Custom, Excise & Service Tax Tribunal
M/S. Moon Network Pvt. Ltd vs Cce, Kanpur on 1 June, 2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM,
NEW DELHI-110066
COURT NO. II
Service Tax appeal No. 16 of 2007
[All arising out of Order-in-Original No. 29/Commnr./MP/2006 dated 30.10.2006 passed by the Commissioner of Central Excise, Kanpur].
Date of Hearing: 1st June, 2011
Date of Decision: 1st June, 2011
For approval and signature:
Honble Shri D.N. Panda, Judiciall Member;
Honble Shri Sahab Singh, Technical Member
1
Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Moon Network Pvt. Ltd., Appellant
Vs.
CCE, Kanpur Respondent
Present for the Appellant : Shri R. Krishnan, Advocate Present for the Respondent : Shri B.L. Soni, D.R. Coram: Honble Shri D.N. Panda, Judicial Member;
Honble Shri Sahab Singh, Technical Member FINAL ORDER NO. ________________ Per D.N. Panda:
Following two issues are involved in this appeal:-
i) Whether balance sheet figures shall ipso facto be measure of value for levy of tax of Rs. 23,44,400/- in the case of cable operator service provided for the period 10.9.2004 to 31st July, 2005? So also whether other consequences of law shall follow?
ii) Whether the service provided to T.V. viewers through cable network shall be called Broadcasing service and appellant is entitled to benefit of Notification No. 8/2001-ST dated 9th April, 2001 for the period 16.7.2001 to 9.7.2004 and whether such service shall be taxable from 10.7.2004 to 31st July, 2005? So also whether levy of service tax of Rs. 25,66,805/- was justified with other consequences of law to follow?
2. Learned Counsel Shri Krishnan appearing on behalf of the appellant submits that in so far as the first issue relating to Cable Operator Service is concerned that is covered by Section 65(105)(zs) of the Finance Act, 1994 (hereinafter referred as the Act) read with Section 65(21) thereof, and service tax demand of Rs. 23,44,400/- was levied with other consequences of law. He invites our attention to the taxing entry under Section 65(105) (zs) of the Act to submit that Multi-system operator providing cable service were brought to ambit of service tax w.e.f. 10.9.2004 under fold of cable service. Accordingly, when the appellant come to know that Appellants liability arose, liability was worked out excluding past considerations received and future consideration receivable from the gross receipts and tax thereon was paid. Reconciliation of alleged figure in balance sheet was done with book figures and tax liability of Rs. 20,49,897/- was calculated as well as paid Rs. 15.50 lacs vide following four challans making adjustment of Rs. 4,63,000/- from Cenvat account:
CHALLAN NO. D A T E AMOUNT 1 03.09.2005 Rs. 5 lakhs 2 15.09.2005 Rs. 5 lakhs 3 15.10.2005 Rs. 1.65 lakhs 4 15.10.2005 Rs. 3.85 lakhs Rs.15.50 lakhs
3. According to learned counsel, above payments are verifiable from acknowledgement issued by Suptd., Agra, Range-IV as appearing at page 74 of the paper book forming part of the appeal record. Although liability was worked out as above and tax thereon was paid through reconciliation process as aforesaid filing a statement exhibiting reconciliation, authority below ignored such statement. But the amount of Rs. 15,50,000/- paid as above was appropriated in the adjudication order while taxing the mullti system operator service under the cable operator category.
4. Shri Krishnan fairly submits that multisystem operator service became taxable w.e.f. 10.9.2004. Law being at the inception stage cable operators were not able to correctly ascertain liability because that required legal consultation and reconciliation of past and future figures eliminating from corrent receipts and tax was paid w.e.f. 3.9.2005 as per aforesaid challans. There was no mala fide on the part of the appellant to make any suppression of figures or fact. Even the adjudicating authority in his order did not find fault of appellant and no wilful intention to evade payment of service tax came to record. Therefore, imposition of penalty under Section 78 and 76 was unwarranted. Service tax registration was also forthwith taken and compliance with law was made without any suppression.
5. Liability as aforesaid was worked out by appellant from the books of account maintained by the assessee which was the basis for Revenue to make a case against it. Even in paragraph 30 of the order, nowhere it raises questionable conduct of the appellant for levy of penalty. He also submits that when balance sheets were filed before various authorities the appellant has made proper disclosure of the facts and figures while determination of liability under law required interpretation thereof to precisely workout tax payable. Therefore, the appellant desrve to be exonerated from penal consequences of law because after impost of levy w.e.f. 10.9.2004 this is the first adjudication against appellant.
