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TMI Blog2022 (10) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not and for viewing of encrypted signals installation of set top boxes at subscriber s end is a must in DAS period and subscribers records in the SMS server were also maintained with MSO. While interpreting the word for such service in Section 67, the Hon ble Supreme Court in the matter of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] has laid down that value of taxable services shall be the gross amount charged by the service provider for such service and the valuation of tax cannot be anything more or less than the consideration paid as quid pro quo for rendering such a service. There is no iota of doubt that LCOs received signals from MSOs (who received the signals from broadcasters) and the ultimate customers/subscribers received signals from the LCOs. The findings of the learned Commissioner is agreed upon that in the post DAS era both MSO and LCOs would fall within the ambit of persons providing taxable services of cable service however the service recipient for both would be different as for the MSOs the recipient is LCOs whereas for LCOs it s the subscribers. It is not dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected from the subscribers/ultimate customer or only on the gross amount received by them from the Local Cable Operators (LCOs) who are providing the content, maintenance services to the subscriber/ultimate customer and collecting payments from them and remitting amount to respondent as per their invoice and retaining the balance amount collected by them? And also whether the Cenvat credit has rightly been denied to the respondent-assessee? 3. The facts of the case are that M/s. Hathway Sukhamrit Cable and Datacom Private Ltd. (now known as M/s. Hathway Patiala Cable Pvt. Ltd.)- Respondent herein were providing cable operator services covered under section 65(105)(zs) of the Finance Act, 1994 upto 30.06.2012 and under section 65(44) of the Act w.e.f. 1.7.2012. Mainly they were working in four cities viz. Jalandhar, Amritsar, Ludhiana and Chandigarh and had obtained separate registrations with the Registering Authority in all the four cities. They had also obtained provisional registration as a Multi System Operator (MSO) from the Ministry of Information Broadcasting under section 4 of Cable TV Act r/w Rule 11C of the Cable TV Rules. It is the case of revenue that preventive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994 should not be imposed upon them in respect of evasion of service tax at (iii) above; viii) Penalty under Rule 15(3) of the CCR, read with Section 78(1) of the Finance Act, 1994 should not be imposed upon them in respect of evasion at (i) and (iii) above. 4. The learned Adjudicating Authority vide impugned Order- in-Original dated 16.9.2020 dropped the substantial portion of the demand except the demand of Rs.4,47,569/- and also denied the Cenvat credit of Rs.1,69,859/-on the ground of non- production of respective invoices and of Rs.75,130/- for paying audit fee to its employee authorised signatory Mr. Rajesh Mehru. The Revenue has filed appeal against the dropping of the demand whereas the respondent has filed cross-objections against the confirmation of the short payment of service tax and also of denial of Cenvat credit after invoking the extended period of limitation as according to respondent the issue herein relates to interpretation of statutory provisions and there is no fraud, collusion, wilful misstatement or suppression with intention to evade service tax on the part of the respondent. 5. According to learned Special counsel appearing for Revenue, pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber after 1.4.2012 (i.e. after introduction of DAS ). According to learned counsel since the subscription were inclusive of service tax, cum-tax benefit has been extended to the respondent during this period and since as per the reconciliation chart supplied by the respondent they have not provided digital services during the period April, 2010 to March, 2012 hence DAS subscription income on which tax has been short paid for the period April, 2012 to July, 2014 has been calculated accordingly. So far as period from August, 2014 to March, 2017 is concerned the same was calculated after taking the Subscriber Management System (in short SMS ) data supplied by the respondent and for ascertaining the subscription for any particular subscriber, the type of channel packs offered to him in SMS system was matched with its rate reported to TRAI and accordingly digital/DAS subscription income from all subscribers in SMS database was calculated. The main thrust of the argument of learned Special counsel is that under DAS/CAS, the customers are subscribers of MSO and that MSO i.e. the respondent is the service provider and section 67 of Finance Act, 1994 prescribes for payment of service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.A/60167-60171/2019 dated 22.2.2019 in the matter of M/s. Blue Star Communication vs. Commr. of Central Excise Service Tax- Ludhiana. According to learned counsel the respondent never issued bills to subscribers and that they discharged their service tax in accordance with law and therefore the learned Commissioner has rightly dropped the demand of service tax. Learned counsel accordingly prayed for dismissal of the appeal filed by Revenue. So far as the confirmation of the demand of Rs.4,72,569/- as well as denial of Cenvat credit are concerned, learned counsel submits that the said demand has been confirmed without any basis and that the disallowance of Cenvat credit on the audit bills of statutory audit on the ground that the auditor is an employee of the company is contrary to law and also that the extended period could not have been invoked by the learned commissioner in the facts of this case as no fraud, collusion, wilful mis-statement or suppression with intention to evade service tax has been proved by revenue. 