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2020 (7) TMI 265
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....ld be leviable to service tax under the head 'broadcasting service' in the hands of the Appellant under the reverse charge mechanism. According to the Appellant, the Master Service Agreement, the Agreement entered into between Intelsat and the Appellant is for securing a dedicated 8MHz bandwidth on the transponder of Intelsat satellite IS-10/IS-20, the satellite, while according to the Department the down linking of the signals from the satellite is transmission of signals covered by the definition of 'broadcasting' and, therefore, leviable to service tax. 3. The Appellant is a Public Limited Company having its corporate office in Noida and its registered office at 7A, Sandesh Nagar, Kankhal, Haridwar. The Appellant claims to be engaged in the business of broadcasting socio, spiritual and cultural television channels, for which it has a network of three 24x7 television channels, namely Aastha, Aastha Bhajan and Vedic. 4. An Agreement was entered into between the Appellant and Intelsat on February 27, 2008. It provides that upon execution of a service order by both the parties under the Agreement, Intelsat shall provide to the Appellant and the Appellant shall purchase from In....
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....e tax as per reverse charge basis under Section 66A of the Finance Act, 1994 on the above said amount paid during the period 2009-10 to 2014-15 (upto July 2014) xxxxxxxxxx 5. In view of the above, it appears that the assessee is liable to pay Service tax amounting to Rs. 1,06,43,622/- including Edu. Cess and SHE Cess for the period 2009-10 to 2014-15(upto July 2014) at applicable rates on the amount of paid to M/s Intelsat using the transponder of their satellite for down-linking and up-linking of the programme." [emphasis supplied] 8. The Appellant submitted a detailed reply pointing out that it had not received any 'broadcasting service' from Intelsat, since the activity of using the transponder of the Intelsat satellite for down linking and up linking of the programme signals is not covered under the definition of 'broadcasting service'. It was also stated that the Appellant was neither a recipient of 'broadcasting service', nor was Intelsat a service provider. 9. The Commissioner, however, did not accept the contentions advanced by the Appellant and confirmed the demand for the period upto June, 2012 but dropped the demand for the remaining period after June, ....
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....y or representative in India or any agent appointed in India or any person who acts on its behalf in any manner. The use of word 'includes' expands the 'persons' who can be subjected to levy of tax. In case the 'person' located in India, engaged in providing broadcasting service, had its head office outside India, he could not escape the tax on this ground and he too was brought within the ambit of service provider, therefore, the party's interpretation is wrong to assume that only Indian broadcasting entities could be taxed. The taxing event is the provision of taxable service which in the instant case, though being performed outside India, is very much covered within the definition of taxable service in the light of Explanation to Section 65(105)(zk) of the Act. Further, as the taxable service has been provided by a broadcasting organization not having any branch/subsidiary etc. in India the service tax has to be recovered from the recipient located in India in terms of Section 66A of the Act. 11. The Commissioner repelled the submissions advanced by the Appellant that allocation of bandwidth was not a service but supply of goods and the observations are as follows : ....
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....tted electro magnetic waves (signals) was incidental. This, I find is not correct at all. When the payment is linked to the uninterrupted availability of signals it becomes prime objective and the intention behind entering into the agreement. It is a settled principle of law that sale and purchase of goods is made for cash, deferred payment or other valuable consideration. As already pointed out this is a case where the provider is actively involved throughout the tenure of the MSA and is also governed by the requisition made by the party in a Service Order. The transmission plan too is provided to M/s Intelsat which can be amended from time to time. I find this is not case of simple one time sale where the act of sale occurs in the beginning. It is provided in Point 4.2 of the MSA that the invoices are to be raised on monthly basis, thus it is a case of continuous supply. Therefore, I find that in such case the reason for making the payment or not making a payment or making a part payment for any duration, become the principal aim of the said contract. This reason has clearly been linked with the uninterrupted availability of Signals as per Point 5.1 and 5.3 of the MSA. Accordingl....