5. In so far as the second issue is concerned Shri Krishnan explains that service tax of Rs. 25,66,805/- was levied bringing the appellant to the purview of Section 65(105)(zk) of the Act under the category of Broadcasting service provider by a Broadcasting agency. The term broadcasting service is defined by Section 65 (15) and 16) of the Act. The term has adopted meaning of broad casting as given to that term under Prasar Bharti Law. Such meaning no way brings the appellant to the fold of Broadcasting service under the Act for levy of service tax. According to him, if the service is provided through space and that too by transmission of electro magnetic waves, there may arise liability under the category of Broadcasting service. But present appellant being a multi-system operator was not carrying out any activity of transmission of electro-magnetic wave. It was only transmitting viewables through cable as cable operator. Therefore, when cable operator meaning is very clear under law, meaning of broadcasting service can not bring a cable operator to the fold of law under section 65(105)(zk) of the Act.
7. According to Shri Krishnan, the moot question involved in the second issue is classification of service under appropriate category. When law was complicated to understand statutory provisions, liability if any incurred and statutory obligation if any arose that needs a liberal construction to determine penal consequence of law while levy itself requires strict construction. A liberal approach is absence of malafide of appellant does not warrant imposition of penalty when law was at the initial stage of implantation.
8. On the point of levy Shri Krishnan categorically submits that if at all the nature of service provided by the appellant is considered to be Broadcasting service that was exempt under notification No. 8/2001-ST dated 9th July, 2001 up to 9.7.2004 since such exemption notification was rescinded by a fresh notification No. 7/2004-ST dated 9th July, 2004. His further submission is that when the appellant transmitted its programme through computer that shall not amount to transmitting magnetic wave. Therefore, there shall be no liability at all under the category of broadcasting service.
9. Learned D.R. per contra on the first dispute submits that appellant failed to provide details in respect of cable service provided for the period 10.9.2004 to 31st July, 2005 and it has admitted liability to the tune of Rs. 20,12,897/- on its own for which tax of Rs. 15,50,000/- was paid and that was appropriated in the adjudication. When the appellant could not give receipts of the past and receivables of future, the department was kept in dark. As a result of which figures gathered in the course of investigation remained uncontroverted and that became the basis of adjudication. Therefore, the appellant cannot deny its liability determined in adjudication as cable operator since its balance sheet disclosed higher figure for imposing tax.
10. So far as second issue is concerned contention of Revenue is that Broad casting service as is recognised by Prasar Bharti Law brought transmission either through space or through cable to the tax ambit. Cable operators providing transmission service came under broadcasting service being a specific category service according to the rules of classification. The appellant thus cannot deny its liability under Section 65(105)(zk) in respect of such service. So far as exemption notification benefit is concerned, departments contention is that such claim was considered in para 26 of adjudication order. But the appellant failed to succeed. Accordingly, appropriate order was passed by the authorities below.
11. Heard both sides and perused the record.
12.1 So far as first issue is concerned there being an admitted liability which was averred to be discharged in terms of different challans as depicted, there is nothing much to dialate on the issue because taxing entry under Section 65(105)(zs) brought Multi-system operator to the category of cable operation service using the word in relation to. Because of such inclusion the appellant is liable to service tax as Cable operator for the service of multisystem provided by it under the taxing entry under Section 65(105)(zs) read with Section 65(21) of the Act w.e.f. 10.9.2004 and liability under law is to be worked out making proper reconciliation of the figures appearing in balance sheet and figures in the books of account maintained subject to safeguard measure that account maintained in the seized computer as is recorded in para 2 to para 7 of the adjudication order is not in variance with the figures submitted by assessee. In case of variation appropriate inference is to be drawn.
12.2 The appellant having stated that reconciliation statement was given in adjudication there may not arise difficulty to re-examine the figures of the previous year and succeeding year with the current year figures and Service tax levied on receipt basis and value of the taxable service received being taxable during a taxable period, that should exclude the payment of service provided in the past and service to be provided in future since future realisation since that becomes taxable in the year of recipt. Receipts of the current taxable period is to be determined to avoid double taxation of the figures of the past or future realisations. Every care is to be taken to tax the receipts of the taxable period only in which service was provided. Learned Counsel at this stage submitted that they shall cooperate with the department to workout tax liability in respect Multi-system operation is concerned in the first category of dispute.
