Citation Codes

Equivalent Citations

citation codes

Case Number

Service Tax Appeal No. 61668 of 2018

Disposition

allowed

Advocates

Shri Naveen Bindal, Advocate
Shri Rajeev Gupta & Sh. M.S. Dhindsa, ARs

Judges

Ashok Jindal, Member (Judicial)
P.V. Subba Rao, Member (Technical)

Acts

SECTION 67 A FINANCE ACT 1994
SECTION 72 FINANCE ACT 1994
FINANCE ACT 1994
Rule 5 of the Rules
Television Network (Regulation) Act, 1995.

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Smart Summary

Tribunal Opinion Summary — Cable Operator Service Tax Appeal (Remand)

Factual and Procedural Background

The appellant is a cable operator providing cable services to subscribers. From subscription charges, the appellant retains a portion and remits the remaining portion to M/s. Fastway Transmission Pvt. Ltd. (the MSO) which supplies the signal for re-transmission. The MSO discharged service tax on amounts received from the appellant and on amounts retained by the appellant when those amounts were below the threshold exemption under Notification No. 6/2005‑ST dated 1.3.2005. The appellant did not register or pay service tax on the ground of claimed exemption.

Based on intelligence and information obtained from the MSO, the Revenue issued show cause notices to cable operators, alleging liability for service tax on the gross amounts received from subscribers. An adjudicating authority confirmed a demand of service tax against the appellant for the period 1.10.2009 to 31.3.2014, denying the benefit of Notification No. 6/2005‑ST on the ground that the appellant was providing "branded service" and therefore not entitled to SSI exemption. The appellant appealed against that order to this Tribunal.

Legal Issues Presented

Whether the appellants (cable operators) are providing "branded service" and consequently entitled to exemption under Notification No. 6/2005‑ST dated 01.03.2005 and Notification No. 33/2012‑ST dated 20.06.2012.
Whether the extended period of limitation is invokable in these cases.
Whether assessment by best judgment under Section 72 of the Finance Act, 1994 has been made correctly.
Whether the appellants are liable to pay service tax on the gross value of the services provided by them.
Whether the appellants are entitled to cenvat credit of service tax paid by the MSO.

Arguments of the Parties

Appellant's Arguments

Learned counsel for the appellant relied on the Tribunal's decision in M/s. Blue Star Communication and others (Final Order No. A/60167‑60171/2019‑CU‑DB dated 22.2.2019), which dealt with the same issue, and sought that the impugned order be set aside and remanded to the adjudicating authority for quantification of demand (if any) in terms of that Tribunal order.

