John, Technical Member
Date of Hearing :5.4.2013
Date of Decision :5.4.2013
FINAL ORDER No.____________________
Per Mathew John
1. Two appeals filed by two different parties are being considered in this proceeding. These appeals are arising from different orders of different authorities but involving common issues and therefore these appeals have been taken together for disposal. With the consent of both sides, the appeals itself are taken up for disposal after dispensing with requirement of pre-deposit for both the appeals.
Appeal No.ST/304/2011
2. This appeal is filed by Aircel Cellular Ltd. operating in Chennai. After hearing both sides in the matter, we find that there are four issues involved in this appeal which are briefly indicated in the following table :-
S.No. Issue Amount Demanded Period (1) Denial of Cenvat Credit of Service Tax paid to BSNL under Access Deficit Charges (ADC) 33,78,443/-
June07 to March08 (2) Demand of Service Tax on account of common recharge facility with M/s.Aircel Ltd., Coimbatore. 4,16,47,154/-
June07 to Dec08 (3) Demand of Service Tax under reverse charge on amounts paid to foreign telecom companies for international outbound roaming service 1,49,95,135/-
April08 to Dec08 (4) Reversal of Cenvat credit on removal used capital goods 56,875/-
April07 to March08 On the first issue, the counsel for appellant submits that the appellant is a mobile telecom operator licensed to operate in Chennai. They take the services of M/s.BSNL for connecting their customers to other persons who are located in areas serviced by the landlines of BSNL. BSNL bills charges along with service tax to the appellant for extending such facility to the appellant. The appellant pays such bills along with service tax to BSNL and take credit of service tax so paid and utilize it for paying their service tax liability on telecom services provided by them to their customers. The department is of the view that the services of BSNL is not an input service but is only a facility extended by BSNL and therefore appellant cannot take Cenvat credit of service tax paid on the bills raised by BSNL. The counsel submits that adjudicating authority has not given any reason for the proposition that it is not an input service within the meaning of Rule 2 (l) of Cenvat Credit Rules, 2004, but only made an observation that by no stretch of imagination the service of BSNL can be considered as an input service but it is only a facility provided by BSNL.
3. The counsel submits that without the services of BSNL, they cannot connect their customers to persons who are accessible only through the lines of BSNL and thus in this situation, BSNL was providing services to the appellant and the government has been collecting service tax on the charges collected by BSNL to appellant by classifying the services under the category of Telecommunication Services and therefore the argument that it is only a facility is not maintainable.
4. In respect of the second issue, the counsel for appellant explains that in Tamil Nadu, Chennai is one Telecom Circle and the rest of Chennai is another Telecom Circle as far as the mobile services are concerned. There have been occasions, when the appellant sold SIM cards and recharge coupons of Aircel Ltd., Coimbatore. On such sales, the service tax is paid on the cards and re-charge coupons by Aircel Ltd. Before release through the appellant or its dealers. He contests that in respect of these amounts the service is provided by Air Cell Ltd and service tax also is paid by them and there cannot be any additional liability.He fairly submits that there is reciprocal arrangement for SIM cards and recharge coupons of appellants sold by Air Cell Ltd. and the amounts to be paid by one company to another is netted against reverse payments due. But this factor is not going to result in any short payment of tax. Therefore, demanding service tax once again would amount to duplication. He submits that identical demand for the subsequent period has been dropped by the Commissioner of ServiceTax, Chennai vide OIO dated 20.11.2011 which has not been appealed against by Revenue.
5. In respect of the third issue, the counsel submits that following :-
a. Foreign Telecom Operator is not licensed under Indian Telegraph Act, 1885. Hence he is not a telegraph authority and is not covered under the definition of Telecommunication service under Finance Act, 1994 during the relevant period. b. In any case, service tax is paid when the Indian subscriber is charged for the International outbound roaming facility availed by him. c. Identical demand for the subsequent period has been dropped by Commissioner of Service Tax, Chennai vide OIO dt. 30.11.2011. This order is accepted by Revenue and no appeal is filed against dropping of demand.
6. In respect of the fourth issue, the counsel admitted the demand and he has submitted that the amount has been paid and appropriated in the impugned order itself.
