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TMI Blog2023 (7) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... such as, pay channels, free to air channels or other bouquet of channels direct to the subscribers. This is definitely covered under the category (i) and/or (iii) of the broadcasting services explained above. However, it is found that the provision of STBs is outside the scope and ambit of any of the above said three groups, in order to fall within the ambit of broadcasting service . It is not the case of Revenue that the appellants had retained the effective control over the STBs supplied to their buyers. Since, the effective control of the STB was with the buyer/subscriber to operate and to view the channels to his own choice, the transaction between the appellants and the buyer/subscriber cannot fall within the ambit of STGU for levy of service tax and would be considered as a deemed sale, attracting payment of VAT - CBEC in the circular dated 29.02.2008, has also accepted the legal provision and clarified that if VAT has been paid on a transaction, there is no question of levy of service tax under the STGU services. What is nature of activity undertaken by the appellants in supply/provision of Set top Boxes (STBs) to their customers/ subscribers? - HELD THAT:- It is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the appellants for STBs are amenable for levy of service tax under any other taxable category? - HELD THAT:- From the records of the case, it is seen that the charges collected by the appellants in respect of providing STBs are on rental basis. The learned Advocate for the appellants argues that they are rightly paid the VAT on supply of STBs considering it as deemed sale - supply of STB on rental basis is a deemed sale in terms of Article 366(29A) of the Constitution, and thus, such transactions per se are not amenable to charge of service tax, for the reason that the right to use the STBs has not been retained by the appellants and same has been provided or transferred to the subscribers for viewing the broadcast channels according to their choice. The supply of STBs cannot be categorized as a taxable service under the definition of broadcasting . Even considering the same as a taxable service under the category of STGU, the same cannot meet the requirement of levy of service tax in the case of the appellants inasmuch as the right to use the STBs were transferred by the appellants to the subscribers. In other words, if the right to use and control of the STBs retaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST/86958/2017 Department Objection by the Department on additional grounds filed by the appellant in misc. application No. ST/MISC/85759/2022 ST/MISC/85306/ 2023 ST/86958/2017 Department ROM against Interim Order No. 6-7/2023 dated 11.04.2023 passed by CESTAT. ST/MISC/85758/ 2022 ST/86706/2019 Appellant Applications filed under Rule 10 of CESTAT (Procedure) Rules for consideration of the additional grounds ST/MISC/85303/ 2023 ST/86706/2019 Department ROM against Misc. Order No. M/85219-85220/2023 dated 06.04.2023 passed by CESTAT ST/MISC/85304/ 2023 ST/86706/2019 Department Objection by the Department on additional grounds filed by the appellant in misc. application No. ST/MISC/85758/2022 1.1 The miscellaneous applications No. ST/MISC/85758/2022 and ST/MISC/85759/2022 were taken up for hearing on 06.04.2023. The issue concerning consideration of additional grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averments made therein justify the case for consideration of such additional grounds and accordingly, we take up those additional grounds as part and parcel of the appeal memorandum for consideration and disposal of the appeals. Therefore, the objections raised by the Revenue for non-consideration of additional grounds in the miscellaneous application Nos. ST/MISC/85304/2023 and ST/MISC/85305/ 2023 are without any basis or substance and accordingly are dismissed. 1.4 In view of above discussions, the miscellaneous applications filed by both the applicants/appellants and Revenue are disposed of and the appeals are taken up for hearing and for a decision on merits. 2. Before proceeding further on merits, we would like to record the following observations for appreciation by the authorities with regard to the judicial decorum and appropriate participation by Revenue officers in disposal of the appeals before the Tribunal. 2.1 During the course of hearing of appeals, the Commissioner of CGST and Central Excise, Aurangabad who desired long adjournment of the hearing and had been required, for the express purpose of justifying such action, to present himself and did so submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellants, pursuant to the Order dated 27.07.2017, passed by the learned National Company Law Tribunal in CSP No.462 of 2017, in approving the scheme of Amalgamation. It is further intriguing that the said Commissioner heading the Aurangabad Commissionerate, feigned ignorance of the above facts, when more specifically, in the impugned order dated 08.03.2019 at para 2.2.2 had specifically recorded that the noticee i.e., M/s Videocon D2H Limited is now merged into Dish TV India Limited. Thus, we fail to understand how the same Authority, though he is a different officer posted subsequently, can take a view contrary to the views expressed by his predecessor, even as he claims ignorance. 2.4 Thus, it is apparent that, in seeking unnecessary adjournments, without any reasonable or valid grounds by Revenue, there is ulterior motive and purpose in obstructing the very process of justice delivery by the Judicial forum. Therefore, the action on the part of the Commissioner of CGST and Central Excise, Aurangabad is highly inappropriate. 2.5 Further, we are also unable to understand the intent of the Commissioner of CGST and Central Excise, Aurangabad in his letter F. No. TC(P)97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oor Dwelling Unit (ODU) kit including dish antenna, other components and accessories to enable reception of DTH services. 