Interconnectivity user charges were outside telecommunication service tax before the 2007 amendment, making the demand unsustainable.

Interconnectivity user charges collected from other telecom service providers were treated as outside the scope of service tax under telecommunication service for the period before the Finance Act, 2007 amendment. The analysis relied on the Board clarification dated 12.03.2007, which was accepted as settling that such charges could not be taxed under that category for the pre-amendment period. On that basis, the demand sustained in the impugned order was found to lack legal support, and the levy on interconnectivity user charges for the dispute period was held unsustainable.

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Issues: Whether interconnectivity user charges collected from other telecom service providers were liable to service tax under telecommunication service for the relevant period prior to the amendment in 2007.

Analysis: The parties accepted the Board clarification dated 12.03.2007 as settling the position that, before the amendment to the definition of telecommunication service brought about by the Finance Act, 2007, interconnectivity user charges could not be subjected to service tax under that category. In view of that settled position, the demand sustained in the impugned order lacked legal support.

Conclusion: The levy on interconnectivity user charges for the period in dispute was not sustainable, and the assessee was entitled to succeed.

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