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.... (vi) The definition of 'broadcasting' under section 65(15) of the Finance Act has been grouped into three categories. It would be evident that the definition of 'broadcasting' in terms of section 2(c) of the Prasar Bharat Act would only include the actual broadcaster and not the satellite service provider; and the later parts of the definition would include specific activities specified thereunder which would in no manner cover the case of Intelsat as a 'broadcasting agency or organization', as defined under section 65(16) of the Act. In support of this contention, reliance has been placed upon the decision of the Delhi Tribunal in ESPN Software India (P) Ltd. vs CST, New Delhi 2014 (35) STR 927 (Tri-Del); (vii) If the activity of re-transmission of amplified electromagnetic waves by Intelsat is held to comprise broadcasting, then this would lead to double taxation on the same activity; and (viii) Intelsat has leased the space segment to the Appellant and this transaction would amount to direct sale of 'goods' within the meaning of article 366(12) of the Constitution and not for providing any service. 14. Shri Vivek Pandey, learned Authorized Represent....
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....rator and Cable/ DTH operators. 1) Broadcaster: A broadcaster produces/ aggregates the program content, which can either be news or non-news content. Non-news content includes general entertainment channels, sports channels, religious channels, music channels, movie channels and infotainment channels. The digital audio-video outputs from these servers are subsequently passed on to the earth station or teleport. 2) Earth station/ Teleport operator: The earth station/ teleport operator takes the audio-video signals from the broadcaster and encodes, modulates and converts the content to high power electro-magnetic waves and up-links it to the allocated/ designated space segment of the satellite, which is located in the geo-stationary orbit of the earth. A geo-stationary orbit is an imaginary orbit located above the earth's meridian at an approximate height of 36,000 kms. from the surface of the earth. The earth station has a transmit antenna pointing accurately to the satellite to which the signal is to be transmitted/ beamed. This is known as the uplink antenna and is generally 9.3 meters in diameter. 3) Satellite Operator: Satellites are used for many ....
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.... satellite to be paid by the broadcaster. b) Simultaneously, the broadcaster also enters into an agreement with an earth station (i.e. uplink service provider) with respect to up-linking of the proposed television channel. c) Thereafter, the broadcaster approaches the Ministry of Information and Broadcasting for obtaining uplink and downlink permission/ license. d) After the broadcaster receives the license for a particular TV Channel, it approaches the uplink service provider for up-linking of the TV channel. The Uplink Service Provider also has to take certain permissions from Wireless Planning Commission, Wing of Department of Telecom (DoT), Ministry of Communication and Network Operation and Control Centre for Uplink of that particular TV channel. After obtaining the requisite permissions from the concerned Regulatory Authorities, the teleport owner i.e. uplink service provider starts the uplink of the channel. The satellite operator provides the technical parameters related to the allocated space segments/ bandwidth on the particular transponder of the satellite on which the earth station is required to uplink the radio frequency signals. e)....
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....is a regulatory body that governs the orbital traffic for launch of a satellite. The Satellite Operator prepares and submits a proposal for launching of a satellite into a proposed orbital location targeting a particular footprint and specification with the ITU. b) Thereafter, the ITU, in coordination with all members countries, approves the location of the satellite and grants permission to launch the satellite. c) The space on satellite can be independently and simultaneously be used for any purpose for example Communication, VSAT, Navigation etc. from different geographically locations." 4) Cable Distributor (MSO and Local Cable Operator) : A cable/ DTH operator obtains a copy of the downlink permission granted to a channel, which approaches it for carrying their channels, on their network for further re-distribution to the masses/ end users/ consumers/ subscribers. 17. To appreciate the contentions of the parties, it would also be appropriate to reproduce the relevant terms of the Agreement and the Service Order. AGREEMENT 18. Clause 1 deals with 'AGREEMENTS', while the 'Provision of Services' is contained in clause 2 of the Agreemen....
