2025 (11) TMI 1882 - AT - Service Tax

Section 80 relief: retransmission service tax penalties waived, extended limitation period rejected for lack of suppression

Shri Babu Lal Kushwaha Versus Commissioner of Central Excise & CGST, Kanpur

CESTAT held that while the service tax liability on retransmission services was not disputed, the appellant's activities did not fall within the generally ... Recovery of service tax not/short paid with interest and penalty - providing taxable branded services of retransmission of broadcast television signals received from their Multi System Operator (MSO) - availability of benefit of threshold exemption under N/N. 33/2012-ST dated 20.06.2012 - invocation of provision of Section 80 for waiver of penalties - invocation of extended period of limitation - suppression of facts or not - HELD THAT:- The tax liability is not in dispute. It appears that the scope of activities undertaken by the Appellant is not falling under generally understood activities of cable operator who is involved in distribution of television signals to various clients. Admittedly, the television signals received from satellite is managed and handled through various layers of persons/activities till it reaches the ultimate customer. The Appellant’s role is as an intermediatory and apparently there could be a bona fide belief on their part regarding the tax liability under the said category. As already noted that they are not acting as a local cable TV operator in transmitting signals to the clients. Neither they are involved in receiving satellite signals as a MSO. The Finance Act, 1994 borrows the definitions of Cable operator’ and ‘Cable service’ from Cable Television Network (Regulation) Act, 1995. Considering scope of definition under Section 2(aa) of the said Act there is a possibility of bona fide belief for non-tax liability - this is a fit case for invoking the provision of Section 80 for waiver of penalties imposed on the Appellant. Accordingly, the penalties are set aside. Time limitation - suppression of facts or not - HELD THAT:- In the absence of any findings of suppression, misstatement etc., with intent to evade payment of service tax in the impugned order and in the Order-in-Original, the SCN is definitely barred by limitation. It is a settled position in law that mere failure to provide certain information or declaration, certain fact would not amount to suppression with intent to evade payment of taxes for invocation of extended period of limitation. The Appellant could have entertained a bona fide belief that he was not liable to pay any service tax. In the case of Ajitabh Mishra Vs. Commissioner of Central Excise & CGST, Raipur [2025 (6) TMI 12 - CESTAT NEW DELHI] it was held that 'in view of the exemption provisions, the appellant was under a bona-fide belief that the services provided are not taxable. This seems to be evident by the fact that in the balance sheet and the income tax returns filed by them, they have fully described the receipt of the amount towards the services received. At the relevant time, the normal period prescribed for issuing the show cause notice was 18 months, however the show cause notice dated 12.10.2018 was issued raising the demand for the period 2013–2014. The demand raised is, therefore, barred by limitation and in view of the discussion, above the extended period is not invokable.' The appeal filed by the Appellant is allowed on limitation. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether the demand of service tax for the period 2014-15 to 2017-18 (up to June 2017), raised by show cause notice dated 07.11.2019, was barred by limitation for want of conditions necessary to invoke the extended period under Section 73 of the Finance Act, 1994. (2) Whether penalties imposed under Sections 78 and 77 of the Finance Act, 1994 and late fee under Section 70 read with Rule 7C of the Service Tax Rules, 1994 were sustainable in view of the assessee's bona fide belief regarding tax liability and the discretionary relief under Section 80 of the Finance Act, 1994. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Limitation for service tax demand and invocation of extended period under Section 73 Legal framework (as discussed) The Court proceeded on the limitation scheme under Section 73 of the Finance Act, 1994, distinguishing the normal period of limitation from the extended period, which can be invoked only on grounds such as suppression of facts, fraud, collusion, or wilful misstatement with intent to evade payment of service tax. The Court noted that limitation is procedural and meant to confer finality to disputes. Interpretation and reasoning The disputed period was Financial Years 2014-15, 2015-16, 2016-17 and 2017-18 (up to June 2017), with the corresponding limitation cut-off dates specifically tabulated (30.09.2016, 30.09.2017, 30.09.2018 and 31.12.2018 respectively). The show cause notice was issued on 07.11.2019, i.e. 'much beyond' these limitation dates. The Court recorded that there were no findings either in the Order-in-Original or in the impugned appellate order of any suppression, misstatement, or similar conduct with intent to evade payment of service tax. It reiterated the settled position that mere failure to provide certain information or declarations does not, by itself, constitute 'suppression with intent to evade' so as to justify invocation of the extended period. The Court further accepted that the assessee could have been under a bona fide belief about non-taxability in light of the nature of its intermediary role in retransmission of signals, the definitional scheme under Section 2(aa) of the Cable Television Network (Regulation) Act, 1995 (from which the Finance Act borrows definitions of 'cable operator' and 'cable service'), and the manner in which similar issues have been viewed in precedent. Reliance was placed on the reasoning adopted in a prior decision (Ajitabh Mishra v. Commissioner of Central Excise & CGST, Raipur) where demands based solely on income-tax/balance-sheet data, with full disclosure by the assessee, were held not to involve suppression or mala fide and hence not to justify the extended period. That line of authority emphasizes that, where full disclosure is made in statutory accounts or income-tax returns and the dispute centres on taxability or exemption, extended limitation cannot be invoked. Conclusions The show cause notice dated 07.11.2019, having been issued beyond the normal limitation period and in the absence of any established suppression, misstatement or intent to evade, was held to be time-barred. The extended period under Section 73 was held inapplicable, and the entire service tax demand for the disputed period was set aside on limitation. Issue (2): Sustainability of penalties under Sections 78 and 77 and late fee under Section 70 read with Rule 7C; applicability of Section 80 Legal framework (as discussed) The Court addressed the penalty regime under Sections 78 and 77 of the Finance Act, 1994 and late fee under Section 70 read with Rule 7C of the Service Tax Rules, 1994. It also considered Section 80 of the Finance Act, 1994, which permits waiver of penalties where the assessee shows 'reasonable cause' for the failure giving rise to such penalties. The Finance Act, 1994 adopts the definitions of 'cable operator' and 'cable service' from the Cable Television Network (Regulation) Act, 1995, which informed the Court's assessment of the nature and tax perception of the assessee's activities. Interpretation and reasoning The Court noted that the tax liability itself was not disputed in the appeal. However, it found that the scope of the assessee's activities did not correspond to the generally understood role of a cable operator directly distributing television signals to end users, nor did the assessee function as a Multi System Operator receiving satellite signals. The assessee's role was characterized as that of an intermediary in the multi-layered process of transmission from satellite to ultimate customer. Given this intermediary character and the definitional framework drawn from the Cable Television Network (Regulation) Act, 1995, the Court held that there was a genuine scope for a bona fide belief on the part of the assessee about the absence or uncertainty of tax liability under the 'cable operator service' category. Having regard to this bona fide belief and to the manner in which similar issues had been treated in other decisions, the Court held that the case was fit for exercise of discretion under Section 80 to waive penalties. Conclusions The Court invoked Section 80 of the Finance Act, 1994 and set aside the penalties imposed on the assessee, including those under Sections 78 and 77 and the related late fee/penalty components. Independently of the limitation finding, the Court held that, on the facts, penalties were not warranted in view of the bona fide belief and reasonable cause established by the assessee.