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No Service Tax on VSAT Hire Charges and VSAT Usage Fee: CESTAT [Read Order]

VSAT - Hire Charges - CESTAT - Taxscan

The Bangalore Bench of the CESTAT in the case of M/s Manipal Universal Learning v CCE held that VSAT Hire Charges and VSAT Usage Fee is not chargeable to Service Tax.

The appellant engaged in providing education through distance education program for universities entered into a Memorandum with Sikkim Manipal University of Sciences for (i) promotion of the latter’s distance education program and (ii) to provide infrastructure and services. The Appellant has entered into Learning Centre Agreements (LCA) with various parties granting the license to set up an authorized Learning Centre of the Appellant with respect to distance education programmes. The party to the LCA has further agreed to provide infrastructure and facilities for the purpose of providing distance education programme of SMU/other universities.

The appellant has supplied Very Small Aperture Terminal equipment (VSAT) to the contracting party and is in receipt of (i) Affiliation fee; (ii) Inspection Fee; (iii) Licence Fee; (iv) One-time VSAT Management Fee and (v) Actual VSAT user costs/reimbursements from the contracting parties. The appellant was hence alleged of non-payment of service tax on VSAT charges (both onetime fee and usage charges) alleging classification as ‘franchise service’ and is the issue before the present Tribunal.

The VSAT hire charges related to Chattel to hire which was a transfer of property and right to use falling within the ambit of the definition of a sale is not a taxable ‘service’. VSAT Usage Fee is in the nature of telecommunication costs apportioned and recovered as reimbursement and the amount has already suffered tax as Airtel who is the supplier of the said service has already charged service tax on the same under the taxable category of ‘telecommunication service’.

The Coram constituting of S.S. Garg as Judicial Member and P. Anjani Kumar as the Technical Member while referring to the agreement held that nothing contained in the agreement helps in construing that the learning centres have been given a franchise by providing the VSAT at the learning centres. Also, the appellants are not in receipt of any royalty for the same. The Tribunal held that the VSAT hire charges for the aforementioned reasons are not chargeable to service tax. In agreement of the view that the VSAT usage fee is on the nature of telecommunication costs reimbursed, they were also held to not be liable to service tax.

To Read the full text of the Order CLICK HERE
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