CESTAT, NEW DELHI BENCH
Bharat Sanchar Nigam Ltd.
Commissioner of Central Excise, Jammu
MISC. ORDER NO. ST/M/270/2012-CUS.
Stay order no. ST/S/793/2012 – Cus.
ST Misc. No. 1896 of 2012
Stay No. 1895 of 2012
ST-Appeal No. 774 of 2012
JUNE 26, 2012
Mathew John, Technical Member
The appellant is a provider of telecommunication service having pan India presence and operations. The appellant has been selling ‘India Telephone Cards’ in Jammu & Kashmir. Using this card telephone calls could be made from anywhere in India, to anywhere in India.
2. Telecommunication services including telephone services rendered in India other than in the state of Jammu & Kashmir is liable to service tax under Section 65(105(zzzx). The appellant has not been paying service tax on services enabled through India Telephone Cards sold in Jammu & Kashmir, though such service was largely provided outside Jammu & Kashmir. Revenue was of the view that service tax is payable on services provided in India, outside the state of Jammu & Kashmir notwithstanding the fact that the charges for such services was collected through sale of cards in Jammu & Kashmir. Based on such reasoning a demand notice for such service provided during the period 2006 to 2010 was issued and after due process a demand of Rs.2,68,70,843/- is confirmed along with interest and penalties. Aggrieved by the said order the appellants have filed this appeal along with request for waiver of pre-deposit of dues for admission of the appeal.
3. The appellants plead that they sold the cards in Jammu & Kashmir through two franchisees M/s Faizal Traders Pvt. Ltd. and M/s Balajit Watch and Mobile Pvt. Ltd. and if there is any short levy of service tax that has occurred on account of the failure of the franchisees who have been selling such cards and M/s BSNL, Jammu & Kashmir circle should not be penalised for the short levy. They plead that adjudication order has imposed only a minor penalty on these two franchisees Entire tax demand and major penalty amount has been confirmed against the appellant company which has not maintainable, according to the Counsel.
4. The Counsel further argues that there is no evidence to show that such cards were sold outside Jammu & Kashmir and if residents of other circles visited Jammu & Kashmir and bought such cards for use in Jammu & Kashmir and took it outside Jammu & Kashmir, and used balance amounts left in the cards the appellants cannot be held guilty of any tax evasion. They plead that since the provisions of Finance Act 1994 does not extend to the state of Jammu & Kashmir service tax cannot be demanded on India Telephone Cards sold in Jammu & Kashmir.
5. The appellants also submit that this demand is issued invoking the extended period of time and such demand cannot be maintainable because there was no intention on the part of the appellant company which is a public sector undertaking. Considering these aspects, the appellant requests for admission of appeal without any pre-deposit of dues arising from the impugned order.
6. Opposing the prayer the ld. A.R. for Revenue submits that service tax is not on sale of India Telephone Cards it is for the service enabled by use of such cards for which consideration is collected in advance by sale of such cards. He makes it clear that the demand is only in respect of that portion of the service which has been provided outside the state of Jammu & Kashmir using such telephone cards sold in Jammu & Kashmir. It is his contention that service tax is a levy on service provided and place of providing such service is the basic criteria to see whether it is taxable and not the place where the consideration for such service was collected. In the instant case since the service was provided in the taxable category the appellants were required appropriate service tax.
7. Ld. AR further submits that this entire arrangement of selling India Telephone Cards in Jammu & Kashmir without collecting service tax on the service enabled through such cards is an arrangement purposely organised only for evading service tax. It is relevant that the appellant has not been selling such cards in other states in India. He also point out that in May 2009 the department came to know of tax evasion through the method and thereafter investigating authorities have been continuously following up with the appellant to provide information regarding services provided in the taxable territory using cards sold in Jammu & Kashmir. There has been considerable delay caused by the appellant in providing such information and the conduct of the appellant during enquiry was indicative of the attempt to suppress information.
8. We have considered arguments on both the sides. Prima facie, we are in agreement with the argument that liability to pay service tax arises with reference to the place where service is provided rather than the place where consideration is collected. Further we are not in agreement with the submission of the appellant that the evasion of tax in this has happened because of the franchisee, in a situation where the franchisees are responsible only for collection of the consideration for service and not for providing the telecommunication service. In a technology intensive operation like providing of telecommunication service backed up by computers it is always possible to find out the consideration received for service provided in taxable territory if only the appellant desired to do so. The appellant has prima facie encouraged sale of such cards in Jammu & Kashmir and not accounting and reporting services provided in the taxable territory using such cards. In our view prima facie this is a case of suppression of information with intent to evade payment of service tax. In fact we are surprised that public sector undertaking resorted to this stealth method to avoid tax. If such practice on the part of a public sector undertaking is approved in any manner soon the other telecommunication operators providing service in the taxable territory will make arrangements for collection of the consideration in Jammu and Kashmir to avoid payment of service tax. In our view this is a serious matter of tax evasion Since the impugned telephone service was provided by the appellant and not the franchises who sold the card. We find no merit in the argument that short levy in tax is attributable to the franchisees.
9. In view of the discussions and findings as above, we are of the view that the appellant should be asked to pre-deposit the entire tax dues arising from the impugned order for admission of appeal and they are directed to do so before 3rd September 2012 and report compliance on 3rd September 2012. Subject to pre-deposit as above, the balance dues arising from the impugned order is waived for admission of appeal and there shall be stay on collection of such dues. If such amount is not deposited by the above said date the appeal will be rejected without any further notice to the appellant.