By TIOL News Service

NEW DELHI, APRIL 07, 2017: BOTH, the assessee and the Revenue are in appeal before the CESTAT against the order passed by the Adjudicating authority.

Whereas the assessee is contesting the service tax liability confirmed in the impugned order, Revenue is aggrieved with the dropping of demand for extended period and also not imposing penalty u/s 78 of the FA, 1994.

The facts are that the assessee is engaged in providing bill-printing service to telecom companies.

Revenue entertained a view that such activities are taxable under the category of Business Auxiliary Service in terms of Section 65(19) of the Act.

The AA concluded that the assessee is liable to service tax for normal period of one year from relevant date and accordingly imposed penalties u/ss 76 and 77 of the FA, 1994.

The assessee submitted that they have entered into contract with the telecom companies to provide printing service of telephone bills and certain post - printing activities.

One such agreement entered with BSNL, Kottayam stipulated the scope of the contract thus - BSNL outsourced the work of printing telephone bills and certain post printing operations. For this, the appellant/assessee has to install heavy duty laser printers alongwith required accessories in the premises of BSNL. The required software, PCs, UPS, interfacing software for processing data forms, designs etc. will be provided by the appellant/assessee. They have to also provide required manpower, consumables, stationery for this operation. The printing of telephone bills should be done based on the data provided by BSNL and as per the form and design approved by BSNL. BSNL is at liberty to insert commercial advertisements, special messages, letters meant for customers, in the telephone bills. As such, the appellant/assessee are to suitably readjust the printing form layout to suit the requirements of BSNL. The telephone bill should also contain bar coding and any additional material as mandated by BSNL. The post printing operations include sorting, z-folding, stapling, pin code wise bundling, stuffing into window cover and bundling in convenient numbers. The printing operation and post printing operations are to be completed within the time schedule prescribed in the agreement. The number of print operations executed should be system controlled and the same will be required for payment of charges to the appellant/assessee.

The Bench noted that the AA had concluded that the above service rendered by the assessee constituted “billing” service in common parlance and, as such, is liable to service tax under BAS in view of clause 65(19)(vii) of FA, 1994.

After extracting the provisions of 65(19) of FA, 1994, the CESTAT observed -

+ We are not able to accept the contention that physical printing of telephone bills can be considered as “billing”. Telecommunication billing involves a group of processes of telecom service providers, including collection of consumption data of customers, calculate charging and billing information, produce bills to customers, process their payments and to follow up default. In other words, billing is more of a financial activity involving quantification of charge, methodology of providing information in the bill and reaching it to the customer and following it up for collection.

+ The appellant/assessee in the present case is not involved in any calculation of quantification of the bill amount, details to be presented in the bill and regarding correctness of the said details in the bill. In other words, the appellant/assessee is not responsible for any details in the bill or authenticity of the same. They are simply printing in a preformatted design the telephone bills based on the data provided by the telecom company and give the printed bills in envelops, after bunching in convenient groups, for further follow up by the telecom companies. We find such activity cannot be considered as business auxiliary service .

+ The operations are in terms of agreement on a principal to principal basis with no involvement of third party, namely user of telecom service. One more point to note is, that sub-clause (vii) talks about incidental or auxiliary service to any one of the activity in sub-clauses (i) to (vi). These sub-clauses talk about promotion or marketing of service provided by the client or customer care service provided on behalf of the client, provision of service on behalf of the client. We note that the appellant/assessee is nowhere connected with promotion of service or provision of service on behalf of the telecom companies.

Holding that the impugned order is not sustainable, the same was set aside and the appeal by the assessee was allowed.

Revenue appeal was consequently dismissed.

(See 2017-TIOL-1165-CESTAT-DEL)