No Service Tax on License Fee /spectrum charges which are service tax w.e.f. 01.04.2016: CESTAT [Read Order]

The assessee/appellant, Sistema Smart Technologies Limited, was involved in the provision of taxable services, specifically telecommunication services by the Telegraph Authority, as specified by the Finance Act of 1994. In regards to the assessee's failure to pay service tax on government dues on a reverse charge basis, an investigation was started.

The assessee was sent a show-cause notice, claiming that service tax was not paid in full, and a service tax demand of Rs. 43.73 crores for the period of April 1, 2016, to June 30, 2017, along with interest under Section 75 and penalties under Sections 76, 77, and 78 of the Act. The demand, interest, and penalties under Sections 77 and 78 of the Act were all confirmed by the Commissioner; however, the penalty under Section 76 of the Act was withdrawn.

 Know Tax Planning Real Estate Transactions Click here

The assessee argued that the service lax demand on the additional license fee of Rs. 222.1 crores (which included the initially self-assessed liability of Rs. 221.4 crores plus the liability of Rs. 0.73 crores above the initially self-assessed liability of Rs. 221.4 crores) was exempt from service tax because it related to 2G licenses that were revoked well before April 1, 2016.

The Tribunal noted that, as properly documented in the contested order, the assessee had paid the service tax and cess amounts for the years 2016–17 and 2017–18 for the services they received from the government on a reverse charge basis.

The bench pointed out that the Supreme Court's AGR Judgment served as the foundation for the entire demand. Additionally, the telecom operators were obliged to pay the Additional License Fee in the aforementioned AGR Judgment. However, in the case of Association of Unified Service Providers of India & Others vs. Union of India , it was decided that telecom operators are not liable to pay additional amounts of license fee or spectrum charges to the DOT prior to the AGR Judgment of the Apex Court.

Tax Planning For NRIs Click here

The two member bench consists of S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has held that the demand of service tax on addition license fee/spectrum charges in the case pertains to the period FY 2008-09 to 2013-14 which is also clear from the CA Certificate and during that period, service tax was not leviable on the license fee/spectrum charges and the same become chargeable to service tax w.e.f. 01.04.2016.

The bench held that the assessee is not liable to pay service tax on additional license fee as demanded by the Revenue and allowed the appeal.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates