2011 (24) S.T.R. 723 (Tri. - Del.

)
IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI
[COURT NO. II]
S/Shri D.N. Panda, Member (J) and Sahab Singh, Member (T)
MOON NETWORK PVT. LTD.
Versus
COMMISSIONER OF CENTRAL EXCISE, KANPUR
Final Order No. ST/274/2011(PB), dated 1-6-2011 in Appeal No. ST/16/2007
Broadcasting service - Cable operator - Section 2(c) of Prasar Bharti
(Broadcasting Corporation of India) Act, 1990 defining ‘broadcasting’ to mean
dissemination of any form of communication like signals, writing, picture, images
and sound through space or cable, to general public directly or indirectly through
medium of relay - Cable operator providing viewables through cable found to be
providing broadcasting service liable to Service tax under Section 65(105)(zk)
ibid, even though there was no capturing of viewables from satellite - However,
for period from 16-7-2001 to 9-7-2004, cable operator was entitled to exemption
benefit under Notification No. 8/2001-S.T. and was liable to Service tax w.e.f. 9-7-
2004 till 31-7-2005, when said exemption notification was rescinded - Section
65(15) of Finance Act, 1994. [paras 13, 14]
Demand - Reconciliation of tax liability - Figures in balance sheet and books
of account seized from computer of assessee should not be in variance with those
submitted by them, and in case of variation, penalty has to be imposed - Since
Service tax is levied on receipt basis, it excludes payment for services provided in
past and future - Receipts of current taxable period is to be determined to avoid
double taxation of figures of past or future realizations - Every care is to be taken
to tax receipts of the taxable period only in which service was provided - Section
73 of Finance Act, 1994. [paras 12.1, 12.2, 12.6]
Penalty - Imposition of - No finding in adjudication order about mala fide or
intention to evade Service tax - Search of premises of assessee and use of some
pass words to operate computer, could not ipso facto give rise to penal
consequences of law unless data in computer was widely different to figures
claimed by assessee - Section 78 of Finance Act, 1994. [paras 12.3, 12.4]
Penalty - Imposition of - Delay in payment of Service tax - New levy of
Service tax and liability to be ascertained by reconciliation of past, future figures
and current receipts - Such delay needs to be redressed by imposition of penalty
of Rs. 100/- per day under Section 76 of Finance Act, 1994. [paras 12.5, 16]
Penalty - Imposition of - Classification dispute involving interpretation of law
deserves lenient consideration - In that view, full relief granted from penalty
under Section 78 of Finance Act, 1994. [para 15]
Interest - Liability of - It is payable after determination of actual liability of
tax - Section 75 of Finance Act, 1994. [paras 12.6, 17]

Appeal partly allowed

[Order per : D.N. Panda, Member (J)]. - 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 Broadcasting
service and appellant is entitled to benefit of Notification No. 8/2001-S.T., 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 to 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. Date Amount
1. 3-9-2005 Rs. 5 lakhs
2. 15-9-2005 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 Supdt.,
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 multi-system operator service under the cable operator
category.
4. Shri Krishnan fairly submits that multi-system 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 current 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 Sections 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 deserve 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 broadcasting 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 cannot 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 mala fide 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-S.T., dated 9th
July, 2001 up to 9-7-2004 since such exemption notification was rescinded by a fresh Notification No. 7/2004-S.T.,
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 it’s
balance sheet disclosed higher figure for imposing tax.
10. So far as second issue is concerned contention of Revenue is that Broadcasting 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, department’s 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 multi-
system 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 becomes taxable in the year of receipt. 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 of Multi-system operation involved 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 mala fide 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 shall be compared 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 unless
during reconciliation otherwise found.
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 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-S.T., 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 has 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-S.T., 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 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)