7. We have heard learned Special counsel for the Revenue and learned counsel for the respondent and perused the case records including the synopsis/written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only receive the payment from the subscribers. Mr. Gurdeep Singh- Director and Mr.Rajesh Mehru-authorised signatory of the respondent in their respective statements specifically mention that M/s. FTPL-MSO [group company of the respondent] after receiving the signals from the broadcaster supplied the same to the LCOs who through their own network re-transmitted the signals to their subscribers/ultimate consumers which is nowhere disputed by the revenue. The respondent is a Multi System Operator and had entered into Interconnection and Revenue Sharing Agreement with Local Cable Operators as per Rule 9 of the Cable Television Network Rules, 1994 and paid service tax on the amount received by them as per the provision of section 67 ibid which require service tax to be paid on value of services rendered by the respective party. Telecom Regulatory Authority of India (TRAI) from time to time issued specimen of interconnection agreement between the MSO LCO for providing cable TV services and one of such specimen agreement dated 15.3.2016 specifically provides for revenue sharing of subscription between MSO LCO and also states that the agreement is on Principal to Principal basis and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 25. This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub- section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 10. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Multi System Operators: In cable TV services, broadcast channels transmit television signals to Multi System Operators, who further send them to cable operators. The services provided by the MSOs to the cable operators have been made taxable. Section 67 of Finance Act, 1994 is also reproduced hereunder for ready reference:- SECTION 67. Valuation of taxable services for charging service tax ─(1) Subject to the provisions of this Chapter, where service tax chargeable on any taxable service with reference to its value shall, then such value shall, ─ (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) ; (iii) . (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent that during DAS period, the signals received/purchased by MSO were encrypted whereas in analogue period they were not and for viewing of encrypted signals installation of set top boxes at subscriber s end is a must in DAS period and subscribers records in the SMS server were also maintained with MSO. What we have gathered from the records is that LCOs received signals from MSOs and ultimate customers received signals from LCOs, so LCO is the cable operator as well as service provider so far as ultimate customers are concerned. 11. While interpreting the word for such service in Section 67, the Hon ble Supreme Court in the matter of Intercontinental Consultants and Technocrats P. Ltd. (supra) has laid down that value of taxable services shall be the gross amount charged by the service provider for such service and the valuation of tax cannot be anything more or less than the consideration paid as quid pro quo for rendering such a service. The Hon ble Supreme Court in the matter of Association of Leasing and Financial Service Companies vs. Union of India; (2011) 2 SCC 352 also has laid down that service tax is imposed every time service is rendered to the custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SO on LCO as well as the invoices issued by LCO on subscribers are also placed on record by the respondent. The agreement dated 3.1.2014 between the LCOs MSO has granted non-exclusive rights to the LCOs to receive signals of its cable services for further re-transmission to the ultimate subscribers. During the period in dispute, the revenue has also raised similar demand on cable operators (LCOs) which was confirmed by the Adjudicating authority therein and when the LCOs approached this Tribunal by way of Appeal, the same was set aside. While allowing one of such appeal filed by one of such cable operator M/s. Blue Star Communication (supra) this Tribunal has held that the cable operators are liable to pay service tax only on the subscriptions received by them from the subscribers for providing the services. We are unable to find from the record anything to suggest that the said order of the Tribunal has been stayed or set aside in Appeal thereafter. Accordingly here also it can be concluded that the respondent i.e. MSO is liable to pay service tax only on their share of revenue. It is not the case of revenue that the respondent is receiving amount in any other form from LCOs rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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