Inter-connectivity charges and service tax: Board circular supported prima facie exemption, justifying stay and waiver of pre-deposit.

Inter-connectivity charges received by one internet service provider from another were treated as prima facie outside service tax where the Board's circular stated that such interconnection payments are not taxable and that tax applies only to amounts charged from the ultimate customer for online information and database access or retrieval service. The Tribunal held that the adjudicating authority could not ignore the circular at the interim stage and that the appellant had shown a prima facie case for relief. Waiver of pre-deposit and stay of recovery were therefore granted.

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Issues: Whether waiver of pre-deposit and stay of recovery was justified when the disputed service tax demand was prima facie covered by the Board's circular on inter-connectivity charges between internet service providers.

Analysis: The demand arose from amounts received for inter-connectivity services rendered by one internet service provider to another. The Board's circular clarified that interconnection charges paid by one ISP to another ISP are not liable to service tax, and that service tax is payable only on the amount charged from the ultimate customer receiving online information and database access or retrieval service. On that basis, the Tribunal found that the adjudicating authority could not disregard the circular and that the appellant had made out a prima facie case for interim relief.

Conclusion: Waiver of pre-deposit and stay of recovery were granted in favour of the appellant.

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