2014 (9) TMI 181 - AT - Service Tax

Cable operator service - dispute about figures of subscriber base - huge difference between the figures of subscriber base as furnished by the appellant to the department and information received from the broadcasters - the statements of payments received from ICC by the broadcasters also corroborated - Held that - for the determination of the short payment of service tax, Revenue has adopted the number of subscribers given in the agreements entered into by the appellant with the broad casters and the same has been compared with the figures adopted by the appellant for discharge of payment of service tax as declared in the statutory ST3 returns. Once the figures are taken from a written contract, which is in pursuance to a statute, namely, Telecom Regulatory Authority of India Act, 1997 and the regulations made thereunder, the same is beyond challenge. For the period subsequent to 10/09/2004, Section 73 which was substituted vide Finance Act, 2004, provided for rejection of declared value and determination of tax liability on the basis of the evidence available. Therefore, the confirmation of service tax demand on the basis of these legal provisions cannot be challenged/questioned. Once the liability to pay service tax is decided, the question of interest liability is automatic and consequential in terms of provisions of section 75 of the Finance Act, 1994. While the penalty under section 76 is for default/delay in the payment of service tax and no mens rea is required to be proved, penalty under section 78 involves mens rea on the part of the appellant. Prior to 10-5-2008 penalties under both the sections could be imposed simultaneously - However penalties cannot be imposed simultaneously under both the above sections with effect from 10-5-2008 as the law was amended to that effect. - demand of service tax and penalties confirmed - Decided against the assessee.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Basis of service tax demand.
3. Relevance of subscriber base declared to broadcasters.
4. Similar investigation by Income Tax department.
5. Payment of entertainment tax and its relevance to service tax.
6. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Violation of principles of natural justice:
The appellant argued that there was a violation of principles of natural justice as no opportunity for cross-examination was granted. However, the tribunal noted that the appellant did not press for cross-examination during personal hearings and filed final written submissions instead. The tribunal cited the case of K Balan vs. GOI, stating that the right to cross-examine is not necessarily part of reasonable opportunity and depends on the adjudicating authority. The tribunal concluded that the denial of cross-examination did not cause any prejudice to the appellant as the written agreements with broadcasters were available for consideration.

2. Basis of service tax demand:
The appellant contended that the service tax demand was based on conjectures and surmises without evidence of amounts received in excess of what was declared in service tax returns. The tribunal found that the subscriber base figures were derived from written agreements with broadcasters, which were in accordance with the Telecom Regulatory Authority of India Act, 1997. The tribunal emphasized that once figures are taken from a written contract pursuant to a statute, they are beyond challenge.

3. Relevance of subscriber base declared to broadcasters:
The appellant argued that the subscriber base declared to broadcasters was irrelevant to service tax payment, which depends on the consideration received. The tribunal rejected this argument, stating that the agreements with broadcasters, which included subscriber base figures, were binding and relevant for determining service tax liability. The tribunal cited the case of Tamilnadu Electricity Board & Anr. Vs. N. Raju Reddiar, emphasizing that parties are bound by written agreements, and oral evidence cannot contradict the written terms.

4. Similar investigation by Income Tax department:
The appellant referred to an Income Tax Appellate Tribunal (ITAT) decision that set aside an income tax demand based on a similar investigation. The tribunal distinguished the facts, noting that the ITAT decision was based on an arbitrary assumption of subscriber base using electricity connections, whereas the service tax demand was based on actual agreements with broadcasters. Therefore, the ITAT decision was not applicable.

5. Payment of entertainment tax and its relevance to service tax:
The appellant argued that the payment of entertainment tax based on the subscriber base declared to broadcasters should not affect the service tax case. The tribunal found this argument unconvincing, stating that the subscriber base figures used for entertainment tax were consistent with those used for service tax, supporting the Revenue's case.

6. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994:
The tribunal upheld the imposition of penalties under both Sections 76 and 78 for the period before 10-5-2008, citing the Kerala High Court decision in Krishna Poduval, which allowed simultaneous penalties for distinct and separate offences. For the period after 10-5-2008, the tribunal noted that simultaneous penalties could not be imposed due to a change in the law.

Conclusion:
The tribunal dismissed the appeal, finding no merit in the appellant's arguments. The service tax demand, along with interest and penalties, was upheld based on the subscriber base figures derived from written agreements with broadcasters, which were in accordance with statutory regulations. The tribunal emphasized the binding nature of written agreements and the lack of contrary evidence from the appellant. The decision was pronounced in court on 7/8/14.