Revenue/Respondent's Arguments

The departmental representative (ld. AR) conceded that the issue was being dealt with by this Tribunal in the case of Blue Star Communication and stated that that Tribunal order had been accepted by the Department.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Blue Star Communication and others — Final Order No. A/60167‑60171/2019‑CU‑DB dated 22.2.2019 (this Tribunal)	Set out and decided a suite of issues for cable operator cases: (a) branded service/exemption under Notification No.6/2005‑ST & 33/2012‑ST; (b) extended period of limitation; (c) correctness of best judgment assessment under Section 72; (d) liability on gross value; (e) entitlement to cenvat credit of service tax paid by MSO.	The Tribunal in the present matter relied on the Blue Star decision, followed its findings (including entitlement to the exemption, rejection of extended limitation/penalty, directing re‑quantification on proper data, liability on gross value, and entitlement to cenvat credit) and remanded the matter to the adjudicating authority for quantification of demand in line with Blue Star.
RDB Industries (supra) — Hon'ble Apex Court (cited in Blue Star reasoning)	Examined the concept of "brand name" and held that markings required by law for identification/monitoring (not intended to indicate a commercial connection in the course of trade) do not amount to a brand name linking the product to a person for trade purposes.	The Tribunal relied upon this analysis to conclude that cable operators receiving signals from an MSO, and where subscribers had not asked for any brand, were not providing "branded service" to subscribers.
Maheshwari Industries (supra) — Hon'ble Apex Court (cited)	Set out criteria for what constitutes use of a brand name: (1) must be a name/mark/symbol etc.; (2) must be used to indicate a connection in the course of trade between goods and the person using the mark; (3) mere bearing of another's brand name is not sufficient to infer manufacture by the other.	The Tribunal applied these criteria to hold that the appellants were not providing branded services and therefore were entitled to the exemptions under Notifications No.6/2005‑ST and No.33/2012‑ST.
Kohinoor Elastics (supra) — (referenced)	Used as contrast: in Kohinoor Elastics the customer wanted the brand name affixed to indicate a commercial connection, unlike cases where markings are compulsory by law.	The Tribunal distinguished the present facts from Kohinoor Elastics to support the conclusion that there was no branded service here.
Trans Yamuna Communication Pvt. Ltd. v. Commissioner of Service Tax, Delhi — 2017 (52) STR 31 (Tri.‑Del.)	Recognised that where there was a bona fide belief about tax liability (because scope of activities and definitions allowed such a belief), extended period and penalties may not be invokable; observed facts where waiver of penalties and allowance of bona fide belief were appropriate.	The Tribunal invoked this reasoning to hold that appellants were under a bona fide belief of non‑liability and that industry confusion existed; therefore the extended period of limitation was not invokable and no penalty was imposable.
Intercontinental Consultants and Technocrats Pvt. Ltd. (supra) — Hon'ble Apex Court (cited)	Interpreted Section 67 (valuation): the value of taxable service is the gross amount charged by the service provider "for such service"; valuation cannot include amounts not calculated for providing the taxable service.	The Tribunal applied this principle to hold that appellants are liable to pay service tax on the gross value of the subscription amounts they received from subscribers.

Court's Reasoning and Analysis

The Tribunal heard the parties and examined the record. It relied substantially on the prior Tribunal decision in Blue Star Communication (supra), which had addressed the same set of issues. Applying the reasoning collated in Blue Star and the cited Supreme Court authorities, the Tribunal proceeded as follows:

Branded service / exemption: The Tribunal found that the appellants receive signals from the MSO and retransmit to subscribers, and that subscribers had not requested any brand. Relying on the Apex Court's discussion in RDB Industries and the criteria from Maheshwari Industries, the Tribunal concluded that compulsory or incidental markings/identifiers (or the MSO supplying signals) do not establish a brand connection with the end customers. Hence, the appellants are not providing "branded service" and are entitled to exemptions under Notification No. 6/2005‑ST and Notification No. 33/2012‑ST.
Extended limitation/penalty: The Tribunal accepted that appellants acted under a bona fide belief of non‑liability to service tax because of the exemption notifications and because of industry confusion whether the MSO or the cable operator was liable. Citing Trans Yamuna, the Tribunal held that the extended period of limitation was not invokable and no penalty should be imposed.
Best judgment assessment under Section 72: The Tribunal found the adjudicating authority's assessment relied on data supplied by the MSO without providing the appellants an opportunity to present their own activity data. It held such assessment under Section 72 to be incorrect. Consequently the Tribunal directed the appellants to provide their activity data within a specified time and remitted the matter to the adjudicating authority for correct quantification.
Liability on gross value: On valuation, the Tribunal applied the principle from Intercontinental Consultants that valuation under Section 67 is the gross amount charged "for such service." Since appellants received subscriptions for providing cable services, they are liable to pay service tax on the gross subscription amounts received.
Cenvat credit: The Tribunal observed that amounts remitted by appellants to the MSO (on which the MSO paid service tax) constitute input services for the appellants. Accordingly, the appellants are entitled to avail cenvat credit of the service tax paid by the MSO.

On this consolidated reasoning, the Tribunal issued specific directions to the adjudicating authority to quantify demand within the period of limitation based on the appellants' own data produced within 30 days, and to compute tax (and interest, if payable).

