CA Urvashi Porwal
In the case of Commissioner of Service Tax Vs. Vijay Television (P) Ltd., it was held by Madras High Court that the decision of the Tribunal is correct in setting aside the demand of service tax for the period beyond the normal period of limitation prescribed under Section 73 of the Finance Act on the ground that the department was aware of the facts and records of the case and the Tribunal is justified in law in vacating the penalties imposed under Sections 76 and 78 of the Finance Act, 1994 on the ground that the issue involved is predominantly and legally interpretative in nature.
Brief Facts of the case
On 1.8.2001, the assessee entered into a Slot Sale Agreement with M/s.Vijay Broadcasting Company (P) Ltd., (for brevity, “the Broadcasting Company”) the owner of the channel “Vijay TV”. The assessee was buying broadcasting time from the Broadcasting Company and selling slots thereof to various clients, namely sponsors of television programmes, who wanted their advertisements to be shown to the public.
Consequent to the investigation conducted by the Headquarters Preventive Unit, Chennai-II Commissionerate, which was a result of exchange of series of correspondence between the assessee and the department prior to the enquiry, it ultimately turns out that the department wanted to demand service tax on the assessee for the period from 16.7.2001 to 30.4.2005 in respect of the Broadcasting Service provided them. The department considered the assessee to be a “broadcasting agency or organization” as defined under Section 65(15) of the Finance Act, 1994 and held that they have rendered broadcasting service to the advertisers/sponsors as a taxable service under Section 65(105)(zk) read with the first part of the definition of broadcasting given under Section 65(14) of the Act as amended.
As per the Slot Sale Agreement dated 1.8.2001, the assessee was given 18 hours time per day to get their programmes telecast by the Broadcasting Company. It appears that the assessee allots time slots to their own sponsors/advertisers against payment of consideration. The demand of service tax is on the amounts collected by the assessee from the sponsors/ advertisers as consideration for the time slots allotted to them.
On this premise, the department issued a show cause notice on 5.10.2006. The show cause notice also proposed to demand service tax for the period beyond the normal period of limitation prescribed under Section 73 of the Finance Act, 1994.
The assessee submitted reply to the show cause notice and thereafter, adjudication order was passed confirming the entire demand and the proviso to Section 73(1) of the Finance Act was also invoked.
The assessee appealed to the Tribunal and the Tribunal after going through the relevant provisions of the Finance Act, 1994, more particularly, the definition of the term broadcasting as defined under Sections 65(14) of the Finance Act, 1994 (as amended by the Finance Act, 2001) and Section 2 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990; and the term “broadcasting agency or organization” as defined under Section 65(15) of the Finance Act, 1994, came to the conclusion that the services rendered by the assessee/assessee fall under the service tax net and observed as under:
“5. After giving careful consideration to the submissions, we find that the appellants have not made out any case on merits. The ‘Broadcasting Company’ was engaged in the business of operating ‘VIJAY’ television channel and was registered with the department for providing ‘broadcasting service’. M/s.Vijay Television (appellants), under an agreement, purchased specific time slots from ‘Broadcasting Company’ against payment of monetary consideration. These time slots were used for the telecast of programmes which were got produced under agreements between M/s.Vijay Television and producers of TV serials and other programmes. M/s.Vijay Television prepared the schedules and decided the programmes to be telecast during the time slot. As per the definition of ‘broadcasting’ as amended by the Finance Act, 2001, with retrospective effect from 16.7.2001, programme selection, scheduling or presentation of sound or visual matter on a television channel would constitute ‘broadcasting’. This position is clear from the first part of the amended definition of ‘broadcasting’ given under Section 65(14).
M/s.Vijay Television undertook the activities of selection, production and scheduling of programmes for telecast and collected money from their sponsors/advertisers by sale of time slots for such telecast. The activity of selling time slots for the telecast of programmes, obtaining sponsorships etc. is covered by the second part of the definition of ‘broadcasting’. By all these activities, they were providing a service to their clients in relation to ‘broadcasting’ and such service was exigible to levy of service tax.” (emphasis supplied)
On merits, therefore, the Tribunal held against the assessee/ assessee. However, on the plea of limitation, the Tribunal was of the view that the Slot Sale Agreement between the assessee and the broadcasting company was very much known to the department and in this regard, gave a specific finding on fact that there was no suppression of material facts by the assessee before the department with intent to evade payment of service tax. The Tribunal also found fault with the adjudicating order and observed that the except making a bald statement that suppression of facts and wilful intent to evade payment of service tax and education cess by VTPL are well established, no speaking order has been passed on the issue of limitation.
Consequently, the penalty imposed under Sections 76 to 78 of the Finance Act, 1994 was set aside by the Tribunal following the decision of the Delhi Tribunal in Zee Telefilms v. Commissioner, 2004 (166) ELT 34. In this regard, the Tribunal held as under:
“9. The lower authority has imposed penalties on the appellants under Sections 76 to 78 of the Finance Act, 1994. After considering the arguments of both sides on this aspect, we are of the view that the penalties are not justifiable in the peculiar nature of the present case. Firstly, a major part of the demand is covered by the extended period which is not invokable in this case. Secondly, the dispute in this case has arisen, by and large, out of rival interpretations of the relevant provisions of Section 65 of the Finance Act, 1994. A predominantly legal issue has been agitated before us by the assessee and the Revenue. In such circumstances, according to us, it will not be justifiable to impose any penalty on the assessee. We note that, in similar circumstances, penalty was vacated by this Tribunal in the case of Zee Telefilms Ltd. (supra).” (emphasis supplied)
Assailing the said order, the Department has filed this appeal.
