Custom, Excise & Service Tax Tribunal
M/S Power Grid Corporation Of India Ltd vs Cst, New Delhi on 24 February, 2011
+IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. COURT NO. III Date of Hearing : 24.2.2011 Service Tax Appeal No. 660 of 2007 [Arising out of the Order-in-Original No. 23/VKG/CST/07 dated 7.8.2007 passed by the Commissioner, Service Tax, New Delhi] Coram: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Mathew John, 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 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 Power Grid Corporation of India Ltd. Appellant Vs. CST, New Delhi Respondent
Appearance:
Appeared for Appellant : Shri B.L. Narasimhan, Advocate
Appeared for Respondent : Shri B.L. Soni, DR
CORAM: Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
The appellant is engaged in transmission of power through inter-state transmission infrastructure primarily intended for transmission of power. The Appellant has also established Broad Band Telecommunication Network on the infrastructure for transmission of power. The Appellant is a holder of Infrastructure Provider Category-II license under first proviso to Section 4 of the Indian Telegraph Act, 1885. The Appellants leased out bandwidth available on this network for transmission of telecommunication signal to various customers including M/s Bharati Infotel Ltd., M/s Convergys, M/s Data Access India Ltd. and Daksh e Services Pvt. Ltd. The case of the Revenue is that this service of leasing of telecommunication network provided by the Appellants is taxable service in terms of clause (zd) of sub-section (105) of Section 65 of Chapter V of the Finance Act, 1994. Under this provision of the said Act the taxable service is any,-
service provided to a subscriber by the telegraph authority in relation to leased circuit.
2. Further the Act defines subscriber as follows:
(104) subscriber means a person to whom any service of a telephone connection or a facsimile (FAX) or leased circuit or a pager or a telegraph or a telex has been provided by the telegraph authority.
3. The Appellant contests that the Appellant is registered under Section 4 of the Indian Telegraph Act, 1885 as telegraph authority and M/s Bharti Infotel Ltd., and M/s Data Access India Ltd., are also registered as telegraph authority under the Indian Telegraph Act, 1885. Therefore, service provided by one telegraph authority to another telegraph authority is not liable to service tax as service is not provided to a subscriber. The Appellant relies upon the decision of the Tribunal in the case of Fascel Ltd. Vs. CST, Ahmedabad reported in 2007 (7) STR 29 (Tri.-Ahmd.) wherein the Tribunal after relying upon the decision of the Karnataka High Court in the case of PCO Vs. Telecom Authority held that no telegraph authority can be treated as subscriber of another telegraph authority in relation to the link established between one telegraph authority and another telegraph authority.
4. The Appellant also points out that the CBEC issued Circular No. 91/2/2007-ST dated 12.3.2007 wherein it has been clarified that inter-connection service provided by one telegraph authority to another telegraph authority was not taxable service. It is pointed out that w.e.f. 1.6.2007 new definition of telecommunication service was inserted by Finance Act, 2008. Under this definition service provided by means of any transmission, emission or reception of signs, signals, writing, images and sounds or intelligence or information of any nature, by wire, radio, optical, visual or other electro-magnetic means or systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception by a person who has been granted a license under the first proviso to sub-section (1) of Section 4 of the Indian Telegraph Act, 1885 has been brought to levy of tax. Contention is that only w.e.f. 1.6.2007 service provided by the Appellants comes under the scope of Service tax.
5. In main defense of the Appellant is that the facility of telecommunication network provided by them to different users on a band-with sharing basis does not come within the meaning of leased circuit as defined in section 65(60) of the Finance Act, 1994. The said definition is as under:
(60) leased circuit means a dedicated link provided between two fixed locations for exclusive use of the subscriber and includes a speech circuit, data circuit or a telegraph circuit
6. The reasons canvassed are the following:
(i) The link provided by them is not a dedicated link because the same cable was used by different clients by sharing the bandwidth. Thus the link is not dedicated to any user as envisaged in the definition.
(ii) The Appellant is not providing a link between two fixed locations in as much as the services are terminated at different places as desired by their customers and not at the beginning and end of a leased line.
(iii) The service provided is not for the exclusive use of any one subscriber.
