Custom, Excise & Service Tax Tribunal
Commissioner Of Ce & Service Tax vs Intermedia Cable Communication Pvt. ... on 16 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/76/11 (Arising out of Order-in-Original No. 5 to 8/P-III/STC/COMMR/2010-11 dated 05.10.2010 passed by Commissioner of Central Excise Pune III) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) ================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Commissioner of CE & Service Tax, Pune III Appellant Vs. Intermedia Cable Communication Pvt. Ltd Respondent Appearance:
Shri K.S. Mishra,Addl. Commissioner (AR) for appellant Shri G. Natarajan, Advocate Shri Ganesh K.S. Iyer for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing: 16.07.2015 Date of Decision: 06.08.2015 ORDER NO Per: M.V. Ravindran This appeal is filed by the revenue against Order-in-Original No. 5 to 8/P-III/STC/COMMR/2010-11 dated 05.10.2010.
2. The relevant facts that arise for consideration are the respondent herein is registered with the service tax authorities as multi system operator and discharges service tax liability. An investigation was carried out against the respondent. It was noticed that they had under reported the number subscribers and there was short payment of the tax. Four show cause notices were issued demanding differential service tax liability for the period October 2005 to September 2009. The said show cause notices were contested by the respondent on merits. The adjudicating authority after considering the submissions made before him and on perusal of the agreement entered by the respondent with star India private Limited, came to a conclusion that the service tax liability discharged by the respondent assessee is correct and there is no short payment of service tax liability. Coming to such a conclusion he dropped the proceedings initiated by the show cause notices.
3. Learned Departmental Representative would draw our attention to the findings recorded by the adjudicating authority and would submit that the impugned order is incorrect and needs to be set aside. He would submit that the respondent under reported the number of subscribers to whom they rendered services. He would draw our attention to the first agreement entered by the respondent (dated 22/02/2005) and submit that the said agreement talks about the consideration payable by the appellant to star India. He would submit that the said agreement talks about approximately 86,000 subscribers to be included in specific consideration, but the appellant did not pay the service tax on the entire subscriber base but discharged service tax on actual number of subscribers which was less. He would further submit that subsequent agreements between respondent and star India did not have the subscribers to be serviced but indicated only amount payable which is incorrect approach for discharging the service tax liability. It is his submission that service tax liability is payable on number of subscribers to whom connections are given. He would submit that by entering in to an agreement which does not indicate the number subscribers to be serviced, the show cause notice correctly takes the figure from agreement dated 22/02/2005. It is his submission that the adjudicating authority has not appreciated the facts correctly. He would submit that as per the Telecom Regulatory Authority of India it is required to indicate scriber base which is as agreed by both service providers. He would submit that in the appellants own case this Tribunal vide order dated 07/08/2014 as reported at 2014 TIOL 1659 CESTAT MUM held against the respondent and confirmed the demands. He would read the findings recorded by the Tribunal.
4. Learned advocate appearing for the respondent would draw our attention to the findings of adjudicating authority. It is his submission that the adjudicating authority has recorded that the subscriber base is purely notional and theoretical, one based on assumptions and presumptions. He would draw our attention to the agreements dated 07/02/2006, 04/11/2006, 30/06/2008 and 30/06/2009 and submit that these agreements are indicating exact amount payable by the respondent as subscription fees to star India. It is his submission that the lower authorities have based upon agreement dated 22/02/2005 calculated the service tax liability without considering the actual number of subscribers on whose services service tax is discharged by the respondent. He would submit that in view of the major discrepancy, study was initiated by the Telecom revelatory authority and report was submitted to Apex Court and it was reported that there was no reliable information on the number of subscribers receiving various channels from broadcasters and it was also recorded that subscription to the broadcasters are negotiated and based on this amount subscriber base of MSO is arrived at. He would submit that the decision of the Tribunal in their own case is to be read in the facts of that case wherein number of the subscribers is indicated in the agreement.