4.1 On noticing that for providing broadcasting services to their customers, the appellants are purchasing STBs and installing the same at the customers premises on rental basis under an agreement, the jurisdictional Range Officer, had called for certain details and the same were submitted by the appellants under the cover of their letter dated 11.01.2011. The appellants were of the view that service tax was not payable, since they are paying VAT on the amount realized from the customers in lieu of set-top box charges or satellite box usage charges, claiming the same as deemed sale . However, the department interpreted that in case of STBs, only the physical possession is with the customer, but the monitoring, sending and usage of signals are vested with the appellants and under their supervision, signals are being transmitted to the site of customers. Hence, the Department treated such modus operandi, as a case of transfer of right to use the STBs, without involving transfer of possession or effective control of the goods and thus, concluded that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med sale, under the provisions of the Article 366 (29A)(d) of the Constitution of India. Thus, he submitted that service tax liability cannot be fastened on the appellants on the rental charges of STBs. He further submitted that in respect of installation and activation of the STBs, the appellants had duly discharged the service tax liability on the charges claimed from the customers. 5.3 Learned Advocate has stated that STBs are to be regarded as movable goods namely, chattels supplied to the subscribers for their use in seeking the channels in the privacy of their homes, which they want to, and thus, the subscribers operate the STBs to view and also apply for various channels, movies on demands etc. Thus, he submitted that the levy of service tax on the services provided by the appellants can only be under the taxable category of Supply of Tangible Goods for Use (STGU), without transferring the Right to Use, both prior to 2012 and thereafter. In this context, the learned Advocate has relied on the Circular Nos. 334/1/2008 TRU, dated 29.02.2008 and 198/8/2016 S.T., dated 17.08.2016 issued by the Central Board of Excise Customs (CBEC), to state that if VAT has been paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various arguments, now being canvassed and that it is also not known to the parties in the present appeal, as to whether, VAT liability had been discharged by the concerned assessee in that decided case or not, not taken into consideration the definition of Service under Section 65B (44) ibid, which excludes from its purview any transaction which amounts to sale under Article 366 (29A), i.e., deemed sale , under the Constitution of India. He also claimed that the set-top boxes and the consideration in the form of rental charges cannot be subsumed, as if it is a consideration for the broadcasting services, when the understanding between the subscribers and the Appellant is that the consideration of rental is for transfer of right to use of the set-top boxes. 5.6 In respect of the Appeal No.ST/86706/2019, learned Advocate submitted that VAT was being paid on the total rental amount received in a particular year and that the rental amounts were spread over seven years on a pro-rata basis. He further submitted that from 01.04.2015, no rentals were being collected and there were jural relationship of access charges on which service tax was paid by the appellants. He also submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, the learned Special Counsel pointed out that the appellant is misrepresenting the service rendered by them by claiming that the classification of the rental consideration if taxed to service tax both pre and post-2012 can only be under STGU Service, as it is contrary to the facts of the case. He states that STB is an indispensable part of broadcasting service provided by the appellant to its subscribers. The transaction is to provide service and not sell STBs and STBs are only used for providing the service and do not have a value of their own. The broadcasting Service provided by the appellant was liable to pay service tax both before 01.07.2012 and thereafter, upon introduction of the Negative list scheme. 6.3. Learned Special Counsel Shri C. Dhanasekaran, appearing on behalf of the Revenue has stated that the appellants cannot provide broadcasting services to their customers without STBs, as the signals are transmitted and displayed on the customer s television with the help of STBs; that the STB is an indispensable part of the broadcasting services provided by the appellants to their subscribers, and as such, are leviable to service tax. In support of his view point, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multisystem operator or any other person on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner; (b) On plain reading of the above statutory provisions, we find that the services connected with broadcasting can be categorized under these different groups: (i) programme selection, scheduling or presentation of sound or visual matter; (ii) activity of selling of time slots or obtaining spo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover services under that head used for providing such principal service, unless otherwise specified. There is no such specification provided anywhere in the statute book that broadcasting services would include within its ambit, all services used to provide the broadcasting services. It is also relevant to note that post - 2012, there is no separate specified head of broadcasting service, under which the learned adjudicating authority has classified supply of STBs as a part of such taxable service. Thus, we are of the considered view that supply of STBs, conferring the right to use the same by the subscriber, would not fall either under broadcasting service or under STGU for levy of service tax thereon. Rather, the activity of such supply, would more appropriately be considered as a deemed sale and recognizing such aspect, the appellants had rightly discharged the VAT liability thereon and also adoption of such modus operandi had been accepted all along by the jurisdictional VAT