2006 (10) TMI 30 - HC - Service Tax

Demand(Service tax)-Cable Operator- Appellant argued that Multi System Operator shall not come within the purview service tax After considering all facts decided that appellant were liable to pay service tax

Summary

Issues Involved:
1. Quashing of demand of service tax on Multi System Operator (MSO).
2. Interpretation of the definition of "taxable service" under Section 65(105) of the Finance Act, 1994.
3. Liability of Multi System Operators to pay service tax.
4. Application of Cenvat Credit Rules in relation to service tax.

Analysis:

Issue 1: Quashing of demand of service tax on Multi System Operator (MSO)
The petitioners sought the quashing of the demand of service tax on the grounds that service tax was not leviable on Multi System Operators (MSO). The petitioners argued that the Central Excise Department claimed that MSOs were liable to pay service tax in relation to cable services provided by them. The contention was that service tax was initially required to be paid only by cable operators providing services to consumers, not by MSOs. The petitioners challenged this demand.

Issue 2: Interpretation of the definition of "taxable service" under Section 65(105) of the Finance Act, 1994
Section 65(105) of the Finance Act, 1994 defines "taxable service" as specified services. The definition was amended by the Finance Act, 2004, to include services provided "to any person by a cable operator including a Multi System Operator." The petitioners argued that for service tax to be levied, services must be provided "to any person, by a cable operator including a Multi System Operator." They contended that since MSOs were not providing services directly to consumers but to cable operators, service tax should not apply.

Issue 3: Liability of Multi System Operators to pay service tax
The Commissioner of Central Excise Service Tax argued that the re-defined "taxable service" included services provided to "any person" by a cable operator, including MSOs. The definition of "cable service" under Section 65(22) includes services provided by MSOs. It was emphasized that there was no double burden as Cenvat Credit Rules allowed for credit of service tax paid on input services by MSOs, which could be utilized for output services by cable service providers.

Issue 4: Application of Cenvat Credit Rules in relation to service tax
The court considered the submissions from both sides and examined the record. It was noted that the definition of "service" included service to any person by a cable operator, including a Multi System Operator. The court rejected the petitioners' contentions that MSOs were not liable to pay service tax unless services were directly rendered to viewers or consumers. The court also dismissed the argument of double taxation, citing the availability of Cenvat Credit Rules to prevent such a scenario.

In conclusion, the court dismissed both writ petitions, upholding the liability of Multi System Operators to pay service tax as per the re-defined taxable service under the Finance Act, 1994.