Telegraphic service valuation through PCOs must follow amounts received from subscribers, not intermediary customer charges.

For telegraphic services provided through PCOs, taxable value is determined by the gross amount received by the service provider from the subscriber, not by the amount charged by the PCO operator to the customer. The valuation scheme under Section 67 treats the subscriber as the relevant reference point, and the 2001 amendment did not change that basis; it only expanded the understanding of telegraphic services. Amounts collected by the intermediary from end users therefore do not affect valuation of the provider's service to the subscriber, and valuation based on customer charges is unsustainable.

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Issues: Whether, for telegraphic service provided through PCOs, the taxable value is to be computed on the basis of the amount charged by the PCO operator from the customer or the amount received by the service provider from the subscriber.

Analysis: The levy under the Finance Act, 1994 is on telegraphic service provided to the subscriber, and the measure of tax under Section 67 is the gross amount received by the provider from the subscriber. The scheme of the Act does not recognise the PCO customer as the person relevant for valuation. The 2001 amendment did not alter this valuation structure, but only expanded the understanding of telegraphic services. Therefore, the amount collected by the PCO operator from the customer has no bearing on valuation of the service provided by the appellant to the subscriber.

Conclusion: The valuation could not be based on the customer charge collected by the PCO operator and had to be determined with reference to the amount received from the subscriber. The demand based on the customer charge was unsustainable and the assessee succeeded.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: For telegraphic services, taxable value must be determined strictly on the basis of the amount received by the provider from the subscriber, not on amounts collected by an intermediary from end users.

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