OFFICE OF THE ASSISTANT COMMISSIONER

CENTRAL EXCISE & SERVICE TAX DIVISION,

481, SHANTI NAGAR, MAJESTIC ROAD, MOGA
01636-229750, cexd7812@gmail.com
C. No. ST-V/STC/Yadav Cable/Moga/59/2015

Dated:

SHOW CAUSE NOTICE

M/s Sneta Cable, Village-Sneta, Mohali (here-in-after referred to as the Noticee) are not registered
with the Service Tax Department as required under Section 69 of the Finance Act, 1994 (hereinafter referred to
as the Act) and have not filed ST-3 return for the half year ending September 2014 as required under Rule 7 of
the Service Tax Rules, 1994 (hereinafter referred to as the Rules) read with Section 70 of the Act and are
engaged in providing taxable services under the category of Cable Operators as defined in Section 65B (44) of
the Act in the specified territorial area for providing the taxable services as mutually agreed upon by the Noticee
and M/s Fastways Transmission Services (P) Ltd., Lajjya Tower, Near P.F. Building, Sham Nagar, Ludhiana
(hereinafter referred to as Fastway).
2.
Fastway are operating as Multi System Operator (MSO) who receive TV contents from TV Channels /
aggregators and supply those to linked cable operators (LCOs). M/s Fastway have entered into an agreement
with the Noticee for supply of TV contents against monetary consideration payable by the Noticee. As per the
agreement entered into by M/s Fastway, the Noticee is transmitting the signals received from M/s Fastway as it
is without any addition/modification. The name/logo of Fastway is continuously displayed during the
transmission and reception of TV programme by ultimate consumers and it appears that the Noticee undertook
the distribution of services provided by a person under a brand name or trade name, whether registered or not, of
another person.
3.
Further, as per provisions of Section 65(105)(zs)(valid upto 30.06.2012) of the Act, and under Section
66B of the Act, (valid w.e.f. 01.07.2012), any service provided or to be provided to any person, by a cable
operator in relation to cable services is taxable service and subject to service tax. As per provisions of Section
67 of the Act, service tax chargeable on any taxable service with reference to its value, shall be the gross amount
charged by the service provider for such service provided or to be provided by him. However, notification No.
06/2005-ST dated 01.03.2005 (as amended) (valid upto 30.06.2012) and/or 33/2012ST dated 20.06.2012 (valid
w.e.f.01.07.2012) exempts taxable services of a specified aggregate value in any financial year from whole of
the service tax leviable thereon. However, it has been specifically provided in the notification that nothing
contained in this notification shall apply to, taxable services provided by a person under a brand name or trade
name, whether registered or not, of another person. The brand name has been defined in the above mentioned
notifications as:
(A) brand name or trade name means a brand name or a trade name, whether registered or not, that is
to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which
is used in relation to such specified services for the purpose of indicating , or so as to indicate a connection in
the course of trade between such specified services and some person using such name or mark with or without
any indication of the identity of that person.
4.
As the service being provided by the Noticee is under the trade name / trade mark/ logo of other person
(i.e. Fastway), as discussed supra, the benefit of value based exemption as provided under Notification
No.6/2005-ST dated 01.03.2005 (as amended) does not appear to be admissible and it appears that the Noticee
should have discharged the service tax liability on the gross amount received from the
customers/users/consumers to whom the Noticee is providing the service. However, it has been observed that
the Noticee has neither obtained the service tax registration from the department during the said period nor have
discharged their service tax liability on the gross amount so received from the customers and have also failed to
file ST-3 Returns.

