Leased circuit and telecommunication service classification failed where the foreign provider lacked telegraph authority status, defeating service tax levy.

Dedicated private bandwidth connectivity procured from a foreign service provider was treated as leased circuit service and later telecommunication service, not as internet telecommunication service. The Tribunal held that service tax could be levied only if the provider also satisfied the statutory requirement of being a telegraph authority, meaning a person licensed under the Indian Telegraph Act, 1885. As the foreign provider had no such licence, the cumulative conditions for taxation were not met. Following an earlier coordinate bench decision on the same statutory framework, the demand was held unsustainable and tax was found not payable on the impugned services.

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Issues: Whether international private bandwidth connectivity availed from a foreign service provider was classifiable as internet telecommunication service or as leased circuit service and telecommunication service, and whether service tax could be levied when the foreign provider was not a telegraph authority.

Analysis: The services were found to be dedicated private bandwidth connectivity, not internet-based services. For the relevant period, such services fell within the statutory categories of leased circuit service and thereafter telecommunication service. The definitions of those taxable services, however, required the provider to answer the description of a telegraph authority, that is, a person licensed under the Indian Telegraph Act, 1885. Since the foreign provider had no such licence, the cumulative statutory conditions for levy were not satisfied. The Tribunal followed the earlier coordinate bench ruling on the same legal framework and held that mere provision of the service was insufficient unless the statutory status of telegraph authority was also established.

Conclusion: The demand was not sustainable on merits and service tax was held to be not payable on the impugned services.

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