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....rvices to such person or entity includes substantially more communications facilities than the Service provided by Intelsat. For purposes of this Section, "resell" shall include any means allowing another person or entity to utilize the Service, in whole or in part, including through sale, resale, license, lease, sublease, grant, assignment, or any other means of direct or indirect conveyance. Without limiting the foregoing, Customer shall be responsible to Intelsat for any and all use of the Service or transmissions via the Service by any third party user throughout the chain of use (each a "User" and collectively the "Users") to the same extent as Customer would be for its own use or transmissions, and all references in the Agreement to Customer's responsibilities to Intelsat regarding Customer's use or transmissions shall be interpreted accordingly. 3.3 Operational Requirements and Non-interference. Customer shall use each Service, and shall require that its Users use such Service, if applicable, in compliance with the "Operational Requirements" contained in the Service Order, as such may be amended by Intelsat from time to time upon notice to Customer, and whic....
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....om, the Satellite, provided that Customer shall require that its contractors comply with all of the requirements of this MSA and the Service Order. If Customer retains third parties as permitted by the previous sentence, those third parties' facilities and personnel shall be deemed to be Customer-Provided Facilities and the acts and omissions of those third parties shall be deemed to be the acts or omissions of Customer. Intelsat shall have the right, but not the obligation, to inspect any Customer-Provided Facilities together with associated facilities and equipment used by Customer, or by a third party under the authority of Customer, to transmit to the Satellite. Intelsat shall use all reasonable efforts to schedule inspections to minimize the disruption of the operation of the facilities, and Customer shall make the facilities available for inspection at all reasonable times. Any such inspection shall not be deemed approval of the facilities by Intelsat or a waiver of any of Intelsat's rights hereunder. 3.5 Transmission Plan. No later than ten (10) business days prior to the Service Start Date, Customer shall provide Intelsat with a transmission plan (the "Tran....
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....te or any component thereof loses power, or in other unusual or abnormal technical situations, or other unforeseen conditions, for Intelsat to deliberately interrupt Customer's use of the Service. Intelsat shall make decisions to interrupt Services for such purposes in good faith. To the extent technically feasible, Intelsat shall give Customer at least 24 hours notice of such interruption and shall use all reasonable efforts to schedule and conduct its activities during periods of such interruption so as to minimize the disruption to users of the Satellite. Customer acknowledges, however, that Intelsat may interrupt Service without notice in any situation that in the opinion of Intelsat has caused or is likely to cause harm to any satellite or related infrastructure of Intelsat or a third party or interference with any satellite or related infrastructure of Intelsat or a third party. Customer shall immediately cease transmissions to the affected Satellite when required to do so by Intelsat under this Section." 22. The 'Suspension of Service' is contained in Clause 8 of the Agreement and relevant clauses 8.1 and 8.3 are reproduced below : "8. SUSPENSION OF SERVICE ....
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....ain Master Services Agreement Number 7106 entered into by and between PanAmSat Corporation and Customer, dated 8-9-2002 (the "Master Agreement") that is incorporated herein by this reference. By signing below, Customer confirms receipt of and agreement to this Service Order and the following Attachments that are attached hereto and incorporated herein by reference, which collectively comprise this Full-Time Agreement: Attachment 1(a) Transmission Parameters (Channel 1) Attachment 1(b) Transmission Parameters (Channel 2) Attachment 2 Service Attachment for Transponder Segment Services Attachment 3 Operational Requirements for PanAmSat Satellites Attachment 4 Special Terms And Conditions Title : Eup Global Sales & Marketing Date : August 27, 2002" 24. The aforesaid Service Order refers to four Attachments. Attachments 1(a) and 1(b) dealing with Transmission Parameters are as follows : Attachment 1(a) Transmit Location: Singapore, Singapore Satellite SFD: -86.50 dBW/m2 Tx Earth Station Size: 13.0 m Tx EIRP: 59.2 dBW Rx Location: Various, India Rx Earth Station Size: 3.0 m Rx Earth Station G/T:....
