CESTAT Sets Aside Penalty on Cable TV Operator for Non-Payment of Service Tax

Court Name : CESTAT Chandigarh

Parties : Prime Cyber Vs Commissioner of Central Excise 

Decision Date : 21 July 2023

Judgement ref : Service Tax Appeal No. 814 of 2011

Imagine you're a Cable TV Operator. You've been slapped with a penalty for non-payment of service tax. You're worried, but you believe you're not liable for the tax. So, you decide to challenge the penalty.

This was the situation in a recent case before the Customs, Excise TV, and Service Tax Appellate Tribunal (CESTAT). The Cable TV Operator had been penalized for non-payment of service tax. But here's the twist: CESTAT set aside the penalty.

The tribunal found that the Cable Operator was not liable for the service tax. As a result,ized the penalty was revoked.

This ruling is a significant one. It underscores the importance of understanding your tax liabilities and standing up for your rights. If you believe you've been wrongly penal might win., you have the right to challenge it. And as this case shows, you just

FINAL ORDER No.60212/2023

Date of Hearing:27.06.2023

Date of Decision:21.07.2023

Per : P.ANJANI KUMAR

The officers of Preventive Branch of Central Excise, Chandigarh

investigated certain Cable TV Operators (CTOs) who were appointed

by M/s SIFY to provide internet service to customers through cable; it

was revealed that the CTOs have installed necessary infrastructure for

the providing of service; M/s SIFY were paying commission to the

CTOs on the basis of a fixed percentage of amount received from the

ultimate users of broadband; the appellant was one of the CTOs

investigated. It appeared to the Department that the CTOs are

providing “Business Auxiliary Services” to M/s SIFY and as such, they

are liable to pay service tax. Two show-cause notices dated

04.12.2007 were issued to the appellants, demanding a service tax of

Rs. 7,694/- and Rs.95,376/-, invoking extended period; the same was

confirmed by the OIO dated 31.08.2009. On an appeal filed by the

appellants, Commissioner (Appeals) has reduced the demand

confirmed to Rs.57,407/- along with penalty under Sections 76 & 78

of Finance Act, 1994. Hence, this appeal.

2. None for the appellant. Learned Authorized Representative for

the Department reiterates the findings of OIO and relies on the case of

Citi Cable Opera- 2020 (41) GSTL 506 (Tri. Chennai) and this Bench

vide Final Order No.60123/20203 dated 11.05.2023.

3. Heard the learned Authorized Representative and perused the

records of the case. We find that the appellants have accepted the

duty liability of Rs.57,407/- and contested the imposition of penalties;

they have, in fact, deposited total duty of Rs.99,769/- vide Challan

dated 1st October, 2009. We find that the issue is no longer res

integra having been decided by the Tribunal in the case of City Cable

(supra). We find that though the issue has been decided in favour of

the Revenue, the appellant’s contention on penalty need to be

examined.

4. Hon’ble Punjab & Haryana High Court in the case of Pannu

Property Dealers-2011(24) STR 173 (P&H) (Appeal No. ST/13/2010)

has held as follows:

“We are of the view that even if technically, scope of

Sections 76 and 78 of the Act may be different, as

submitted on behalf of the revenue, the fact that

penalty has been levied under Section 78 could be

taken into account for levying or not levying penalty

under Section 76 of the Act. In such situation even if

reasoning given by the appellate authority that if

penalty under Section 78 of the Act was imposed,

penalty under Section 76 of the Act could never be

imposed may not be correct, the appellate authority

was within its jurisdiction not to levy penalty under

Section 76 of the Act having regard to the fact that

penalty equal to service tax had already been imposed

under Section 78 of the Act. This thinking was also in

consonance with “the amendment now incorporated

though the said amendment may not have been

applicable at the relevant time. Moreover, the amount

involved is Rs.51026/- only.”

5. Though, the Hon’ble High Court did not categorically hold that

the imposition of penalty under Section 76 and Section 78 separately

is not mutually exclusive prior to 10.05.2008, Hon’ble High Court has

certainly held that the Appellate Authority was within its right to hold

that the penalty is mutually exclusive and in the spirit of the

amendment. While the amount involved in the above case was

Rs.51,026/-, the amount involved in the instant case is about half that

amount. Therefore, in deference to the jurisdictional High Court’s

order, we find that penalty under Section 76 and 78 can be seen to be

mutually exclusive even before the amendment.

6. Moreover, it was the plea of the appellants that the benefit of

Section 80 of the Finance Act, 1994 was not given to them. Section 80

of the Finance Act, 1994 reads as under:

80. Penalty not to be imposed in certain cases Notwithstanding anything contained in the provisions of Section 76 [section 77 or section 78], no

penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure.

7. We find that in the facts and circumstances of the case and

looking into the fast changes that were coming in the Service Tax law

during the relevant period, it can be concluded that the appellant

being a small operator had no wherewithal to keep track of the law

and thus, the applicability of the Service Tax to him, more so looking

into the fact that the main cable operator M/s SIFY had discharged

Service Tax on the entire amount collected from the customers, there

are reasons to believe that there were sufficient reasons for the

appellant in not discharging the applicable Service Tax. Looking into

the conduct of the appellants in depositing the tax with interest and

25% penalty the provisions of Section 80 are invited and the benefits

of Section 80 can be extended to the appellants. Thus, we find that

the penalties imposed are not sustainable.

8. In view of the above, we set aside the penalties imposed and

the appeal is partially allowed to that extent.

(Pronounced in the open Court on 21/07/2023)

(S. S. GARG)

MEMBER (JUDICIAL)

(P. ANJANI KUMAR)

MEMBER (TECHNICAL

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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

CHANDIGARH

~~~~~

REGIONAL BENCH – COURT NO. 1

Service Tax Appeal No. 814 of 2011

[Arising out of Order-in-Appeal No.18/CE/A/CHD/2011 dated 21.02.2011 passed by

the Commissioner (Appeals), Customs & Central Excise, Chandigarh]

M/s Prime Cyber : Appellant (s)

2238/86A, Thakurdwara,

Opposite CAT-III, Manimajra,

Chandigarh

Vs

The Commissioner of Central

Excise- Chandigarh-I : Respondent (s)

Central Revenue Building

Sector-17C, Chandigarh-160017

APPEARANCE:

None for the Appellant

Shri Ravinder Jangu, Authorised Representative for the Respondent

CORAM :

HON’BLE Mr. S. S. GARG, MEMBER (JUDICIAL)

HON’BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL)