No Service Tax Liability arises When Amount Already Paid By Principal in Lieu of Services Rendered by Cable Fees Collection Agent: CESTAT [Read Order]

The Chandigarh Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable when service tax is paid by the principal and the question of who has paid is a procedural issue.

The appellants, M/s Channel Management and Marketing Chandigarh, challenged the Order-in-Appeal which in turn upheld the demand raised vide show-cause notice. The appellants are engaged in the business of collection of all the fees/ dues payable to the T.V Channels by the cable operators as per contract, with their principals M/s Set Discovery Pvt. Ltd. (M/s SETD), on their sole cost and expense besides promoting and marketing on behalf of T.V Channels. It was alleged that the principals have discharged duty whereas the appellants were under obligation to discharge the same. 

 Shri Sudeep Singh Bhangu, Counsel for the appellants, submitted that the fact of discharge of the service tax liability, of the appellants, by M/s Set Discovery Pvt. Ltd., was informed to the Department; M/s SETD have also given a certificate to the effect that for the period July 2003 to March 2005, they have paid service tax on behalf of the appellants.

Shri Shivam Syal, Authorized Representative for the Department, on the other hand, submitted that the impugned order gives a clear finding that the appellants have not submitted any proof of deposit of service tax by the service recipient to support their contention.

In the case of M/s Melange Developers, the question was whether a sub-contractor is liable to pay service tax when the main contractor has paid service tax on the total value of the contract. In the instant case, however, it is clear that M/s SETD have discharged the service tax payable by the Agent. Payment of service tax into the Revenue Exchequer is not in dispute. What is in dispute is who has to discharge the service tax liability.

It was viewed that “Once service tax is paid, there is no loss to the revenue of the Government, the question as to who has paid the same, remains a procedural issue and thereto, an empty one.” 

A two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) observed that “the appellants have kept the Department informed of the fact that applicable service tax is being paid or has been paid by their principals i.e., M/s SETD.  Therefore, there are cogent reasons for the appellant to believe that they are not obliged to pay service tax again; therefore, the ambiguity in the minds of the appellant is a bona fide one. Therefore, the extended period cannot be invoked.”

Since no case has been made for the invocation of the extended period, the CESTAT allowed the appeal.

To Read the full text of the Order CLICK HERE

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