Holding and Implications

APPEAL ALLOWED BY WAY OF REMAND

The Tribunal's final orders (following Blue Star Communication) are:

The appellants are entitled to exemption under Notification No. 6/2005‑ST dated 01.03.2005 and Notification No. 33/2012‑ST dated 20.06.2012 (i.e., they are not providing branded services for the purposes of denial of SSI exemption).
The extended period of limitation is not invokable; consequently no penalty is imposable on the appellants.
The appellants are liable to pay service tax on the gross value of the services (subscriptions) received by them; they are also entitled to avail cenvat credit of service tax paid on the amounts remitted to the MSO.
The adjudicating authority is directed to quantify the demand (for the relevant period and within the period of limitation) after receiving the appellants' data of services provided within 30 days of receipt of the Tribunal's order; any tax found payable should be paid (along with interest, if payable).

Implications for the parties: The direct effect is that the adjudicating authority must re‑quantify any demand after the appellants provide their records within 30 days; exemptions and cenvat entitlement as decided shall be applied, penalties and extended period were rejected. The Tribunal remanded the matter for quantification; the decision relies upon existing Tribunal and Apex Court authorities cited in the opinion.

This summary is based exclusively on the content of the provided Tribunal opinion and does not add or infer information beyond that text.

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Reetika Cable v. Commissioner Of Cgst

Ashok Jindal, Member (Judicial):— The appellant is in appeal against the impugned order wherein the demand of service tax has been confirmed on services as cable operator for the period from 1.10.2009 to 31.3.2014.

2. The brief facts of the case are that the appellant is a cable operator proving cable services to its subscribers. From the charges for the cable services, some part of subscription is retained by the appellant and the remaining portion is remitted to M/s. Fastway Transmission Pvt. Ltd. (MSO) from whom the appellant receive the signals for re-transmission to the subscribers. For the portion remitted to M/s. Fastway, M/s. Fastway is discharging service tax liability on the consideration received from the appellant and the subscription retained by the appellant, if they are falling below the threshold exemption limit in terms of Notification No. 6/2005-ST dated 1.3.2005 the appellant was not paying service tax on the ground that they are not liable to pay service tax and did not get registered with the Department. On the basis of intelligence, the appellant was asked to provide the details of their activity and immediately, thereafter investigation was conducted at the end of the MOS i.e. M/s. Fastway. The Revenue collected data from M/s. Fastway and for the data supplied by M/s. Fastway, various show cause notice was issued to the cable operators to demand of service tax on the gross amounts received by the appellant from the subscribers for providing cable operator services. The show cause notice was adjudicated, demand of service tax on gross amount of service charge by the appellant was confirmed by denying the benefit of exemption Notification No. 06/2005-ST dated 1.3.2005 alleging that the appellant is providing branded service, therefore, they are not entitled for SSI exemption and demands have been confirmed by denying the benefit of Notification No. 06/2005-ST dated 1.3.2005. Against this order, the appellant is before us.

3. Ld. Counsel for the appellant submits that in one such case i.e. M/s. Blue Star Communication and others, this Tribunal vide Final Order No. A/60167-60171/2019-CU-DB dated 22.2.2019 has decided the issue and remanded the matter back to the adjudicating authority for quantification of the demand, if any. Therefore, he prays that by setting aside the impugned order, the matter be remanded back to the adjudicating authority for quantification of the demand in terms of order of this Tribunal in the case of Blue Star Communication (supra).

4. The ld.AR also submits that the issue being dealt with by this Tribunal in the case of Blue Star Communication and this order has been accepted by the Department.

5. Heard and perused the record.

6. We find that the said issue came up before this Tribunal in the case of Blue Star Communication, wherein this Tribunal has held as under:—

“11. On careful consideration and submission made by both sides, the following issues emerges as under:—

a) Whether the appellants are providing branded service or not? Consequently they are entitled for exemption under Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012.

b) Whether the extended period of limitation is invokable or not?

c) Whether the best judgement under Section 72 of the Finance Act, 1994 has been assessed correctly or not?

d) Whether the appellants are liable to pay service tax on the gross value of the services provided by them or not?

e) Whether the appellants are entitled for cenvat credit of service tax paid by the MSO or not?

12. Whether the appellants are providing branded service or not? Consequently they are entitled for exemption under Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012.

