2007 (12) TMI 22 - AT - Service Tax

Tribunal overturns order due to Circular enforcement, lack of legality, Revenue non-contest, and legal precedents.

The Tribunal allowed the appeal, citing the enforcement of a Board's Circular, the lack of legality in the impugned order, and the absence of contest from ... Taxability of interconnectivity/usage charges - Board's Circular No. 91/2/2007-S.T. - penalty not leviable for statutory government bodyTaxability of interconnectivity/usage charges - Board's Circular No. 91/2/2007-S.T. - The service tax demand in respect of interconnectivity/usage charges is not sustainable. - HELD THAT: - The Commissioner has accepted and acted upon Board's Circular No. 91/2/2007-S.T. dated 12-3-2007, conceding that the impugned Review Adjudication Order lacks legality and cannot be enforced. The Tribunal's earlier decisions on identical controversy, including rulings holding that interconnectivity/usage charges are not to be treated as leased circuit services, cover the matter in the assessee's favour. In view of the departmental concession pursuant to the Board's Circular and the precedents relied upon, the demand for service tax on interconnectivity/usage charges cannot be sustained. [Paras 5]Demand for service tax on interconnectivity/usage charges set aside; appeal allowed on this ground.Penalty not leviable for statutory government body - absence of mala fide intention - The penalty imposed is not leviable against the appellant, a statutory PSU unit. - HELD THAT: - Relying on Tribunal authority and the Apex Court principle that a statutory government body lacks mala fide intention to evade tax, the Tribunal held that penalty is not leviable. The Commissioner, by conceding the matter in view of the Board's Circular, did not press for confirmation of the impugned order and the Tribunal found established precedents (including Surat Municipal Corporation and Tamil Nadu Housing Board) applicable to preclude penalty in the circumstances. [Paras 5]Penalty set aside; no penalty leviable against the appellant.Final Conclusion: The stay application and the appeal are allowed; the Review Adjudication Order is set aside in view of the Board's Circular and controlling precedents, and consequential relief, if any, is granted. Issues:Challenge to Review Adjudication Order, Service Tax on Inter Connectivity service, Enforcement of Board's Circular, Legality of Impugned Order, Tribunal Rulings on similar issues, Levying of Penalty, Applicability of Service Tax.Analysis:1. Challenge to Review Adjudication Order:The appellant, a PSU unit, challenged the Review Adjudication Order confirming a significant amount towards Service Tax. The matter involved the provision of 'Inter Connectivity' service to cellular/mobile operators, which was subject to service tax. The appellant obtained clearance to pursue the appeal against the order.2. Enforcement of Board's Circular:The Revenue enforced Board's Circular No. 91/2/2007-S.T., dated 12-3-2007, which led to the conclusion that the impugned order lacked legality. The Commissioner conceded that the order could not be enforced in light of the circular.3. Tribunal Rulings and Legal Precedents:The appellant's counsel referred to Tribunal rulings in similar cases to support the appeal. Rulings in cases like Reliance Telecom Ltd. v. CST, Fascel Ltd. v. CST, and Surat Municipal Corpn. v. Commissioner of Central Excise were cited to argue against the applicability of penalty and service tax in the present case.4. Levying of Penalty:The Tribunal considered the submissions from both sides and noted that the Commissioner accepted the Board's Circular, leading to the conclusion that the impugned order lacked legality and could not be enforced. The Tribunal also found that the penalty was not leviable based on legal precedents cited by the appellant's counsel.5. Applicability of Service Tax:The judgment clarified that the activity in question was not taxable up to a certain date and was not subject to service tax after a specific amendment in the Finance Act 2007. The Revenue did not contest the issue based on the Board's Circular, leading to the allowance of the stay application and the appeal with consequential relief.In conclusion, the Tribunal allowed the appeal based on the enforcement of the Board's Circular, the lack of legality in the impugned order, and the absence of contest from the Revenue. The decision was also influenced by relevant legal precedents and the non-leviability of penalty in the given circumstances.