authorities, while finalizing the tax assessments. (f) For the period post-2012, the category of services hitherto defined under the erstwhile regime were merged under a common phrase i.e., service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the goods are delivered for use. What is required is that the goods should be in existence so that they may be used. (f) The levy of tax under Article 366(29A)(d) is not on the use of goods. It is on the transfer of the right to use goods which accrues only on account of the transfer of the right. In other words, the right to use goods arises only on the transfer of such right to use goods. (g) The transfer of right is the sine qua non for the right to use any goods, and such transfer takes place when the contract is executed under which the right is vested in the lessee. (h) The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to the identity of the goods is shown the transaction is exigible to tax. (i) The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use the goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant. (g) Further, the phrase right to use the goods and transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority of India (TRAI) as well as under the Finance Act, 1994 for determining the levy of tax on the services and the relevant rules and regulations framed thereunder. (b) It is seen that prior to the introduction of DTH services, the only source of distribution of TV Channels was through cable. To have an alternative to Cable and provide better services to the consumers, the Government of India rolled out the DTH License in the Year 2003 subsequent to which, DTH License was issued to eligible persons including the appellants who are one of such DTH license holder and DTH service provider to the subscribers. In India, DTH service was a recent entrant as compared to cable transmission. It has certain technical advantages over cable operations. DTH is an addressable system and covers the entire country. The authority to issue DTH license vests with the Government of India, Ministry of Information Broadcasting. (c) Earlier, the Government had legislated the Cable Television Networks (Regulation) Act, 1995 in order to regulate the cable television networks in the country and to protect the interest of the consumers. The need for provision of STBs arose from the statutory r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide DTH service, inasmuch as STB is a necessary equipment to receive the DTH signals sent in encrypted form, to be received through the dish antenna, and which can be decoded and displayed on the television of the subscriber. From the above, we thus come to the conclusion that STB is a part of Customer Premises Equipment which is necessary for providing DTH service to a subscriber. It may be seen that STB is used as an equipment, being part of CPE, and that whenever the television channels are viewed by a subscriber, the said STB along with antenna are used for receiving and decoding the signals as a part of conditional access system. In other words, the broadcasting of signals by the appellants for viewing television channels are distinct by themselves from the STBs and other equipment. Thus, we conclude that the nature of activity undertaken by the DTH operator in providing STB to a subscriber, is provision of an equipment, which is one-time activity, and it is not a part of DTH service in providing television channels for viewing by the subscriber. (iii) whether provision of STBs by the appellants to the subscribers would amount to rendition of service? On reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are enhancing the quality of services as held in the case UCN cables (supra). Hence, they claim that STB shall be subject to levy of service tax as supply of tangible goods for use with no legal right of possession or control . (d) We have examined each of the claims made by the Revenue in detail in the following paragraphs. Revenue strongly relies upon the Hon ble Supreme Court s Judgment in the case of Idea Mobile Communication Ltd. (supra), wherein it has been held that consideration for SIM Card would be more relevant to service tax and not amount to sale of goods. On reading of the said judgement, it transpires that the Hon ble Court have proceeded on the basis that the charges for SIM Card were activation charges and the SIM was relevant to service and would not be goods in the manner understood in common parlance for levy of VAT thereon. However, in the present case, the STBs are being transferred for consideration and on the activation charges, installation charges and subscription charges for the broadcasting contents, service tax is being paid by the appellants. Therefore, the ratio of the above judgement relied upon by Revenue cannot be applied to decide the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice whether the use of the paper upon which an image is printed using certain consumables and chemicals, being incidental to the provision of service, amount to sale of goods in terms of Article 366(29A)(b) of the Constitution and whether value of photography service shall be determined in isolation of cost of such goods? . The said question was answered affirmatively in favour of the appellant therein, holding that the value of photographic paper being leviable to sales tax under works contract service, by considering it as deemed sale, the said consumables cannot be included in the value of photography service for the purpose of imposition of service tax. Similarly, an identical issue regarding deemed sale vis- -vis service has also been discussed by the Hon ble Supreme Court in the case of Safety Retreading Co. (P) Ltd. Vs. Commissioner of C. Ex., Salem reported in 2017 (48) S.T.R. 97 (S.C.). The relevant paragraph in the said judgement is extracted herein below: 10. The exigibility of the component of the gross turnover of the assessee to service tax in respect of which the assessee had paid taxes under the local Act whereunder it was registered as a Works Contractor, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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