7. The Appellant further submits that the demand is time barred in as much as there was no suppression of facts in the matter and the dispute involves interpretation of legal provisions and hence extended period cannot be invoked. They claim that they were under the bonafide belief that their telecommunication network is not covered by the definition for leased circuit and hence they had no intention to evade payment of duty. So long as there was no such intention they argue that the extended period of five years cannot be invoked.
8. They further submit that even if they are liable to tax, the tax calculation made in the order-in-original is incorrect in as much as the remuneration received by them is cum-tax and the tax liability is not worked out following the principle laid down by the Tribunal in the case of Sri Chakra Tyres reported in 1999 (108) ELT 361 and affirmed by the Apex Court in CCE vs. Maruti Udyog Ltd in 2002 (4) RLT 1 SC
9. The Ld. DR on the other hand submits that the definition for leased circuit that was in force during the relevant period as reproduced in para 5 above covers the service provided by the Appellant. He relies mainly on para 34 of the adjudication order. To explain the argument there is a need to reproduce the definition of leased circuit which is as below.
leased circuit means a dedicated link provided between two fixed locations for exclusive use of the subscriber and includes a speech circuit, data circuit or a telegraph circuit
10. The entire case of the Revenue is built on the argument that the above definition for leased circuit has two parts as separated by high lighting in the definition reproduced above. The first part (in ordinary print) is hereinafter called means- part and the second part (in bold print) is hereinafter called the includes-part. It is argued that while considering the includes-part all the contents of means-part should be just ignored. Thereafter it is argued that what the Appellant provides is a data circuit specified in includes-part and therefore whether or not the circuit was dedicated, or link provided between two fixed locations or for exclusive use , it will still fall under the definition of leased circuit. To come to this conclusion the Revenue relies on the decision of the Apex Court in the case of Black Diamond Beverages and Another Vs. Commercial Tax Officer- 1988 (1) SCC 458. In this case the ruling was that the includes-part cannot restrict the meaning of the means-part and not the other way round. The adjudicating authority has extended this logic to argue that the means-part cannot control the meaning of includes-part. No such ruling by any Court is quoted. The adjudicating authority has conceived a definition for motor cycle as per his imagination to argue out his point. The definition conceived is as under:
motor cycle means a road vehicle with two wheels driven by an engine, with one seat for the driver and space for a passenger behind him and includes a bicycle with a motor wheel attachment
11. We respectfully disagree with this argument. First of all the definition of motor cycle conceived by him is not from any statute book or not even from any eminent legal authority. If there is a legal intent to cover bicycle with a motor wheel attachment it will be covered as a separate part in the definition and not by an includes-part in the definition of motor cycle as conceived above.
12. In any definition the means-part gives the meaning of the entry. But there can be some grey area where there can be doubt whether the means-part will cover a particular item. To throw light on such a grey area an includes-part is used. What is included has to broadly satisfy the requirements of means-part. Something not fitting into any of the parameters of the means-part is not normally included in the includes-part. Since no actual example of such legislation or such an interpretation by any authority is produced we disagree with this interpretation canvassed at least in the matter of the definition of leased circuit under discussion. Once this issue is ruled against the Revenue the entire demand fails. Still it is worthwhile to examine the other issues also.
13. We also follow the decision of the Tribunal in the case of Fascel Limited vs. Commissioner of Service Tax Ahenedabad-2007-TIOL-208-CESTAT-AHM and the decision in Reliance Telecom Ltd. Vs. CST Ahmedabad -2007-TIOL-414-CESTAT-AHM to the effect that a telegraph authority receiving interconnecting service cannot be considered as a subscriber. Once this position is adopted even without the ruling at para 12 above, the demand will fail except for about Rs. 7 lakhs in respect of service provided to M/s Convergys and M/s Daksh e Services who were not registered as telegraph authority as noted in the order granting stay against the impugned order.
14. In the matter of time-bar also we are in agreement with the Appellant. Since the demand is raised by using a labored interpretation, the obvious conclusion is that non-payment of tax (if due) was due to an issue of interpretation beyond the grasp of an ordinary tax-payer and not resulting from suppression or misstatement or any act with intent to evade duty. So the Appellant succeeds on this count also.
15. Accordingly the Appeal is allowed with consequential benefit.
(Pronounced in open Court) (Ashok Jindal) Member (Judicial) (Mathew John) (Member (Technical) RM