Delhi High Court
Bharti Airtel Limited & Anr vs Union Of India & Ors on 9 May, 2013
Author: Badar Durrez Ahmed
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 09.05.2013
+ W.P.(C) 2954/2013 (Renumbered as CEAC 30/2013)
BHARTI AIRTEL LIMITED & ANR ... Petitioners
versus
UNION OF INDIA & ORS ... Respondents
Advocates who appeared in this case:
For the Petitioners : Mr Neeraj Kishan Kaul, Sr. Advocate with Mr Rohan P. Shah,
Mr Shushant Murthy, Mr Shankey Agarwal and Mr Samar
Kachwa
For the Respondents : Mr Zafar Moonis, Advocate.
Mr Jayant Tripathi, Advocate for CGSC, R-1
CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
CM No. 5568/2013
Exemption is allowed subject to all just exceptions.
The application is disposed of.
W.P.(C) 2954/2013 (Now renumbered as CEAC No. 30/2013) & CM
No. 5567/2013
1. The present writ petition be numbered as an appeal under Section
35G of the Central Excise Act, 1944. This is so because the order passed
by the Customs Excise Service Tax Appellate Tribunal dated 11.04.2013
is under challenge. The learned counsel for the petitioner (now appellant)
undertakes to deposit the differential court fees within two days.
2. The appellant is aggrieved by the said order dated 11.04.2013
passed by the Tribunal, whereby the Tribunal has directed the appellant to
make a pre-deposit of a sum of ` 80 crores out of a tax demand of
` 118,70,19,472/- as also a penalty in the amount of ` 125 crores. The
Tribunal has directed that if the said deposit of ` 80 crores is made within
the stipulated time, the realization of the balance tax demand of ` 38.78
crores as well as penalty of ` 125 crores and interest on the service tax
demand shall be stayed during the pendency of the appeal or till
03.12.2013 whichever date is earlier.
3. The entire controversy in this appeal relates to the issue of
chargeability of service tax on the free calls which are provided by the
appellant to its employees. According to the revenue, if the employees
had not been granted the facility of free calls, they would have paid for
them and consequently, service tax would have been collected by the
revenue on such payments. The fact that the appellant has given this
facility of free calls has translated into a deprivation of the service tax to
the extent of the free calls provided by the appellant to its employees. On
the other hand, Mr Kaul, the learned senior counsel appearing on behalf
of the appellant, submitted that it had an excellent prima facie case
inasmuch as service tax can only be collected on the amount charged by
the service provider for rendering the service. Any service which is
provided free of charge cannot be the subject matter of service tax. He
has also placed reliance on a Circular dated 13.10.1997 issued by the
Central Board of Excise and Customs by way of a clarification. In
respect of question No. 4 contained in that circular, the CBEC has
clarified that the value of taxable service in relation to a telephone
connection provided to a subscriber is the gross total amount received by
the Telecom Authority from the subscriber. It has, further, clarified that
in case the service is provided free and no amount is received by the
Telecom Authority, the question of service tax liability does not arise.
On the other hand, it has been contended on behalf of the revenue that the
said Circular dated 13.10.1997 is no longer extant inasmuch as it has been
superseded by the CBEC Circular dated 23.08.2007. Mr Kaul, however,
submitted that there is nothing in the CBEC Circular dated 23.08.2007
which derogates from the position as indicated in the earlier Circular
dated 13.10.1997 and since that was only a clarificatory Circular, the
position remains the same. Mr Kaul has also placed reliance on another
Circular of the Central Board of Excise and Customs dated 01.12.2008 in
support of his contention that there cannot be a service when there is a
relationship of an employer and an employee and that the entire service of
the employee is controlled by the contract of employment. There is no
other service that is provided by the employer to the employee.
4. Having considered the arguments advanced by the learned counsel
for the parties, we are of the opinion that the appellant would be entitled
to partial relief at this stage. This is so because the period in question for
which the demand has been raised is 2004-09. Even if we agree with the
learned counsel for the respondents that the CBEC Circular dated
13.10.1997 was superseded by the later Circular dated 23.08.2007, it
would imply, prima facie, that the earlier Circular dated 13.10.1997 held
the field till 23.08.2007. It is in this context that we asked the learned
counsel to bifurcate the tax demand of approximately ` 118 crores
between the two periods, i.e., from 2004 upto 23.08.2007 and from the
latter date till the end of the relevant period in 2009.
5. The learned counsel for the appellant pointed out that even the
adjudicating authority had computed the tax demand based on a
proportional basis. Therefore, considering the entire period 2004-09 and
the tax demand of approximately ` 118 crores, the period prior to
23.08.2007 would entail, if at all, a tax demand of approximately ` 70
crores. Considering this aspect, we feel that the requirement of pre-
deposit of ` 80 crores does not appear to be reasonable. Consequently,
we modify the order of the Tribunal by requiring the appellant to make a
pre-deposit of ` 25 crores. The said amount be deposited by 31.05.2013.
In case the said deposit is made, the rest of the demands including the
penalty would be stayed till the pendency of the appeal before the
Tribunal.
6. With this modification in the Tribunal's order, the appeal is
disposed of.
Dasti under the signature of the Court Master.
BADAR DURREZ AHMED, J
VIBHU BAKHRU, J
MAY 09, 2013
su