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....le Uplink and/or Downlink Beam of the Satellite in order to minimize mutual interference between adjacent satellites, to ensure compliance with applicable coordination agreements with other networks, and/or to permit efficient loading of the Satellite. Except in emergency circumstances, PANAMSAT shall notify Customer of any changes to its initial allocation as soon as reasonably practicable prior to such change and shall use reasonable efforts to minimize disruption to Customer's Service during any such change." 26. Attachment 4 deals with 'Special Terms & Conditions' and the relevant portion is reproduced below : "2. Total Initial Payment/Termination Right: PanAmSat acknowledges and agrees that Customer must obtain certain licensing from the Indian government in order to comply with the payment terms of this Full-Time Agreement. Accordingly, notwithstanding Section II(A)(1) of the Master Agreement, PanAmSat hereby agrees to permit Customer to pay PanAmSat the Total Initial Payment (consisting of the Service Fees for the September and October, 2002 and Security Deposit) by not later than October 31, 2002. Accordingly, from and after November 1, 2002, all other payme....
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.... are (i) broadcaster, (ii) uplink service provider (more popularly known as earth station or teleport operator), (iii) satellite operator, and (iv) Cable/DTH operators. A broadcaster produces or aggregates the program content. The digital audio-video outputs are subsequently passed on to the earth station or teleport. The earth station then modulates and converts the content to high power electro-magnetic waves and uplinks it to the allocated/designated space segment of a satellite, which is located in the geo-stationary orbit of the earth. The satellite operator owns the satellite and leases out space segments on the satellite to customers as per their requirement. The radio frequency or electro-magnetic waves uplinked from the earth station are automatically reflected back to the earth by the satellite without any alteration/modification of the program content with the help of internal process of set on-board equipments. The radio frequency signal sent back to the earth by the satellite is received by the cable operator/DTH service provider through a downlink antenna, which points towards the satellite. 31. It also needs to be kept in mind that a broadcaster who desires to lau....
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....atellite to the Appellant for the purpose of up-linking and down-linking the signals for which certain charges were paid by the Appellant. 34. What has been stated above can conveniently be described by a pictorial representation which is drawn below : 35. In order to appreciate the aforesaid contentions raised on behalf of the Appellant and the Department, it would be necessary to appreciate the contents of the Agreement and the Full Time Agreement - Service Order. Clause 1.1 of the Agreement provides that upon execution of a Service Order pursuant to the Agreement, Intelsat shall provide to the Appellant and the Appellant shall purchase from Intelsat the services described in such Service Order. Clause 2.1 of the Agreement stipulates that Intelsat shall provide service in accordance with the 'Service Specifications' defined in the Service Order. Under Clause 2.3 Intelsat reserved to itself the right to assign and/or reassign the space segment allocation of the Customer within the satellite identified in the Service Order or to move the Service to a different satellite and/or a different orbital location. Clause 3.3 of the Agreement requires the Appellant to use each Service....
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.... Full Time Agreement - Service Order deals with 'Transponder Segment Services'. Clause 1.0 provides that unless otherwise specified in the Service Order, that portion of the service transponder which comprises Customer's Service shall be power and bandwidth limited, consisting of transponder segment, equivalent to the amount of bandwidth specified in the Service Order and associated power on the service transponder which would be known as "Transponder Segment". Clause 3.3 provides that PanAmSat reserves the right to assign and/or reassign Customers space segment allocation within the service transponder or to other Transponders within the applicable uplink and/or downlink beam of the satellite in order to minimize mutual interference between adjacent satellites. 39. Attachment 4 deals with 'Special Terms and Conditions'. Clause 2 provides for total initial payment/termination right. Under this clause PanAmSat acknowledges that the customer has to obtain certain licensing from the Indian Government in order to comply with the payment terms of the Full Time Agreement. It is for this reason that the customer has been permitted to pay the charges for the month of September and Octob....
