Leased circuit service classification: V-SAT connectivity charges were prima facie outside the tax net, with recovery stayed.

V-SAT connectivity charges recovered from sub-brokers and customers were held, at the stay stage, to be prima facie outside the scope of leased circuit service under section 65(105)(zd) read with section 65(111) of the Finance Act, 1994 because the appellant was neither a telegraph authority nor a person licensed under section 4(1) of the Indian Telegraph Act, 1885. On that basis, the tribunal waived pre-deposit of service tax, interest and penalty and stayed recovery pending appeal.

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Issues: Whether V-SAT connectivity charges recovered from sub-brokers and customers could be treated, at the stay stage, as consideration for leased circuit services liable to service tax.

Analysis: The definition of leased circuit service under Section 65(105)(zd) read with Section 65(111) of the Finance Act, 1994 applies to service provided by a telegraph authority or a person licensed under Section 4(1) of the Indian Telegraph Act, 1885. The appellant was neither a telegraph authority nor a licensed person under the Telegraph Act. On that basis, the charges collected towards V-SAT connectivity were, prima facie, not chargeable as leased circuit service.

Conclusion: The requirement of pre-deposit of service tax, interest and penalty was waived and recovery was stayed during the pendency of the appeal.

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