In this case, the appellants are cable operator and providing cable services to the subscribers on the basis of signals received from the MSO. The subscriber has not asked for any brand for providing the said services. In fact, the appellant is also not providing any branded service as MSO is supplying signal to the appellants which has been transmitted to the subscribers, in that circumstances, there is no relation of brand name to the ultimate customers. Therefore, we hold that the appellants are not providing any branded service to the subscribers and the said issue has been examined by the Hon'ble Apex Court in the case of RDB Industries (supra) wherein the Hon'ble Apex Court came to the occasion to examine the issue of brand name and observed as under:—

“18. It is obvious that, on the facts of these cases, what is in fact affixed to the jute bags is the name of the procurer agency in question such as the FCI, the State Government of Punjab and so on, the crop year, the name of the jute mill concerned, its BIS certification number and the statement that the food grains are manufactured in India. It is clear that all the aforesaid markings have, on the pain of penalty, to be done by the manufacturers of the jute bags, given the Jute Control Order and the requisition orders made thereunder. Obviously, such markings are made by compulsion of law, which are meant for identification, monitoring and control by Governmental agencies involved in the PDS. Neither do such markings enhance the value of the jute bags in any manner nor is it the intention of the appellants to so enhance the value of jute bags, which is necessary if Excise duty is to be imposed. This flows from the expression “…for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark…”. In the present case, the markings on the jute bags are not for the purpose of indicating a connection in the course of trade between the jute bag and some person using such name or mark. The markings are by compulsion of law only in order that Governmental Authorities involved in the PDS may identify and segregate the aforesaid jute bags. This being the case, it is obvious that there is no “brand name” involved in the facts of the present cases.

22. The facts of these cases are far from the facts in Kohinoor Elastics (supra). In Kohinoor Elastics (supra), it was found that, as a matter of fact, the customer wanted the brand name affixed on the product because he wanted the consumer to know that there is a connection between the product and him. This is very far from the facts of the present case, in that, as has been held by us above, it is clear that the markings required on the jute bags are compulsory, being required by the Jute Commissioner, and are not for the purpose of enhancing the value of the jute bags by indicating a connection in the course of trade between the aforesaid products and the manufacturer of those products.”

>Further, in the case of Maheshwari Industries (supra), the Hon'ble Apex Court observed the criteria for use of brand name which is as follows:—

“1) It must be a name or mark such as symbol, monogram, label, signature or invented word or writing;

(2) It must be used in relation to such specified goods, for the purpose of indicating a connection in the course of trade between such goods and some person using such name or mark, with or without any indication of the identity of that person; and

(3) The mere fact that the specified goods manufactured by a person bear a brand name or trade name of another manufacturer, is not sufficient to conclude that those goods are manufactured by such other manufacturer or trader.

19. Therefore, it is clear that a person may be taken to be manufacturing specified goods, bearing a brand name or trade name only if the name, mark or symbol used as such, is intended to indicate a connection in the course of trade between such specified goods and some person using such mark or name. If the use of the brand name or trade name is not intended for the purpose of indicating a connection in the course of trade between such specified goods and the person using such name or mark, then the same may not fall within the definition of the expression brand name or trade name under the Explanation under paragraph 5 of the Exemption Notification.”

In view of the above cited judicial pronouncements, we hold that the appellants are not providing any branded services, therefore, the appellants are entitled to avail the benefit of exemption Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012.

b) Whether the extended period of limitation is invokable or not?

We find that the appellants were under bonafide belief that they are not liable to pay service tax as they are entitled for benefit of exemption under notification no. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012, therefore, they did not pay service tax. Moreover, there was confusion in the industry during the relevant period whether the appellants are liable to pay service tax or the MSO liable to pay service tax on their activity, in that circumstances, the benefit of doubt goes in favour of the appellants. Therefore, we hold that the extended period is not invokable as held by the Tribunal in the case of Trans Yamuna Communication Pvt. Ltd. v. Commissioner of Service Tax, Delhi - 2017 (52) STR 31 (Tri.-Del.) wherein this Tribunal observed as under:—

