GOVERNMENT OF INDIA

MINISTRY OF FINANCE

OFFICE OF THE  COMMISSIONER OF CENTRAL EXCISE

CHENNAI-III-COMMISSIONERATE

121, Mahatma Gandhi Road,  Nungambakkam, Chennai600034.

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SERVICE TAX TRADE NOTICE 01/2001                           18.01.2001

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          Sub.: Service Tax - Levy of Service Tax on Surcharge

                   Collected by Telecom Department - Regarding.

          Board's Sevice Tax Circular 32/3/2000 CX dated 20.12.2000 (F.No.341/1/2000 TRU) superceding its earlier circular 29/3/99 dated 15.07.1999 (communicated in this office Service Tax Trade Notice no.4/99 dt.3.8.99) on the above subject is communicated herewith for information and necessary action.  The Board has now decided that service tax is not leviable on the sur-charge collected by the Telecom Department.

                       (issued from file C.No.IV/16/304/2001 S.Tax)

                                                                                                                                 Sd/--

(T. RAJENDRAN)

DEPUTY COMMISSIONER

CHENNAI III

To

As per mailing list (Both Dept. & Trade)

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TEXT OF BOARD'S SERVICE TAX CIRCULAR

32/3/2000 DATED 20.12.2000

          I am directed to say that it has been brought to the notice of the Board that divergent practices exist in respect of levy of service tax on 'surcharge' collected for delayed payment of telephone bills.

          The matter has been carefully examined by the Board.  As per the provisions of section 65 (48)(b) of Chapter V of Finance Act, 1994, Service tax is leviable on the service provided by the telegraph authority to a subscriber, in relation to a telephone connection.  Further, under 67(b) of the said Finance Act, the value of taxable services has been defined to include only the amount charged for the services provided by the telegraph authority to a subscriber.  On a harmonious interpretation of the above provisions and also taking note of the fact that the amount of surcharge on delayed payment of a telephone bill does not alter the value of taxable services, it is hereby clarified that service tax is not leviable on the amount of surcharge collected for delayed payment of telephone bills.  Consequently, Board's Service Tax circular No.29/3/99 dated 15.07.1999 (Issued from file F.No.149/5/97 - CX 4 and communicated in this office Service Tax Trade Notice no.4/99 dt.3.8.99) which is contrary to the above position stands withdrawn.

          It is desired by the Board that pending disputes, if any be finalised as per the instructions contained herein.  Trade and field formations may also be informed suitably.

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