Contentions of the Revenue
The department attempted to controvert the finding of fact rendered by the Tribunal contending that the department was not aware of the Slot Sale Agreement, as the assessee did not make it as an issue in the appeal before the Tribunal and there was no material for the Tribunal to render such a factual finding. Thus, the department justifies the appeal stating that the Tribunal erred in setting aside the demand of service tax for the extended period of limitation, as the department had no knowledge about the Slot Sale Agreement.
The plea raised by the department that no such grounds have been raised by the assessee in the appeal before the Tribunal and that the assessee has never intimated the department about their activity under the Slot Sale Agreement cannot be accepted by any stretch of imagination, as it is incumbent on the department to establish that no such material was available with the Tribunal and no such plea was taken by the assessee before the Tribunal.
Held by Hon’ble High Court of Madras
The Hon’ble High Court stated that the first question of law that has been proposed by the department is on the very face of it not a question of law, but a question of fact. To answer that question necessarily one has to delve into the facts and find out whether such material was available or not. The finding of the Tribunal, which is the final fact finding authority, cannot be overturned merely based on a plea made in the appeal by the department. This view is fortified by a decision of the Supreme Court in Kushal Fertilisers (P) Ltd. v. Commissioner of Customs & Central Excise, Meerut, 2009 (238) ELT 21 (SC). In the said decision, while dealing with Section 11-A of the Central Excise Act and the proviso thereto, which is pari materia to Section 73 of the Finance Act, 1994 and the proviso thereof, the Supreme Court held as under:
“16. The order of the Tribunal having been passed on 3rd March, 2005 an appeal was maintainable to the High Court in terms of the substituted provision and not a reference. Whereas a reference could be made on a question of law, Section 35G of the Act, as it stands, provides for an appeal on a substantial question of law. Such a question of law is required to be formulated by the High Court itself. Even otherwise the question of law purported to have been referred to by the learned Commissioner of Central Excise would have been maintainable provided a substantial question of law arose for consideration of the High Court and not otherwise.
Whether non furnishing of information was willful and would amount to suppression of material fact in terms whereof the extended period of limitation as provided for in Section 11-A of the Customs Act, 1944 could be invoked or not, in our opinion, was not a substantial question of law. The finding of fact arrived at by the Tribunal should have been treated to be final. It would be binding on the High Court while exercising its appellate jurisdiction. A ‘substantial question of law’ would mean – of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with -technical, of no substance or consequence, or academic merely. (See Boodireddy Chandraiah v. Arigela Laxmi, [ (2007) 8 SCC 155]).
The High Court has not said that the finding of fact arrived at by the High Court was perverse and/or was based on applying wrong legal principles etc. The High Court proceeded on the basis that the failure on the part of the appellant to submit required declaration or application for licence for establishment, would amount to concealment of facts from the department. We will assume to be so. But, as we have noticed earlier, requisite information was not only furnished on 22nd January, 1991, indisputably the officers of the Central Excise Department made inspection of the factory and the books maintained by the appellant, including the production register, which must have disclosed the nature of the products from the factory in question. If the requisite information had been given to the authorities on 22nd January, 1991, the question which should have been posed and answered was as to whether despite such knowledge, the Commissioner of Central Excise could have proceeded on the basis that there had been a suppression on the part of the appellant.
Section 11-A of the Central Excise Act, 1944 provides for penalty. It, therefore, requires strict consideration. Period of limitation provided for in the Act bars the jurisdiction of the Commissioner to initiate a proceeding for imposition of penalty on the expiry thereof. The proviso appended to Section 11-A(1) of the Act makes an exception to the said Rule, the ingredients whereof are thus required to be established for invoking the extended period of limitation. If on the materials produced by the parties, the Tribunal had arrived at a finding of fact that there had been no suppression on the part of the appellant after 22nd January, 1991, the question of invoking the extended period of jurisdiction did not arise. The show cause notice dated 28th March, 1994 thus having been issued after the expiry of the period prescribed under Section 11A of the Act, was clearly barred by limitation.
In any view of the matter, whether a party is guilty of suppression of fact or not is essentially a question of fact. It does not per se give rise to substantial question of law per se. [See Commissioner of Central Excise, Chandigarh v. Punjab Laminates (P) Ltd, [(2006) 7 SCC 431] and M/s. Larsen and Toubro Ltd. v. The Commissioner of Central Excise, Pune-II, [2007 (6) SCALE 524].” (emphasis supplied)
The Hon’ble Court stated that in view of the above, the court finds no reason as to why the order of the Tribunal should be overturned on the plea now raised by the department. In regards to penalties under Sections 76 to 78 of Finance Act, 1994, the Tribunal observed that a major part of the demand is covered by the extended period which is not invokable and moreover, there is a dispute on interpretation of the relevant provisions of Section 65 of the Finance Act, 1994. Therefore, the Tribunal, placing reliance on the decision of the Tribunal in Zee Telefilms case, referred supra, vacated the penalty.
In view of the above, there is no suppression of material facts with an intent to evade payment of service tax and education cess and that the Tribunal was justified in vacating the penalty imposed by the adjudicating authority.