TaxTMI 
TaxTMI 
2020 (2) TMI 227
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....of the assessee that they are actually not providing any service to M/s Sify Limited. They have only entered into an agreement which is in the nature of a joint venture with M/s Sify Limited as per which they get a share of the total revenue and M/s Sify Limited gets the remaining part of the revenue. After investigation, the Department issued a show cause notice which culminated in the impugned orders levying service tax and imposing penalties as proposed. 3. After hearing both sides and perusing the records, we find that crux of the matter is determination whether activities of the appellant are in the nature of a service provider to M/s Sify Limited and therefore, chargeable to service tax under the head "business auxiliary services" or whether the appellant is a partner in a joint venture with M/s Sify Limited in which case they are neither the service providers nor are M/s Sify Limited the service recipients. In order to determine this issue, we have gone through the agreement between the appellant and M/s Sify Limited. The relevant paras of this agreement are as follows: 1. Purpose 1.1. Business partner (i.e. the appellant herein) shall use his cable netw....
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....bsp; Power Pass Unit 7000 UPS back-up for the switches for Customers 3000 Lan switch (10/100 Mbps) at control room of the CTO - Managed Switch 10000 Factory Crimped Patch Cords - 3 x 110 330 Firewall at Control Room 29000 Un-interrupted power at the switch serving customer End etc 1000 6 U Rack 2650 Total Payable 74980 Note: 1. Electrical Earth must be made available at the Control room. 2. Uninterrupted power must be made available to all the cascaded switches on the network. 3. Only LAN Switches to be used in the network and not Hubs. 4. Not more than 3 Switches in a cascade. 5. Not more than 100 meters for hop distance [distance between two switches] 6. Manual joints to be avoided in CAT5/CAT6 data cables. Recommendations: 1. All Switches to be accommodated in proper weather protected Boxes, with enough air circulation and available space for maintenance. 2. 2. CAT-5 or CAT-6 STP cable ....
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....e last mile. • Should ideally be "clipped" against supports. • Network Information Card must be stuck on every user PC. • Post Installation testing, Service demonstration and basic user training should be mandatory. 3.2 Business Partner shall provide uninterrupted Services to Subscribers through its cable network. Business Partner shall solely responsible for installation of necessary cables, switches, hubs etc., at its own cost, for operation of the Services through its cable network. 3.3 Business Partner shall maintain the network till the Subscriber's premises and shall not do anything that would affect the business of Sify. The Business Partner shall not use the connectivity provided by Sify for any other purpose other than for th e purposes herein. 3.4 Business Partner shall be responsible for service quality services within its cable network. Sify shall be responsible for the service quality upto Sify POP. 3.5 Sify reserves the right to provide customer with alternate connectivity, either directly or through other Business Partners, at instances where customer has complained about the services provided....
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....known to all his subscribers so that they are dissuaded from activities not permitted by the laws of the land. 4. As per Schedule-II of the agreement, in return for their services, the appellant receives 30% of the browsing revenue in the first year and 25% of the browsing revenue for second and third year. This browsing revenue would be the revenue earned by M/s Sify Limited net of taxes from the subscribers/customers for internet access between login and logout. 5. A perusal of the above clauses of the agreement would show that the agreement is not in the nature of an agreement between a principal and principal. It is in a nature of an agreement between a principal and an agent. As a principal, M/s Sify Limited is entitled to engage as many several agents as they please in addition to the appellant (para 3.5 of the agreement). On the other hand, as an agent the appellant cannot provide services of other internet service providers through their network (para 3.7 of the agreement). The agreement is for an initial term of 3 years and renewable at Sify's option for further term of one year each. Either during the initial term or during any renewed term, Sify may, at any time, t....