“4. I have heard both the sides and perused the appeal records. As noted above, the tax liability is not in dispute. It appear that the scope of activities undertaken by the appellant is not falling under generally understood activities of cable operator who is involved in distribution of television signals to various clients. Admittedly, the television signals received from satellite is managed and handled through various layers of persons/activities till it reaches the ultimate customer. The appellant's role is as an intermediatory and apparently there could be a bona fide belief on their part regarding the tax liability under the said category. As already noted that they are not acting as a local cable TV operator in transmitting signals to the clients. Neither they are involved in receiving satellite signals as a MSO. The Finance Act, 1994 borrows the definitions of ‘Cable operator’ and ‘Cable service’ from Cable Television Network (Regulation) Act, 1995. Considering scope of definition under Section 2(aa) of the said Act there is a possibility of bona fide belief for non-tax liability. Considering the ratio followed by the Tribunal in the abovementioned cases and also considering the facts of the present case, I find that it is a fit case for invoking the provision of Section 80 for waiver of penalties imposed on the appellant. Accordingly, the penalties are set aside and the appeal is allowed only to that extent.”

Therefore, no penalty is imposable on the appellants.

c) Whether the best judgement under Section 72 of the Finance Act, 1994 has been assessed correctly or not?

In this case, it is a fact on record, the appellants were not given time of supply the data of their activity and assessment has been done on the basis of the data supplied by the MSO which is not correct, therefore, we hold that the assessment under Section 72 of the Finance Act, 1994 is not correct. In that circumstances, the impugned demand is not sustainable, but the appellants are directed to provide the data for their activity within the period of limitation to the adjudicating authority within 30 days of the communication of this order and on the basis of the data supplied by the appellants, the correct service tax liability shall be determined by the adjudicating authority. Therefore, for that purpose, the matters need to be examination at the end of the adjudicating authority.

d) Whether the appellants are liable to pay service tax on the gross value of the services provided by them or not?

We find that in terms of Section 67 of the Finance Act, 1994, the appellants are liable to pay service tax on the gross value of subscription received by them. The said view having the support of the Hon'ble Apex Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd (supra) wherein the Hon'ble Apex Court observed as under:—

“24. In this hue, the expression ‘such’ occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing ‘such’ taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such ‘taxable service’. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the

Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider ‘for such service’ and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service.”

Admittedly, in this case, the appellants have received subscriptions from the subscribers for providing the services, on the said amounts, the appellants are liable to pay service tax.

e) Whether the appellants are entitled for cenvat credit of service tax paid by the MSO or not?

We find that the out of the total amount received by the appellants, some amounts of total subscriptions, the appellants are remitting to the MSO on which the MSO is paying service tax, therefore, the signal provided by the MSO to the appellant is an input services for the appellants. Therefore, the service tax paid by the MSO is available as cenvat credit to the appellants. In these circumstances, we hold that the appellants are entitled to avail cenvat credit of the service tax paid by the MSO.

13. In view of the above, the following order is passed:—

a) the appellants are entitled for exemption under Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012.

b) the extended period of limitation is not invokable. Consequently, no penalty is imposable on the appellants

c) the appellants are liable to pay service tax on the gross value of services received by them and is entitled to avail cenvat credit of service tax paid on the amount remitted to the MSO.

d) The adjudicating authority shall quantify the demand for the period within the period of limitation on production of data of services provided by the appellants of cable services to the subscribers within the 30 days of receipt of this order on which the appellant shall paid the service tax if payable.”

7. Relying on the decision of this Tribunal in the case of Blue Star Communication (supra), we pass the following order:—

a) the appellants are entitled for exemption under Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012.

b) the extended period of limitation is not invokable. Consequently, no penalty is imposable on the appellants

c) the appellants are liable to pay service tax on the gross value of services received by them and is entitled to avail cenvat credit of service tax paid on the amount remitted to the MSO.

d) The adjudicating authority shall quantify the demand for the period within the period of limitation on production of data of services provided by the appellant of cable service to the subscribers within the 30 days of receipt of this order on which the appellant shall paid the service tax, if payable along with interest.

8. Accordingly, the matter is remanded back to the Adjudicating authority for quantification of demand as above.

9. In view of the above, the appeal is allowed by way of remand.

Reetika Cable v. Commissioner Of Cgst

Tribunal Opinion Summary — Cable Operator Service Tax Appeal (Remand)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Revenue/Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Reetika Cable v. Commissioner Of Cgst

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