7. Further, the counsel submits that in the case of 2nd& 3rd issue, the matter has been adjudicated by Commissioner of Service Tax, Chennai by Order-in-Original No.68/2011 dt. 30.11.2011 for the subsequent period and demands in respect of these two issues have been dropped by the Commissioner. He submits that this order has been approved by the reviewing authority which decision has been confirmed by the Ld. AR for Revenue also. Therefore, the counsel for appellant relies on the decision of the Supreme Court in the case of Jayaswals Neco Ltd. Vs CCE Nagpur - 2006 (195) ELT 142 (SC) and requests that the matter may be decided following the principles adopted by the adjudication order issued by the Service Tax Commissionerate vide order dt. 30.11.2011.
8. Ld. AR for Revenue reiterates the findings of the adjudicating authority and argues that services provided by BSNL cannot be an input service to the appellant. In respect of the 2nd& 3rd issues, he has no objection if the matter is remanded to the Service Tax Commissionerate, Chennai who is the respondent and the jurisdictional Commissionerate, though the impugned order was passed by another adjudicating authority under special assignment order. In the case of 4th issue, he submits that appellant has to pay appropriate interest and penalty also.
9. We have considered the arguments on both sides. We are not in agreement with the argument that BSNL is providing only a facility and not any service to the appellant. After classifying the facility provided by BSNL as Telecom services and collecting the service tax under such head, Revenue cannot turn around and argue that that this is not a service. Even otherwise, we are convinced that the service provided by BSNL to the appellant is a Telecom service as defined in section 65 (109a) of Finance Act, 1994. Since this service is required by the appellant for providing output services to appellants customers, it is obviously an input service as per definition at Rule 2 (l) of Cenvat Credit Rules, 2004. Therefore the appellant is entitled to take Cenvat credit on such services. Therefore, we allow this appeal of the appellant in respect of the first issue.
10. In respect of the 2nd and 3rd issues, we remand the matter to the respondent-Commissioner i.e. Commissioner of Service Tax, Chennai who has already examined similar matter to give a detailed finding whether the issue involved in this appeal is in any way different from the one already adjudicated by Order-in-Original No.68/2011 dt. 30.11.2011 and pass appropriate orders keeping in view the Apex Courts decision in the case of Jayaswals Neco Ltd. (supra).
11. As regards the 4thissue, the appellant has not contested the issue and we uphold the order-in-original in respect of this issue Thus the Appeal No.ST/304/2011 gets disposed of.
Appeal No.ST/313/2011
12. This appeal is filed by Aircel Ltd., Coimbatore who is operating as a mobile telecom service provider in the region of Tamil Nadu outside Chennai having tie up with Aircell Cellular Ltd. for interconnecting facility for connecting telephones located in Tamil Nadu and Chennai circle.
13. In this appeal, two issues are involved as under :-
Demand of Service Tax are under reverse charge on import of services. S.No. Issue Amount Demanded Period (A) International Outbound Roaming (Under Business Auxiliary Service) 32,16,694/-
July03 to March08 (B) Subscription paid to GSM Association, Ireland (Under Club Or Association Service) 2,47,104/-
May06 to March08 The counsel for the appellant submits that the issue at (A) is identical to the issue considered at Sl.No.(3) in Appeal ST/313/2011 discussed in the earlier in this order but relates to cases where the service is provided by Aircel Ltd and sale of cards and coupons is done by Aircel Cellular Ltd. He submits that the arguments already raised are applicable in respect of this issue also.
14. The counsel explains that the second issue relates to amounts paid by the appellant to GSM Association, Ireland as subscription. Revenue has raised a demand under reverser charge mechanism as provided under Section 66A of Finance Act, 1994 classifying the service as club or association service. He submits that under the new Section 96 (J) introduced by Finance Act,2011, no service tax shall be levied or collected in respect of membership fee collected by club or association formed for representing industry or commerce, during the period on and from the 16th day of June, 2005 to the 31st day of March, 2008. He submits that demand in question relates to this period and therefore is not sustainable. Admittedly, this provision was not before the lower authorities when they decided the matter. The question whether this section will apply to a demand under section 66 of Finance Act, 1994 needs to be examined by the adjudicating authority. The counsel prays that the entire matter maybe remanded to the adjudicating authority for decision considering the Order-in-Original No.68/2011 dt.30.11.2011 passed by the Commissioner of Service Tax, Chennai and accepted by the reviewing authority and having regard to the decision of Honble Apex Court in Jayaswals Neco Ltd. (supra) and also having regard to Section 96(J) of Finance Act, 1994. Having heard both sides, we find it proper to set aside the impugned order and remand the entire matter in this appeal to the adjudicating authority for de novo decision and decide both the issues in accordance with law. Stay petitions get disposed of.
(Operative part of the orderwas pronounced
in open court)
(MATHEW JOHN) (P.K.DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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