Transponder bandwidth leasing is not broadcasting service when signal transmission is merely incidental to space segment capacity.

Mere leasing of transponder space segment capacity on a foreign satellite, where signal transmission is only incidental, is not taxable broadcasting service. The text reads section 65(15) of the Finance Act, 1994 with section 2(c) of the Prasar Bharati Act, 1990 and states that a satellite operator acting only as a relay station that receives, amplifies and retransmits signals does not itself become a broadcaster. It also says the inclusive limbs of section 65(15) and section 65(16) do not apply, and section 65A cannot be used to reclassify the transaction as broadcasting. On that basis, the service tax demand, interest and penalty were set aside.

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Issues: Whether the charges paid for use of 8 MHz transponder bandwidth on a foreign satellite constituted consideration for a taxable broadcasting service liable to service tax under reverse charge, or were only for lease of space segment capacity and therefore outside the charge.

Analysis: The definition of broadcasting in section 65(15) of the Finance Act, 1994 has to be read with section 2(c) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990, which requires dissemination through the medium of a relay station. A satellite operator that merely receives, amplifies and retransmits signals as a relay station does not itself become the broadcaster. The second inclusive limb of section 65(15) and section 65(16) of the Finance Act, 1994 also do not apply because the entity was not engaged in providing broadcasting service in the statutory sense. The agreement and service order showed a fixed monthly payment for allocated bandwidth on the transponder, with space segment allocation being the real subject matter of the contract and signal transmission being only ancillary. Since the transaction was not a taxable service classifiable as broadcasting, section 65A of the Finance Act, 1994 could not be invoked to apply the essential character test to combine a non-taxable lease with an alleged service.

Conclusion: The demand could not be sustained and the alleged service was not taxable broadcasting service in the hands of the appellant.

Final Conclusion: The order confirming service tax, interest and penalty was set aside and the appeal succeeded.

Ratio Decidendi: Mere leasing of transponder space segment capacity by a satellite operator, where transmission of signals is only incidental to the lease, is not broadcasting service; a relay station that retransmits signals does not itself answer the statutory description of broadcaster or broadcasting agency.

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