5.
Accordingly, the Noticee vide letter Letter_issued_to_the_party_200910_to_2 was requested to
provide the details of the amount charged from each subscriber and the details of service tax payment, if any
during the period October 2009 to March 2014. The Noticee did not respond to the departmental
communication.
6
However, Hqrs. Preventive, Central Excise Commissionerate, Ludhiana provided the details of LCOs
based in the jurisdiction of Range Office, Malout as received from Fastway indicating the name, address and
contact number of the person concerned and the figures for the period 2009-10 to 2013-14.
7.
Further to seek some clarifications, the statement of Shri Rajesh Mehru S/o Shri Dharam Chand Mehru,
resident of H. No,273, Model Gram, Ludhiana, authorized signatory of Fastway, was recorded on 09.10.2014
under Section 14 of the Central Excise Act as made applicable to the Service Tax as per the provisions enshrined
in Section 83 of the Finance Act, 1994. Shri Rajesh Mehru, the authorized Chartered Accountant of Fastway in
his statement, interalia, stated that he was working since 2009 with Fastway and was entrusted the work of
supervising, maintenance and finalization of Financial Accounts of the above said company; that he also
supervise the filing of statutory returns with various Government Departments including service tax department;
that Fastway is engaged in providing the Television Signals both Digital and Analogue and working as MSO;
that they provide signals to LCO who in turn provide the signals to the last mile subscriber; that from the year
2009-10 (April ,2009) to 2011-12 (Upto March, 2012) only Analogue System was in operation; that in the
analogue system lump-sum bill was raised to the LCO as per the data regarding number of connections
(subscribers) provided by the LCO as there was no Digital Access System; that the billing was @ Rs.100/- per
connection during the said period; that the share of LCO and MSO was usually on 50% share basis (Rs.100/each); that from April, 2012 after onset of Digitalization, the company used to raise the bill on the basis of STB
installed in the territory of each LCO @ Rs.100/- per STB out of which Rs.65/- being the subscription amount
and Rs.35/- as digital rent of STB; that Rs.100/- was the gross amount of billing which was inclusive of service
tax as well;
8.
Sh. Gurdeep Singh S/o S. Jaswant Singh, Resident of House No. 57-B, Rajguru Nagar, Ludhiana,
Managing Director of M/s Fastway Transmissions Pvt. Ltd., Lajjya Tower, Near E.P.F. Building, Sham Nagar,
Ludhiana in his statement recorded on 28.02.2015 inter alia stated that:
i

M/s Fastway Transmissions Pvt. Ltd., Ludhiana had five directors namely S/Sh. Gurdeep Singh
(himself), Arshdeep Singh (his son), Vishal Chaudhary, Jagjit Singh Kohli and Yogesh Shah and that the
company was incorporated on 11.10.2007;

ii

the company was working as an MSO (Multi System Operator) and were registered with the Service
Tax department vide Registration No. AABCF1854BST001;

iii

MSO was an intermediary between broadcasting companies and LCOs, and received the TV contents
from broadcasters and re-transmitted the same to LCOs; for such re-transmission purpose they had
installed head-end and transponders at their premises at Lajjya Tower, Ludhiana; and that from there
they distributed the signals to LCOs through optic fibre cable network laid throughout Punjab,
Chandigarh and some parts of Haryana and Himachal Pradesh;

iv

the LCOs distributed the signals received from the MSOs to each and every subscriber of their network
through their own cable network;

before the digitalization (of cable services), i.e. prior to 31.03.2012, analogue system was in operation
under which analogue signals were provided to LCOs, and MSO used to raise the bills on LCOs at lump
sum basis on the declaration of LCOs regarding the number of connection/subscribers;

vi

the share of MSO (M/s Fastway Transmissions Pvt. Ltd., Ludhiana) and its LCOs in the subscription
(amount received from ultimate consumers of cable service) during analogue period was about 50:50
and they (M/s Fastway) paid service tax on the amount so received by them (M/s Fastway) from LCOs
during the period of analogue era;

vii

with effect from 01.04.2012, with the introduction of amendment to the provisions of Cable Television
Regulation Act in 2011 the Digital Addressable System (DAS) was adopted by their company in a
phased manner; that in DAS system each subscriber needed to install a device called Set Top Box to
decode the signals;

viii

under DAS system the MSOs were having full control over the STBs; the STB could start functioning
only after its activation by MSO and, for this purpose, they had installed Subscriber Management
System (SMS) at their premises at Lajjya Tower, Ludhiana and that SMS system was a computerized
system which had LCO-wise details of STB boxes installed at the premises of each subscriber;

ix

they had imported these STB boxes from China and were charging rent from subscribers for using STBs
but the ownership of the STBs remained with their company;

in DAS regime, they used to raise bills on LCOs on the basis of number of subscribers i.e. number of
STB installed under a particular LCO multiplied by Rs.100/- (inclusive of service tax); and this Rs.100/was further bifurcated into two parts i.e. Rs. 65/- in respect of subscription fee and Rs.35/- for STB rent;

xi

they were paying Service Tax on Rs.100/- (inclusive of service tax); the LCO used to charge from
subscribers on an average Rs.250/- per STB; thus the share of LCO under digital system was Rs.150/per STB;

xii

they had yet not covered the entire territory of operation under DAS system; some of their LCOs
located in far flung areas and rural areas were still under analogue system; that the company was
progressively covering the entire area under DAS; that the LCOs working under analogue system even
after 01.04.2012 had started keeping Rs.150/- per subscriber as their share (out of the amount collected
from the subscriber) with effect from 01.04.2012 (thus their share had declined from 50% to 40%);

