Service Tax
TRT-2025-
Cestat Chennai
Date:-12-10-22
In:-
Issue Favourable to Tax Payer ?:-
Date of order: 12 October 2022
Facts:
- The Responded, M/s. Hathway Sukhamrit Cable and Datacom Private Ltd. (now known as M/s. Hathway Patiala Cable Pvt. Ltd.), were providing “cable operator services”.
- Scrutiny and investigation was conducted including recording of the statements of Director as well as authorised signatory of respondent which, according to Revenue, revealed that the respondent had evaded service tax by suppressing the value of taxable service provided as they had not paid service tax on the gross amount of subscription collected from ultimate consumers and accordingly a show cause notice dated 23.3.2018 was issued to the respondent.
- 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.
Issue:
- Whether the respondent - a Multi System Operator (MSO) was required to pay service tax on the gross amount collected 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?
Order
- The Tribunal observed that it is the specific case of the respondent that they i.e. MSO is providing services to Local Cable Operator (LCO) only and the said LCO through its own network is distributing that contents/services to the ultimate customer/consumer and that the responsibility of maintenance of network and complaints regarding the reception of content is entirely on LCO, therefore it is the LCO who is providing the content, maintenance and collection services to the ultimate subscriber whereas the respondent is only providing services to LCO at a single point of his network.
- In another case namely Service Companies vs. Union of India Hon’ble Supreme Court has
- laid down that service tax is imposed every time service is rendered to the customer/client and thus the taxable event is such exercise/ activity undertaken by the service provider and each time service tax gets attracted. Therefore, be it MSOs or LCOs both have to pay service tax on their respective taxable event or we can say on the activity undertaken by them respectively being the service provider i.e. MSOs to LCOs and LCOs to subscribers/ultimate customers.
- Owing to the business model of cable operator industry, the MSO is providing cable operator services to LCO and not to ultimate consumer and hence the MSO would be liable to pay service tax only on the amount received from LCOs whereas LCOs will be separately liable for discharging service tax on gross amount received from the ultimate customers for the service provided by LCO to them.
- In view of the discussions made hereinabove, the appeal filed by revenue is rejected and the cross-objections of respondent are accordingly disposed of.
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