5. We have considered the submissions made at length by both sides and perused the records.
6. The issue in the case in hand is whether the respondent has short paid the service tax or otherwise. It is undisputed that the respondent is discharging the service tax liability as MSO on the bills raised by them on subscribers to whom they give connections. It is the case of the revenue that the number of subscribers is under reported by the respondent and hence the subscriber base has to be reworked out and service tax liability needs to be discharged.
7. We find from records that the respondent enters into agreement with broadcasters annually for retrieving signals and passing them to his subscribers. The said agreements indicate the subscription fees to be given by the respondent to the broadcasters. In view of this it is imperative that agreement for the period in question needs to be read. We find that for the relevant period in question in this appeal is from October 2005 to September 2009.
8. For the demands raised for the period October 2005 to December 2005 it is noticed that the agreement dated 22/02/2005 was in force. On perusal of the said agreement it is noticed that the said agreement at Annexure A indicates number of subscribers whom respondent will render service as MSO. The very same agreement was considered by the bench in the respondents own case and held that service tax liability needs to be discharged on the agreement which indicated the number of subscribers. We reproduce that portion of the order.
5.8 The next question is whether on the basis of the subscriber base declared in the agreements with the broadcasters and the subscription charges given in the bills/invoice issued to the subscribers, can service tax demand be made and whether such an assessment of tax liability can be considered as arbitrary. Prior to its omission with effect from 10.09.2004, section 72 of the Finance Act, 1994 provided for best judgement assessment and read as follows:-
72. Best judgement assessment. If, -
(a) any person fails to furnish the return under Section 70, or
(b) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, The Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgement and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. The impugned order which is under challenge before us seeks to precisely do this based on the material gathered during the investigation and therefore, the said order is strictly in accordance with the legal provisions. Therefore, the determination of service tax liability in the impugned order cannot be challenged at all, especially in the absence of any contrary evidence adduced by the appellant as to its subscriber base. For the period subsequent to 10.09.2004, Section 73 which was substituted vide Finance Act, 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. The above reproduced ratio squarely covers the period from October 2005 to December 2005 and accordingly we hold that the respondent is liable to discharge the differential service tax liability taking the subscriber base as per the agreement in force. The respondent is also required to discharge the interest on the said differential service tax.
9. We find that the subsequent agreements entered by the respondent with Star India for the period from January 2006 to September 2009 do not indicate number of subscribers in the Annexures but indicates the subscription fees to be paid by the respondent to star India. Specimen Annexure-B is reproduced below.
It can be seen from the above reproduced specimen Annexure of the agreement dated 07/02/06 that the respondent had contracted and agreed to pay a specific amount for and as a subscription fee. This arrangement is continued by different agreements for the period in question in this appeal. As against this, the revenue has not produced any contrary evidence to indicate that appellant had larger subscriber base than as is declared in ST3 returns. The query from the bench as to any additional evidence being not noticed by the adjudicating authority, departmental representative was unable to show us any additional evidence gathered by the revenue. In the absence of any additional evidence that there being larger subscriber base, we find that the difference of service tax liability for the period January 2006 to September 2009 has been worked out based upon presumptions and assumptions. The subscriber base as calculated by the revenue for this period is a notional one, theoretical without any basis. We agree with the findings of the adjudicating authority that demands of differential service tax liability cannot be raised on presumptions and assumptions; in the absence of any evidence to show that respondent has provided services to under reported subscribers, collected the payments and did not discharge service tax thereon. In view of the, we hold that the adjudicating authority was correct in dropping the proceedings initiated by the show cause notices for the period January 2006 to September 2009 and we uphold that portion of the order and reject the appeal to that extent.
10. In sum, demands raised in the show cause notice for the period October 2005 to December 2005 is confirmed with interest, while demand for the period January 2006 to September 2009 has been correctly dropped by the adjudicating authority. As major portion of the adjudicating authoritys order is upheld and as there could confusion in the mind of the respondent we do not propose to impose any penalty on the respondent.
11. The appeal is disposed of as indicated hereinabove.
(Order pronounced in Court on.) (Raju) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
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