Case Law Details
M/s Spectranet Limited Vs Commissioner of Service Tax (CESTAT Delhi)
(i) So far the first issue of levy of service tax on the monthly rentals charged by the foreign internet service provider for procuring band with, under reverse charge mechanism, we hold that such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act. Accordingly, we hold that no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable.
(ii) The next issue is regarding service tax on rental charge by the appellant from its customers/ subscribers towards rent of its wireless routers/ radio. Admittedly, this activity qualify as deemed sale of goods as the said activity tantamount to “transfer of right to use these goods”. Admittedly, in the transaction, the goods in question were delivered by the appellant and the effective possession and control of the goods have been given. Thus, the said activity amounts to sale, on which admittedly appellant have paid VAT / sale. Accordingly, no service tax is payable by the appellant on the rental of wireless/ router or radio.
(iii) So far the demand based on rental / lease charges (Interconnectivity charges) received by the appellant from other ISP for providing use of its optical fiber cable is concerned, it is a service provided by one Telegraph authority to another. Service Tax under the provisions of lease circuit service or telecommunication service is exigible only when service is provided by a Telegraph authority to a subscriber. This has also been clarified by the CBEC vide Circular No. B/11/1/2001-TRU and such view have also been taken by the Coordinate bench of this Tribunal in the case of Reliance Telecom (supra).
(iv) So far the demand for sale of domain name is concerned, the issue stands decided in favour of the appellant in the case of Tata Sons Limited (supra) wherein it has been held that transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods. Domain name are akin to trade mark, making them the property of the person who owns it.
FULL TEXT OF THE CESTAT JUDGMENT
Appellant is filing the present appeal against the Order-in-original No. 48 to 50/AKM/ CST/ ADJ/2013 dated 01.08.2013.
2. The appellant is engaged in the business of providing Internet Services to various customers and registered with the Service Tax Department under category of ‘Leased Circuit Services’ & ‘Online Information & Database Access Services’.
3. During the period 2002-03 till 2006-07, the appellant had entered agreements with foreign internet service providers, for procuring band with on undersea cables laid between countries for purpose of its business. For this, monthly rentals were charged by such foreign internet service providers and remitted by the appellant in 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 returns and depositing the admitted tax on self assessment basis. Pursuant to audit by the Revenue of the appellant’s record, show cause notices were issued as follows:
| Description | Category of service | SCN dt. 8.2.2008 (period 1.1.2002- 13.12.2007) | SCN dt. 19.04.11 (period 1.1.2008- 31.03.11) | SCN dt. 24.12.2012 (period 1.4.2011-31.03.2012) | Total |
| Under LCS for foreign remittance made |
