2025 (2) TMI 556 - AT - Service Tax

DTH operators' Set Top Box supply to subscribers constitutes deemed sale under VAT, not service tax

CESTAT Mumbai held that supply of Set Top Boxes by DTH operators to subscribers constitutes deemed sale under state VAT legislation, not a service taxable ... Levy of service tax - value of turnover towards cable network service charges and sale of Set Top Box (STB) as shown in the Profit & Loss account enclosed with ITR-V Income Tax Return for the Financial Year 2014- 2015 in terms of the Finance Act, 1994 - HELD THAT:- Though the SCN was issued in the present case prior to the issue of the instructions dated 26.10.2021, the crux of the above instructions squarely apply to the present case. Firstly, the original authority did not discuss the issues under consideration for coming to a conclusion and for confirming the demands raised in show-cause notice, and the learned Commissioner (Appeals) had upheld such order, on the basis of the decision taken by the Tribunal in the case of UCN Cable Network Pvt. Ltd. [2016 (9) TMI 188 - CESTAT MUMBAI] without discussing how the present facts of the case fits in to such relied upon decision. The issue of supply of Set Top Box (STB) by the MSO to their customer, whether it would amenable to levy of service tax or not, was examined by the Co-ordinate Bench of this Tribunal in the case of Dish TV India Limited Vs. Commissioner of Central Excise and Service Tax, Aurangabad [2023 (7) TMI 1238 - CESTAT MUMBAI], wherein it was held that supply of STBs by the appellants is not a service, rather it is a deemed sale, leviable to VAT under the State legislature. The appellants themselves have correctly determined the service tax payable by them, from their financial records duly certified by the Chartered Accountant, and thus have fulfilled all the requirements for discharge of service tax liability along with applicable interest and penalty voluntarily, before filing this appeal before the Tribunal on 28.06.2021. In the above circumstances and on the basis of the discussions, there are no strong grounds found to hold that the appellants did not pay service tax in respect of the differential amount demanded in the show cause proceedings, owing to the reason that the service tax on the taxable value of turnover relating to the financial year 2014-2015 as detailed, have been duly paid by the appellants and the same has been accepted by the Department. Conclusion - The nature of activity undertaken by the DTH operator in providing STB to a subscriber, is provision of an equipment, which is one-time activity, and it is not a part of DTH service in providing television channels for viewing by the subscriber. STBs are deemed sales and not subject to service tax. The impugned order set aside - appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered was whether the appellants were liable to pay service tax on the turnover related to cable network service charges and the sale of Set Top Boxes (STBs) amounting to Rs. 47,99,960/- for the financial year 2014-2015 under the Finance Act, 1994.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents: The primary legal framework involved was the Finance Act, 1994, specifically concerning the levy of service tax. The case also referenced the Central Board of Indirect Taxes and Customs (CBIC) instructions regarding the issuance of show cause notices based on ITR-TDS data. The Tribunal's decision in the case of UCN Cable Network Pvt. Ltd. and the Supreme Court's ruling on the nature of STBs as a deemed sale (not liable to service tax) were pivotal precedents.Court's interpretation and reasoning: The Tribunal scrutinized the original and appellate authorities' orders, which were based on the assumption that the entire turnover was liable to service tax. It noted that the CBIC had issued instructions to ensure show cause notices were not issued indiscriminately based on discrepancies between ITR-TDS data and service tax returns without proper verification. The Tribunal also considered the precedent that STBs are deemed sales and not services, thereby not subject to service tax.Key evidence and findings: The appellants provided a detailed breakdown of their turnover, certified by a Chartered Accountant, distinguishing between service-related turnover and STB sales. The Tribunal found that the appellants had already paid the service tax, interest, and penalties voluntarily, based on the correct taxable turnover.Application of law to facts: The Tribunal applied the CBIC instructions and relevant case law to determine that the appellants' turnover related to STBs was not subject to service tax. It further acknowledged the appellants' voluntary compliance in paying the service tax on the correct turnover amount, as verified by their financial records.Treatment of competing arguments: The Tribunal noted that the original and appellate authorities failed to discuss how the facts of the case aligned with the relied-upon decision in UCN Cable Network Pvt. Ltd. It also highlighted the lack of consideration for the CBIC's instructions in the adjudication process.Conclusions: The Tribunal concluded that the appellants had correctly determined and paid their service tax liability, including interest and penalties. It found no grounds to uphold the demands made in the show cause proceedings, given the appellants' compliance and the CBIC's instructions.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized that 'the nature of activity undertaken by the DTH operator in providing STB to a subscriber, is provision of an equipment, which is one-time activity, and it is not a part of DTH service in providing television channels for viewing by the subscriber.'Core principles established: The Tribunal reinforced the principle that STBs are deemed sales and not subject to service tax. It also highlighted the necessity of adhering to CBIC instructions to avoid indiscriminate issuance of show cause notices based on ITR-TDS data discrepancies.Final determinations on each issue: The Tribunal set aside the impugned order, allowing the appeal based on the appellants' voluntary payment of the differential service tax amount. It recognized the appellants' compliance with the law and the lack of evidence supporting the additional service tax demand.