12.3 The appellant faced penal consequence under Section 78 of the Finance Act in respect of first category of dispute. There is no finding in the adjudication about the malafide of the appellant and also absence of any intention to evade. No doubt, the appellants premises were searched and some pass words were found to have been used to operate the computer. That shall not ipso facto give rise to penal consequences of law unless data in computer brings a wide difference to the figures claimed by the appellant.
12.4 We have already indicated that the authority shall provide opportunity to the appellant to reconcile the figures claimed by it,, and figures appearing in the balance sheet compare with the figures extracted from computer. Since no mala fide is apparent at present on reading of para 30 of the order, the appellant deserves to be exonerated from penal consequences of law under Section 78 of the Finance Act, 1994 in respect of first issue.
12.5 So far as penalty of Rs. 100/- per day imposed under Section 76 is concerned for the delay in payment of service tax as has been depicted hereinbefore, such a delay needs to be redressed by imposition of penalty under Section 76 of the Act and we confirm adjudication order in respect of such penalty.
12.6. So far as interest under Section 75 is concerned since there is tax liability, such interest become payable upon determination of actual liability. Thus tax demand is confirmed subject to reconciliation with concession in penalty to the above extent. If the authority finds that computer figures and book figure differs, and the authority is not satisfied about reasons of discrepancy, if any adduced, he may invoke penal provisions of section 78 of the Act.
13. We have examined the second issue as aforesaid. It appears that there was confusion in law as to whether service provided by a cable operator without capturing the viewables from satellite amounts to broadcasting service. In this connection, we have examined meaning of the term broadcasting appearing in section 65(15) of the Act. Meaning of such term has been borrowed from section 2 (c) of Prasar Bharti (Broadcasting Corporation of India) Act, 1990. According to that section broadcasting means dissemination of any form of communication like signals, writing, picture, images and sound through space or cable to the to the general public directly or indirectly through medium of relay. Appellant disseminated viewables through cable resulting in broadcasting service. The moment communication is disseminated to the general public either through space or cable that become broadcasting. Such a service being provided by the appellant, it falls in the category of broadcasting service and that is taxable under Section 65 (105)(zc) of the Act. Accordingly there shall be liability of the appellant on this service for the period 16.7.2001 to 31st July, 2005. But it was brought to our notice that exemption notification No. 8/2001-ST dated 9th July, 2001 was issued to exempt cable T.V. operators providing service in relation to broadcasting service till 9.7.2004 and such notification was rescinded on 9.7.2004 by notification No. 7/2004 ceasing exemption.
14. It is the case of the appellant that it was cable T.V. operator and being so they invited liability under Section 65(105)(zs) read with section 65(21) of the Act as has been held while deciding first issue. When it is held that the Appellant was broadcasting service provider and it hasd incurred tax liability as such service provider, it is entitled to the exemption benefit for the period from 16.7.2001 to 9.7.2004 under Notification No. 8/2001-ST dated 9th July, 2001. But it has incurred liability w.e.f. 9.7.2004 till 31.7.2005 under the taxing entry enacted under Section 65(105)(zk) of the Act when the exemption notification was rescinded. The appellant accordingly gets partial relief in respect arise of tax liability under issue No. 2, which shall be recomputed by Adjudicating Authority.
15. Coming to the penal consequences of law having noticed the features relating no elements of penal consequence in the impugned order, view taken in this regard in respect of issue No. 1 is equally applies to the penal consequences under Section 78 of the Finance Act, 1994, in respect of second issue. It deserves lenient consideration since classification dispute was persisting and that was involving interpretation of law. The appellant gets full relief of penalty under Section 78 of the Act for the impugned period and the impugned order to that extent is set aside.
16. We confirm our view for levy of penalty under Section 76 of the Act as has been stated hereinbefore in respect of first issue and that shall be payable by the appellant.
17. So far as interest liability in respect of second issue is concerned, the appellant shall also be liable to interest under Section 75 of the Act on the ultimate liability that shall be determined relating to no exemption period as aforesaid.
18. In the result, appeal is partly allowed to the extent indicated above in respect of each issue and original authority has to re-determine liability for the reasons aforesaid.
(Dictated & pronounced in the Open Court.) (D.N. PANDA) JUDICIAL MEMBER (SAHAB SINGH) TECHNICAL MEMBER RK 12 ST/16/2007