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....reement Intelsat has leased out 8MHz bandwidth of its transponder or Intelsat is engaged in transmitting signals. To appreciate this, it would be necessary to examine the purpose for which charges have been paid by the Appellants to Intelsat. The contents of the Service Order and the four Attachments to the Service Order leave no manner of doubt that the Appellant is required to pay a fixed fee of US$ 40,000 per month to Intelsat. The Transponder Segment Service refers to two bandwidths and Attachments 1(a) and 1(b) each refer to allocated bandwidth 4.00 MHz bandwidth, thus making a total of 8MHz bandwidth. It is also clear from clause 1.0 of Attachment 2 to the Service Order that unless otherwise specified in the Service Order, that portion of the service transponder which comprises the Service to the Appellant shall be power and bandwidth limited, consisting of a Transponder Segment equivalent to the amount of bandwidth specified in the Service Order and associated power on the service transponder. Thus, the monthly fixed payment made by the Appellant to Intelsat relates to the lease of space segment capacity of the transponder and has nothing to do with the signals that are tran....
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....ludes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multisystem operator or any other person on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner." "65(16) 'broadcasting agency or organization' means any agency or organization engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head off....
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....irst inclusive part; and (iii) the second inclusive part 47. Under the 'means part', reference has been made to the definition of 'broadcasting' under clause (c) of section (2) of the Prasar Bharati Act. It would, therefore, be appropriate to reproduce section 2(c) of the Prasar Bharati Act, which is as under: "2(c) "broadcasting" means the dissemination of any form of communication like signs, signals, writing, pictures, images and sounds of all kinds by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations and all its grammatical variations and cognate expression shall be construed accordingly." 48. Under the first inclusive part, programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing are also included in the definition of 'broadcasting'. 49. The second inclusive definition consists of the following three limbs : (a) List of entities in case of 'broadcasting agency or organization', having their head office situated....
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....of learned Counsel for the Appellant deserves to be accepted. The use of the words 'through the medium of relay stations' is very significant in the definition of 'broadcasting' under section 2(c) of the Prasar Bharati Act. For Intelsat to fall in the definition of 'broadcasting', it must necessarily disseminate any form of communication by transmission of electromagnetic waves through space through the medium of relay stations. The definition 'broadcasting' under section 2(c) of the Prasar Bharati Act brings within its sweep the provision of broadcasting service by an actual broadcaster by availing the service/facility of a relay station which would be a satellite service provider, as Intelsat is in the present case. The activity of dissemination of any form of communication by transmission of electromagnetic waves through space alone cannot be regarded as 'broadcasting', unless it is intended to be received by the general public through the medium of relay station and not by a relay station. The term 'relay station' has not been defined under the Prasar Bharati Act. A relay station would be a fixed station or a mobile station such as a satellite that receives signals and rebroadc....
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....t. Under this section, 'broadcasting agency or organization' has been defined to mean any agency or organization engaged in providing service in relation to broadcasting in any manner. The contention of learned Counsel for the Appellant is that unless any 'agency or organization' is engaged in providing service in relation to broadcasting in any manner, it cannot be regarded as a 'broadcasting agency or organization'. The contention, therefore, is that if Intelsat is not a 'broadcasting agency or organization', it cannot be said to be providing any service of broadcasting under the second inclusive part of the definition of 'broadcasting' under section 65(15) of the Finance Act. 58. The contention of learned Authorized Representative of the Department, however, is that Intelsat is a 'broadcasting agency or organization' because the definition is very wide and would also include any agency or organization engaged in providing service in relation to broadcasting in any manner. The contention is that by providing a designated band with a frequency of a particular band in a particular transponder of a satellite which is used for transmitting the signals at a particular minimum speed....
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.... Intelsat is not engaged in transmitting signals per se but is instead engaged in the activity of leasing out space segment capacities of transponders on its satellite. The transmission of signals is the result of use of space segment capacity of a transponder of the satellite as a result of which the relay station is able to uplink the programme signals which are merely reflected to the earth by Intelsat on the footprint area. To support this contention, the Appellant has relied upon the procedure explained by the two experts and has submitted that a satellite is designed in such a manner that the radio frequency uplinked with a particular power are automatically reflected back without any alteration/modification of the programme contents with the help of internal process of set on-board equipments. Thus, no human intervention takes place. Thus, according to the Appellant, the Agreement with Intelsat is with respect to leasing of space segment capacity of its transponder and, therefore, it cannot be said that Intelsat is engaged in transmission of electromagnetic waves/signals. 62. This position has been seriously disputed by learned Authorized Representative of the Department ....