xiii

on being questioned about decreased percentage of their own share after introduction of DAS system, he
stated that it was because after introduction of DAS system their subscriber base had increased
substantially;

xiv

W.e.f. 01.07.2014 as per Telecom Regulatory Authority of India (TRAI) regulations, in the cities which
were mandatorily to be covered under DAS in phase II of digitalization, MSOs were required to collect
the cable charges directly from their subscribers under their (MSO) invoices; thus w.e.f. 01.07.2014 the
company had started raising bills directly on subscribers in three cities i.e. Ludhiana, Amritsar and
Chandigarh and this system was called Direct Accessible System (DAS); now LCOs of the said three
cities were raising the bills on their (MSO) company in respect of their (LCO) share;

xv

W.e.f. 01.07.2014, they were paying service tax on full amount of subscription charged from subscribers
located at Ludhiana, Amritsar and Chandigarh;

xvi

They had entered into written agreement with each and every LCO;

xvii

their LCOs were located in Punjab, Chandigarh and parts of Himachal Pradesh and Haryana; that they
were keeping data as per branch network maintained by them such as Ludhiana, Amritsar, Jalandhar,
Chandigarh, Bathinda, Patiala, Shimla and Ambala;

xviii

branch-wise soft copy of list of LCOs along with the amount collected from these LCOs (area wise) had
been supplied to Ludhiana Commissionerate and hard copy of the same would be signed by authorized
representative of the company, i.e. Sh. Rajesh Mehru in token of its correctness.

xix

On further being asked about the logo/brand name of the company and whether the logo/brand name
remained displayed on TV screens of subscribers during transmission of contents supplied by their
company to LCO, he stated that the logo/brand name of their company was FW which remained
continuously displayed on TV screens of subscribers during the transmission of contents supplied by
them to LCO and further to subscribers;

9
A Show Cause Notice was issued to the noticee for the period October 2009 to March 2014 vide C. No.
SCN_No____Date for recovery of Service Tax of Rs. SCN_Issued_Amt_Rs/- on the basis of best judgment
assessment as provided under Section 72 of the Act by the Assistant Commissioner, Central Excise & Service
Tax Division, Moga.
10.
For the subsequent period 2014-15, the Jurisdictional Range Office vide letter dated
Letter_issued_to_the_party______________ requested the Noticee to provide the amount received /
receivable on account of providing cable services and Service Tax paid, if any, for the period 2014-15 but the
Noticee failed to respond to the Departmental communications.
11.
In the meanwhile the Jurisdictional Range office vide letter C. No. ST-20/Misc/Enquiry Cable/
MLT/01/2015/95 dated 27.01.2016 also requested the Fastway to provide the details of the amount for which
bill raised by Fastway to the LCO and the amount retained by the LCO during the period 2014-15. The Fastway
vide their letter dated 11.02.2016 provided the copies of Noticees ledger account for the period 2014-15. On
scrutiny
of
ledger
accounts
revealed
that
the
noticee
was
debited
for
Rs.
Debit_amt_as_per_Ledger_AC_0414_to_09/- for the period 01.04.2015 to 30.09.2015 by M/s Fastways
Transmissions (P) Ltd., Ludhiana for different charges.
12.
On Scrutiny of the data received from Fastway it appears that the MSO have raised their bills /
invoices / debit notes etc. to the LCO on account of different charges and LCO is raising bill/ invoice to the
ultimate consumer and collecting the entire/gross subscription charges on which the LCO has not discharged
their complete service tax liability for the period April to September 2014 is as under:Sr. No.

Period

Amount

1.

2014-15 (Upto September 2014)

Rs. Debit_amt_as_per_Ledger_AC_0414_to_09/-

13.
The Noticee have not replied to the departmental communication seeking complete details of the gross
amount collected during the relevant period from the cable subscribers. Further, the noticee have neither taken
Service Tax Registration nor paid the Service Tax and also failed to file periodic ST-3 Return, as such the value
for the purpose of Service Tax liability has to be worked out in terms of provisions of Section 72 of the Act on
the basis of details provided by Fastway (as disclosed by Shri Gurdeep Singh, in his statement dated
28.02.2015) as was done in the previous SCN issued to the Noticee by taking the amount paid by the Noticee to
the Fastway as 40% of the amount received by the Noticee for provision of the taxable services. Accordingly,
the details of service tax liability in respect of the Noticee are as under:S.
No.
1

