TaxTMI 
TaxTMI 
2019 (3) TMI 1503
X X X X Extracts X X X X
X X X X Extracts X X X X
....operators. Such Interconnect Usage Charges (IUC) were brought within the ambit of service tax under the category of "Telecommunication Service" with effect from 01.06.2007. Appellants were paying service tax from that date on the amounts received from their telecom operators for the provision of Interconnection Services. 2.2 It emerged that appellants had provided Interconnection Service to their own Landline segment also and had received an income thereof during the period 2007 to 2012. The Department took the view that the appellants are required to pay the service tax on such amounts received from the Landline segment of M/s. BSNL. 2.3 Accordingly, three Show Cause Notices were issued for various periods to these appellants which have culminated in the following adjudication Orders : (i) General Manager (BSNL Cellular Mobile Services) CMTS, M/s. BSNL Ltd., Trichy Impugned Order : O-in-O No. 12/2013-ST dated 29.11.2013 Period of dispute: June 2007 to September 2011 Demand confirmed: Service tax of Rs. 19,18,95,836/- with interest. Penalties imposed: under Sections 77 and 78 of the Finance Act, 1994. (Appeal No. ST/40123/2014) (ii) General Manager, M/s. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceived by two different persons. Even after the introduction of negative list of services with effect from 01.07.2012, as per Section 65(B)(44) of the Act "service" means "any activity carried out by a person for another for consideration;" this interpretation can be applied retrospectively for the earlier period also. (v) The appellant is a public sector undertaking wholly owned by the Government of India. Their records are scrutinized throughout India by the Comptroller and Auditor General of India and also by the Internal Statutory Auditors. The appellants were under the bona fide belief that there cannot be any service tax liability on such inter-segment income. For these reasons, the allegation that appellants had deliberately withheld information about inter-segment income with an intention to evade tax is not sustainable. Hence, the demands are also hit by limitation. 4. On the other hand, Ld. AR Shri. K. Veerabhadra Reddy appearing on behalf of the respondent, supports the impugned Order. He also made oral and written submissions which can be broadly summarized as under : (i) Appellants have contended that the service provided by them is a service to self. Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which provide two entirely different kind of services and the revenue/expenses on account of such services is also shown as income/expenditure in the financial statements of both M/s. BSNL (Landline) and M/s. BSNL (CMTS). As already stated, both the above two segments of M/s. BSNL qualify as 'persons' within the context of definition under Section 65(105)(zzzx) of the Finance Act, 1994. (vi) The definition of 'service' under Section 65(B)(44) of the Act is applicable with effect from 01.07.2012 consequent to the negative list based levy of service tax and the same cannot be applied to services provided prior to the said date. Same is the case with the explanation given in the Educational Guide on Taxation of Services published by TRU, CBEC which cannot be retrospectively applied for the past period. (vii) In terms of Section 70 of Chapter V of the Finance Act, 1994, ever person providing taxable service shall himself assess the tax payable on the taxable service provided by them and furnish the relevant details in the statutory returns, to be filed with the jurisdictional Range Office. However, the appellant had deliberately failed to disclose the material facts to the knowl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TRAI Notification dated 24.01.2003 clarifies the purpose of the Notifications, namely : "... to fix the terms and conditions of interconnectivity between Service Providers, to ensure effective interconnection between different Service Providers and to regulate arrangements amongst Service Providers of sharing their revenue derived from providing telecommunication services, the Telecom Regulatory Authority of India hereby makes the following Regulation". 6.4 The Telecommunication Interconnection Usage Charges (Thirteenth Amendment) Regulations, 2017 were issued by TRAI Notification dated 19.09.2017 in the Explanatory Memorandum to these 2017 Regulations. The definitions of "Interconnection" and "Interconnection Charges" were further clarified as under : "A. Interconnection 1. Interconnection allows subscribers, services and networks of one service provider to be accessed by subscribers, services and networks of the other service providers. If networks are efficiently interconnected, subscribers of one network are able to seamlessly communicate with those of another network or access the services offered by other networks. Without an effective interconnection, the m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....forced by the fact that the said Regulations include the definitions of "Interconnection Provider" as a service provider to whose network interconnection is sought and "Interconnection Seeker" as a service provider who seeks such interconnection. 7. From the facts on record, we find that the disputed services pertain to interconnectivity provided by M/s. BSNL, Cellular Mobile Telephone Services (CMTS) Division and M/s. BSNL, appellants herein to their own landline network. Surely, by no stretch of imagination can these two Divisions of M/s. BSNL be termed as two separate service providers for the purposes of the definitions contained in the aforesaid TRAI Regulations that we have just analyzed, etc. 8.1 In the present scenario, most, if not every, service provider extends a gamut of connectivity services like landline connectivity, connectivity on mobiles through GSM, CDMA connectivity, data and voice through optical fibre and so on. A service provider like M/s. BSNL may be providing one or more of these connectivities as may be subscribed to by their subscribers. But the important point to be noted is that when the CMTS Division of BSNL is providing interconnectivity to thei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng transaction as against consideration. In a member's club, there is no question of two sides. Members and Club both are the same/entity. One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. Hence, members club are not liable to pay service tax in allowing its members to use its space as mandap. The ratio of the above case law is clearly applicable to the present case. M/s. Precot Mills Ltd. is a Corporate entity. It has got various units which function as separate profit centers. When service is rendered by one unit to the other, debit note is raised for the value of service in order to evaluate the performance of a particular unit. Ultimately there is only one Balance sheet for the legal entity for M/s. Precot Mills Ltd. and not for the separate unit. In other words, the appellants, M/s. Precot Mills Ltd. do not receive any valuable consideration for services rendered by one unit of the appellant to the other unit, in view of the fact that the each unit is part of the same legal entity which is the appellant. To ....