TaxTMI 
TaxTMI 
2019 (8) TMI 324
X X X X Extracts X X X X
X X X X Extracts X X X X
....n foreign exchange. 4. Further, appellant provides internet connectivity to various customers through underground fibre cables. However, in case a customer desires wireless connection, it provides the customer a wireless router which converts internet signals into radio waves. This router/ radio is connected to the fibre cable of the appellant's network. This wireless router/ radio is either purchased by the customer from the appellant, or given on rent to it. When given on rent, the appellant charges rental charges on which it has been paying VAT. 5. The appellant gives certain portion of its optical fibre cables on lease to other Internet Service Providers (ISP). In such cases, the other ISP use the fibre cable of appellant to provide Internet Services to their customers. In this regard, the appellant charges certain rental/ lease charges from the ISPs. 6. The appellant has been purchasing domain names from ICANN accredited Registrars, such as Directi Internet Solutions P. Limited. These domain names are further sold to the appellant's customers, for which it charges a price. 7. The appellant is registered with the Service Tax Department and have been filing regular r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iginal, has confirmed the proposed demand, alongwith penalty under Section 77 and 78 of the Act recording the following findings: (i) That the foreign internet providers are "Telegraph Authorities" under their respective laws, in their place of business and hence procuring bandwith from them would tantamount to receiving leased circuit/ telecommunication services. Therefore, ld. Commissioner has held that the foreign remittances are taxable at the hands of the appellant for the period post the introduction of Section 66A (w.e.f. 18.04.2006) of the Act. Hence, ld. Commissioner has dropped the demand on this count for the period prior to 18.04.2006. (ii) That wireless routers/radios are used to provide a link between two different locations, for use by a customer for transmission of data/speech through internet. It was held, that without these routers, a customer will not have access to the Appellant's network. Consequently, it was held that the leasing of wireless router/radio would be taxable under leased circuit/telecommunication services. (iii) That the leasing of optical fibre/duct to other ISPs, also tantamount to leased circuit/telecommunication serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which includes either the Director-General of Posts and Telegraphs or a person who has been given a license, by the Central Government to establish, maintain and work telegraphs. 10.4 In the present case, it is clear that neither FLAG Atlantic nor REACH qualify the definition of 'telegraph authority'. Thus, on strict construction of the provisions of the Act, FLAG Atlantic and REACH cannot be said to have provided 'leased circuit services' to the Appellant. In this regard, the Appellant relies upon the following circulars and judicial decisions: a. Circular F. No. 137/21/2011-ST dated 15.07.2011 which provides that a foreign telecom service provider cannot constitute a telegraph authority in India and therefore cannot provide leased circuit/telecommunication services in India; b. Vodafone Essar Mobile vs.CST, 2017 (9) TMI 359-CESTAT New Delhi c. TCS-Serve Ltd. vs. CST, 2014 (33) STR 641 (Tri-Mum) d. Infosys Ltd. vs. CST, 2014 TIOL 409 (Tri-Bang) 11. As regards demand on the rental charges charged by the appellant from its customers towards the rent of its wireless routers/ radio, under the category of leased circuit service/ telecommunicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een clarified by the CBEC itself vide Circular No. B.11/1/2001-TRU dated 09.07.2001, which provides that inter-connectivity charges paid by one ISP to another ISP would not be subject to service tax. Further, judicial decisions have also held that a telegraph authority cannot be construed as a 'subscriber', for the levy of service tax under the category of leased circuit services. The following decisions are relied upon: a. Fascel Ltd. v. CST 2007 (7) STR 299 (Tri-Bang.); b. Power Grid Corporation of India Ltd vs. CST 2011 (24) STR 307 (Tri-del.) c. Reliance Telecom Ltd. v. CST 2007 (7) STR 595 (Tri-Ahmd.) 13. As regards the demand of service tax on the amount received by the appellant for the sale of domain name to various customers, it is urged- The last category relates to demand of service tax on sale of domain name by the Appellant to Indian customers, in return for a consideration. The said demand has been confirmed under the category of 'computer network services' or 'online information and database access or retrieval service' ('OIDAR'). It is submitted that this demand is not sustainable for the following reasons: i. The first SCN ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ission services including provision of access to wired or wireless facilities and services, specifically designed for efficient transmission of data. 15.1 The exclusion clause in the definition of telecommunication service provide for exclusion of any service provided by any person in relation to internet telecommunication service referred to in clause (zzzu) of Section 65(105). The phrase internet telecommunication in the exclusion clause was earlier "internet telephony" till 16.05.2008, when the word telephony was replaced with the word 'telecommunication'. Lease circuit means a dedicated link provided between two fixed location for use of the subscriber and includes a speed circuit, data circuit or telegraph circuit. The data circuit can be both wired or wireless. 15.2 So far the demand on the rental charges received by the appellant under agreement titled 'radio set up and maintenance agreement' falls under deemed sale, "transfer of right to use" or under LCS / TCS. The essential / dominant character of the wireless router agreement evidences that appellant is engaged in the business of providing internet services. Their clients have executed an agreement with them to ava....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot be a subscriber to another Telegraph authority, in the context of the old definition of leased circuit service. Hence, the case law is not relevant to the portion of demand made for the period 01.06.2007 to 31.03.2012. Since the party has not taken any ground other than the above case laws to challenge the demand for this transaction, the demand may be sustained for the period 01.06.2007 to 31.03.2012. 15.5. Further, the argument of the appellant that by virtue of exclusion clause in definition of telecommunication service, no internet related activity can be classified as telecommunication service. He submits that telecommunication service includes data transmission services under sub-clause (vii) of Section 65(109a) includes the provision of access to wire or wireless facilities and service specifically designed for efficient transmission of data. The exclusion clause only covers internet telecommunication which was earlier internet telephony as defined under Section 65(105) (zzzu). Thus, what is exempt is only internet telephony, not other services. 15.6 So far the demand with respect to sale of domain name is concerned, a domain name is required to give an address....