Service tax on private telephone exchange operations required factual verification before liability could be determined and the matter was remanded.

Service tax liability on amounts received for operating a private telephone exchange depended on unresolved factual questions, including whether the appellant acted only as a sub-contractor or franchisee of DoT and whether tax had already been paid on the telephone services. The record also required verification of the departmental circular relied upon by the appellant before liability could be determined. The impugned order was set aside and the matter was remanded to the original adjudicating authority for fresh decision after examining the factual position and the circular's applicability.

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Issues: Whether service tax was payable on the amounts received by the appellant for operating the private telephone exchange, and whether the refund claim required reconsideration in light of the departmental circular and the fact that tax had already been paid on the telephone connections.

Analysis: The appellant was licensed to run a private telephone exchange under Section 4(2) of the Indian Telegraph Act. The lower authority proceeded on the footing that the appellant was liable to service tax on the entire amount received. The written submission raised a distinct factual plea that the appellant functioned only as a sub-contractor or franchisee of DoT and that service tax had already been discharged on the telephone services. The record showed that this aspect had not been examined, and the departmental circular relied upon by the appellant also required factual verification before the liability issue could be conclusively determined.

Conclusion: The impugned order was set aside and the matter was remanded to the original adjudicating authority for fresh decision after verifying the factual position, including the applicability of the circular and the earlier payment of service tax.

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