2007 (3) TMI 246 - AT - Service Tax

CESTAT rules inter-connection usage charges not taxable as leased circuit service

The Appellate Tribunal CESTAT AHMEDABAD ruled in favor of the appellant, determining that inter-connection usage charges should not be taxed as 'leased ... Taxability of inter-connection usage charges collected by one telecom authority from other telecom authorities - service provided by the appellant is sought to be taxed as “leased circuit” service – CBEC Circular No. 91/2/ 2007-S.T. dated 12-3-2007 clarified that the inter-connection usage charges will be chargeable to duty from the date of the Finance Bill of 2007 becomes an Act and for the earlier period such charges will not be subject to service tax – hence demand is set aside Issues: Taxability of inter-connection usage charges as 'leased circuit' service under Section 65(50) of the Finance Act, 1994.In the Appellate Tribunal CESTAT AHMEDABAD case, the appellant argued that the inter-connection usage charges collected by one telecom authority from others should not be taxed as 'leased circuit' service. They relied on a previous decision in Fascel Limited v. Commissioner of Service Tax, Ahmedabad, where it was held that such charges cannot be considered as part of a dedicated link service. The appellant also referred to CBEC Circular No. 91/2/2007-S.T. to support their argument. The circular clarified that service tax on inter-connection usage charges would be applicable only after the Finance Bill of 2007 becomes an Act. The learned SDR agreed that the case aligns with the Fascel Limited decision and the Board's clarification. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The decision was made after considering the arguments and relevant legal provisions, ensuring that the taxation issue was thoroughly analyzed and resolved in favor of the appellant based on the existing legal framework and precedents.