BSNL optic fibre cable laying exempt from service tax under Board Circular 123/5/2010

CESTAT Chennai held that laying of optic fibre cables for BSNL is exempt from service tax levy. The Tribunal relied on Board's Circular No.123/5/2010 which exempts laying of cables under/alongside roads from service tax, interpreting "cable" in general sense to include telecommunications cables. Following precedent from CESTAT Allahabad in CCE Lucknow v. Raj Electric Works, the Tribunal found no service tax liability exists. Additionally, the demand was time-barred as no suppression of facts occurred - the appellant maintained proper records and the issue was interpretational. The appeal was allowed and impugned order set aside.

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Issues Involved:
1. Liability to discharge service tax for the activity of laying optic fibre cables.
2. Applicability of Board's Circular No.123/5/2010-TRU dated 24.05.2010.
3. Invocation of the extended period for demand alleging suppression of facts.

Summary:

1. Liability to discharge service tax for the activity of laying optic fibre cables:
The appellant provided services relating to cable laying for M/s.BSNL during 2008-09 to 2009-10. The department viewed that this activity falls under 'Erection, Commissioning or Installation Service' as defined u/s 65(39a) of the Finance Act, 1994, and issued a show cause notice demanding service tax along with interest and penalties. The original authority confirmed the demand, and the Commissioner (Appeals) upheld the same. The Tribunal considered whether the appellant is liable to discharge service tax for the activity of laying optic fibre cables.

2. Applicability of Board's Circular No.123/5/2010-TRU dated 24.05.2010:
The appellant argued that the activity of laying cables is exempted from service tax based on Circular No.123/5/2010-TRU. The Circular clarifies that laying of cables under or alongside roads is not taxable u/s 65 of the Finance Act, 1994. The Tribunal noted that the Circular does not specify 'electric cables' and uses the term 'cable' in a general sense, which includes telecommunication cables. The Tribunal concluded that the clarification in the Circular applies, and the activity is exempt from service tax.

3. Invocation of the extended period for demand alleging suppression of facts:
The appellant contended that the demand raised by invoking the extended period is not sustainable as there was no suppression of facts. The figures for quantifying the demand were taken from the appellant's records. The Tribunal observed that the department had a contrary view in different cases, making the issue interpretational in nature. The Tribunal referred to the case of CCE, Cus. & ST Guntur Vs Indian Oil Corporation Ltd., which supports the argument that extended period cannot be invoked for interpretational issues. The Tribunal held that the show cause notice is time-barred, and the appellant succeeds on the ground of limitation.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any. The demand of service tax was found unsustainable on merits, and the show cause notice was deemed time-barred due to the interpretational nature of the issue and lack of suppression of facts by the appellant.

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