Amount for which bill

raised by Fastway for
subscription (40%)

Amount retained
by the Noticee
(60%)

Total
amount
collected from
ultimate
subscriber

Rate of
Service Tax

Service
Tax
recoverable

Debit_amt_as_per_Le
dger_AC_0414_to_09

M_60

M_100

12.36%

STax

Thus, by application of best judgment assessment under Section 72 of the Act, the value of taxable
Service provided by the Noticee comes to Rs. M_100/- as arrived on the basis of statement of Sh. Gurdeep
Singh S/o Sh. Jaswant Singh resident of House No.57-B, Rajguru Nagar, Ludhiana Managing Director of M/s
Fastway Transmissions Pvt. Ltd., Lajjya Tower, Near E.P.F. Building, Sham Nagar, Ludhiana recorded on
28.02.2015 by applying the 40/60 ratio. Service Tax of Rs. STax/- appears to be recoverable from the Noticee
under Section 73 of the Act on the said value of taxable services. Further, interest on the said amount of Service
Tax also appears to be recoverable from the noticee under Section-75 of the Act.

14.
From the foregoing, it appears that non-furnishing of information/non registration and non filing of
ST-3 Return by the Noticee resulted in non-payment of service tax and this action on the part of the Noticee
tantamount to deliberate non-compliance with the provisions of the Act and Rules. In other words, this is
only implying suppression of facts with an intent to evade payment of service tax in as much as;
14.1
The Noticee had not taken registration as per the provisions of Section 69 of the Act read with Rule 4 of
the Rules and thereby rendered themselves liable for penal action under Section 77(1)(a) of the Act;
14.2
The Noticee had not filed the statutory return as per the provisions of Section 70 of the Act read with
Rule 7 of the Rules and thereby rendered themselves liable for penal action under Section 77(2) of the Act;
14.3
The Noticee had not paid the service tax, as per the provisions of Section 68 of the Act read with Rule 6
of the Rules and thereby rendered themselves liable for penal action under Section 78 of the Act as discussed at
Para-14;
15.
From the above, it appears that the Noticee have failed to pay service tax amounting to Rs. STax/- for
providing the said taxable services under a brand name, whether registered or not, of another person to various
users in contravention of the provisions of Sections 68 of the Act read with Rule 6 of the Rules which appears to
be recoverable from them under Section 73 of the Act along-with interest under Section 75 of the Act. The
Noticee also appears to be liable for penal under S ection 77 & 78 for the aforementioned contraventions.
16.
Now, therefore, Name_of_the_LCO are hereby called upon to show cause to the Assistant
Commissioner, Central Excise & Service Tax Division, 481, Shanti Nagar, Majestic Road, Moga within 30
days of receipt of this notice, as to why :
i

The provisions of Section 72 of the Act should not be invoked to assess the taxable value and
service tax payable by the noticee;

ii

Service tax amounting to Rs. STax/- (Rupees one lac ninety seven thousand seven
hundred forty nine only) should not be recovered from them under Section 73 of the Act.

iii

Interest on the above Service Tax should not be recovered from them under Section 75 of the
Act.

iv

Penalty should not be imposed upon them under Section 77(1)(a) and 77(2) of the Act for
contravention of the provisions of Act as explained supra;

Penalty should not be imposed upon them under section 78 of the Act for contravention of
various provisions of Act/Rules as explained supra.

17.
The Noticee are further required to produce at the time of showing cause all the evidence documentary
or otherwise upon which they intend to rely in support of their defence. They should also mention in their
written explanation whether they wish to be heard in person or through their authorized representative/counsel
before the adjudication of the case. If no mention is made about this in their written explanation, it shall be
presumed that they do not desire a personal hearing in this case.
18.
The Notice should also note that if no cause is shown against the action proposed to be taken against
them within the stipulated period of 30 days or if the Noticee or their authorized representative/counsel do not
appear before the adjudicating authority on the date and time fixed for personal hearing without sufficient cause
being shown, the case would be decided ex-parte on the basis of evidence already on record without any further
reference to them.
19.
This show cause notice is issued without prejudice to any further action that may be taken against the
Noticee either in the case or any other case under the provisions of Finance Act, 1994 and the Service Tax Rules
made there under, or any other Act or Law for the time being in force in India.

Assistant Commissioner
Registered A.D.
Name_of_the_LCO
Copy to :1. The Additional Commissioner, Central Excise & Service Tax Commissionerate, Ludhiana.
2.

The Superintendent, Central Excise Range, Malout.

Superintendent (Adj.)
Assistant Commissioner Competency