RELIANCE INFRATEL LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE appeal and stay application are directed against Order -in -Original No. 38/ST -II/RS/2012, dated 30 -11 -2012 passed by the Commissioner of Service Tax, Mumbai -II. M/s. Reliance Infratel Ltd. (RIL for short) is a subsidiary of Reliance Communications Ltd. (RCOM for short). They are providing taxable service falling under 'Business Support Service' as defined in Section 65(104c) read with Section 65(105)(zzzq) of the Finance Act, 1994. The Directorate General of Central Intelligence received intelligence that M/s. RIL has been providing infrastructural support services to M/s. RCOM since April, 2007 and though M/s. RIL were in receipts of sums from their service recipient towards charges for the service so rendered, they were not discharging their Service Tax liability. Investigation conducted revealed that M/s. RIL had entered into a master service agreement dated 10 -4 -2007 with M/s. RCOM. In this agreement, apart from the nature of the services to be provided by M/s. RIL and the service charges payable, it was specifically mentioned that financial support also would be provided by the service recipient to M/s. RIL as advances or customer credit which should be settled by way of set -off against the service charges payable to M/s. RIL.

(2.) THE learned counsel for the appellant submits that they had entered into a 'Master Service Agreement' dated 1 -4 -2007 with RCOM (MSA for short). The appellant was providing passive telecom infrastructure service of 'Business Support Service' to RCOM since April, 2007 and they had raised invoices towards service charges in terms of Article 11 of the Master Service Agreement (MSA) which included capital charges, fixed operating charges and variable operating charges on a monthly basis. The value of taxable service raised in the invoice are not in dispute and the appellant received service charges for the services rendered from the service -recipient from December, 2007 onwards. Since obligation to pay Service Tax is on receipt basis, the appellant started payment of Service Tax on the service charges received from January, 2008 onwards. Neither in the show cause notice nor in the impugned order there is any dispute raised regarding the value of taxable services raised by the appellant in their invoices and the payments received pertaining to the same. The appellant had received a sum of Rs. 1,210 crore towards interest -free loan between 7 -6 -2007 to 17 -9 -2007 from RCOM. The entire amount was returned to M/s. RCOM in December, 2007 and the balance sheet of both the parties reflect the receipt of the amount as also the repayment of the amount. Further, M/s. RCOM incurred a sum of Rs. 283 crore approximately towards setting up of RIL and payments made to the vendors of RIL for supply of materials. The above amounts were also completely paid back by the appellant to RCOM on 31 -12 -2007 and the ledger extracts placed on record reveal these transactions. The Revenue has sought to add a sum of Rs. 1,493 crore received as loans and duly returned within the same financial year as consideration for the services rendered which is completely incorrect. The balance sheet of RCOM, which is the holding company of the appellant, very clearly indicates this amount of Rs. 1,210 crore as loans and advances. Similar loans have been given not only to the appellant but to various other group companies and these amounts have been indicated as unsecured loans in the balance sheet.

(3.) WE have carefully considered the submissions made by both the sides.