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....mers of Intelsat (non-exclusive use). (d) The term "interruption of service" refers specifically to transmission of signals because a bandwidth once allocated cannot be interrupted. Interruption can only be of transmission and not of allocation of bandwidth. (e) The payment is linked to the uninterrupted transmission of signals. The charges for the provision of service are not for the amount of bandwidth allocated but for the amount of data and the speed of data being transmitted. (f) Intelsat can change frequency bandwidth or the transponder or the satellite whenever it likes but it has to ensure the transmission of signals at a particular minimum speed and of specified strength to ensure proper transmission of TV programs of the appellant.; (v) It is clear from the above that the transmission of signals, the minimum speed of data and the strength of signal during down linking are the critical factors governing the provision of services under the Agreement and, therefore, the transmissions of signals is a predominant character of the services being provided by Intelsat; and (vi) Even if the test of "intention of the parties" behind the ....
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....Hz bandwidth. The mere fact that the assignment of space segment capacity of transponder is fixed at USD 40,000 per month, for contracted 8 MHz bandwidth, whether used or not, would conclusively prove that the said charges are not towards transmission of signals, otherwise the same would have been variable every month, as per the quantum/speed of frequencies transmitted. It is, therefore, not possible to accept the submission of learned Authorized Representative of the Department. 65. Learned Authorized Representative of the Department also laid emphasis on Clause 3.3 of Attachment 2 dealing with the right reserved by Intelsat to assign and/or reassign Customer's space segment allocation within the service transponder or to other transponders and to the contents of Attachment 1(a) and 1(b) to demonstrate that there is no fixed transponder or fixed frequency bandwidth that is hired by the Appellant since both the transponders and the frequency of bandwidth can change. 66. This submission is based on a misreading of Clause 3.3 of Attachment 2 and the provisions of Attachment 1(a) and 1(b). A reading of Clause 3.3 of Attachment 2 makes it clear that the assignment and/or reassig....
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....pellant has taken lease of only 8 MHz bandwidth out of the 54 MHz bandwidth of the transponder. This 8 MHz bandwidth allocated to the Appellant is for exclusive use of the Appellant and cannot be allocated to any other user. It is only the remaining bandwidth of the transponder that can be allocated to any other user. It cannot also be denied that Intelsat may be providing Services to many users from its various transponders. It is a particular space segment of a particular transponder that has been taken on lease by the Appellant. 71. Much emphasis has been laid by learned Authorized Representative of the Department on Clause 6 of the Agreement dealing with 'Interruption of Service' and it has been contended that the term 'Interruption of Service' refers specifically to transmission of signals because a bandwidth or frequency once allocated cannot be interrupted. 72. This submission is based on a misreading of Clause 6 of the Agreement. Clause 6 of the Agreement has to be read with Clause 2 of the Agreement relating to 'Provision of Services' as also Clause 1.0 of the Service Order. Under Clause 2.3 of the Agreement, Intelsat reserves to itself the right to assign and/or rea....
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....nlinking the programme, but it cannot be said the Intelsat has contracted to broadcast/transmit the programme signals. In case the space segment capacity of a transponder is not leased, a broadcaster would not be in a position to uplink and downlink the programme signals. Intelsat has, it is clear, leased space segment capacity of the transponder and transmission of signals is ancillary to such leasing activity. It also needs to be appreciated that whether or not the Appellant uses the space segment capacity of the transponder for uplinking and downlinking of signals, it has to pay the monthly charge of US$ 40,000 to Intelsat. 75. Learned Authorized Representative of the Department laid much emphasis on section 65A of the Finance Act to contend that since the Agreement contains features relating to both allocations of bandwidth and transmission of signals, the activity which gives such a transaction its essential character, has to be determined in accordance with sub-section (2)(b). 76. It would, therefore, be necessary to reproduce section 65A of the Finance Act. It is as follows : "65A. Classification of taxable service - (1) For the purposes of this Chapt....