2017 (7) TMI 1268 - AT - Service Tax

Waiver of penalty u/s 77 and 78 of FA - service tax along with interest paid belatedly - cable operator service - bonafide belief regarding non-liability to tax as the services may not fall under the category of cable operator service - Held that - Admittedly, the television signals received from satellite is managed and handled through various layers of persons/ activities till it reaches the ultimate customer. The appellants role is as an inter mediatory and apparently there could be a bonafide belief on their part regarding the tax liability under the said category - Considering scope of definition under Section 2 (aa) of the said Act there is a possibility of bonafide belief for non-tax liability. This is a fit case for invoking the provision of Section 80 for waiver of penalties imposed on the appellant - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Appellant seeking waiver of penalties under Section 77 and 78 of Finance Act, 1994.
- Appellant's role in providing services to a cable network company.
- Interpretation of the scope of activities undertaken by the appellant.
- Application of Section 80 for waiver of penalties.

Analysis:

Issue 1: Appellant seeking waiver of penalties under Section 77 and 78 of Finance Act, 1994.
The appellant in this case is solely requesting the waiver of penalties imposed on them under Section 77 and 78 of the Finance Act, 1994. The penalties were a result of proceedings initiated against them, confirming a service tax liability of ?14,59,805. The appellant has already paid the service tax along with interest for delayed payment and is not contesting the tax liability in the appeal. The prayer is specifically for the waiver of penalties invoking the provisions of Section 80.

Issue 2: Appellant's role in providing services to a cable network company.
The appellant is engaged in providing services to a cable network company, M/s Siti Cable Network Ltd., related to the distribution of television signals. Their activities include preparing local programs, entering agreements with franchisees (local cable operators), and ensuring compliance with local laws regarding signal distribution. The appellant's role is that of an intermediary between the main service operator and the local cable operators, rather than directly involved in signal distribution.

Issue 3: Interpretation of the scope of activities undertaken by the appellant.
The appellant's counsel argued that the appellant may not fall under the category of a cable operator service as they do not directly receive or distribute signals. They operate as an intermediary between the main service operator and local cable operators. The Tribunal considered the activities undertaken by the appellant and noted that their role does not align with the typical activities of a cable operator involved in direct signal distribution. The Tribunal also highlighted that the Finance Act, 1994 borrows definitions from the Cable Television Network (Regulation) Act, 1995, and based on the scope of these definitions, there could be a genuine belief regarding non-tax liability.

Issue 4: Application of Section 80 for waiver of penalties.
After hearing both sides and examining the appeal records, the Tribunal found that the appellant's activities do not fit the typical activities of a cable operator. Considering the precedent set by previous Tribunal decisions and the specific circumstances of the present case, the Tribunal invoked the provision of Section 80 to waive the penalties imposed on the appellant. The Tribunal concluded that it is a suitable case for the waiver of penalties, and accordingly, the penalties were set aside, allowing the appeal to that extent.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning in granting the waiver of penalties to the appellant.