By TIOL News Service

MUMBAI, SEPT 03, 2015: THE respondent is registered as Multi system operator (MSO) and discharges service tax liability.

An investigation revealed that they had allegedly under-reported the number of subscribers and there was short payment of service tax.

Four show cause notices were issued demanding differential service tax liability for the period October 2005 to September 2009.

The adjudicating authority after considering the submissions and on perusal of the agreement entered 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. Inasmuch as the proceedings initiated by the show cause notices were dropped.

Unhappy Revenue, is in appeal.

The AR submitted that the first agreement entered by the respondent (dated 22/02/2005) 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 ST on actual number of subscribers which was less . Further, subsequent agreements between respondent and Star India did not have the subscribers to be serviced but indicated only amount payable which is an incorrect approach for discharging the service tax liability. As such, the show cause notice correctly takes the figure from agreement dated 22/02/2005 and computes the ST liability. Moreover, as per the Telecom Regulatory Authority of India,the subscriber base is required to be indicated. Lastly, in the appellant's own case the Tribunal - 2014-TIOL-1659-CESTAT-MUM had confirmed the demands.

The respondent adverted to the findings of adjudicating authority wherein it is recorded that the subscriber base is purely notional and theoretical, one based on assumptions and presumptions; that agreements are indicating exact amount payable by the respondent as subscription fees to Star India; that in view of the major discrepancy, study was initiated by the Telecom Regulatory authority and report was submitted to Apex Court and it was informed 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; 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.

The Bench inter alia observed -

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 respondent's own case - 2014-TIOL-1659-CESTAT-MUM and held that service tax liability needs to be discharged on the agreement which indicated the number of subscribers.

++ The above 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.

Period January 2006 to September 2009

++ We find that the subsequent agreements entered by the respondent with Star India do not indicate number of subscribers in the Annexure's but indicates the subscription fees to be paid by the respondent to Star India.

++ It can be seen from the 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.

++ 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.

++ 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.

Conclusion:

++ Demand 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 authority's 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.

The appeal was disposed of.

(See 2015-TIOL-1858-CESTAT-MUM)