In a significant case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)upheld the demand for service tax since the non-payment of service tax for broadcasting of SS Music and Sur Sangeeth Channel through sham document amounts to tax evasion.
M/s. Coxswain Technologies Ltd, the appellant is engaged in operating a television channel and also uplinking facility for a third party and has obtained registration under the category of ‘Business Support Service’ (BSS).
During the course of the audit of accounts it was noticed by the Internal Audit Group of Service Tax Commission rate that the appellant had accounted the income under the head ‘Fees for allotment of air time and uplink income’. It appeared to the department that the allotment of air time was related to broadcasting service and that the appellant is primarily engaged in the business of television broadcasting.
The appellant had not paid service tax under the category of Broadcasting Service which has come into effect on 16.07.2001. The appellant informed the department that the appellant was not a broadcasting organization or agency and that they were engaged only in the uplinking of TV programmes produced by SS Music and Sur Sangeeth Channel which were owned by M/s.Fortune Media Pvt. Ltd. and M/s.Mindscape Creations Pvt. Ltd. respectively.
It was found that the appellant was providing a broadcasting service also. The appellant had obtained permission from the Ministry of Information and Broadcasting vide letter dt. 03.06.2003 in which it was stated that the appellant owned a television channel under the name & style “Coxwaine Channel”. On 08.10.2004, the appellant obtained permission from the Ministry of Information & Broadcasting for changing the name of the channel into “SS Music” and “Sur Sangeeth” channel in the Hindi language.
The accounting of income under the head “Fee for allotment of air time and uplinking income” thus appeared to indicate that the appellant was indeed providing broadcasting service as well as uplinking facilities to other channels.
The appellant had been paying service tax under the category of ‘Business Support Service’ (BSS) on the income earned by them only from 2006-07. The appellant was not discharging service tax on the entire income received under BSS.
A two-member bench comprising of Ms Sulekha Beevi C S, Member (Judicial) and Mr M Ajit Kumar, Member (Technical) observed that the appellant had suppressed and misrepresented the facts of providing broadcasting service by deliberately declaring that they were undertaking only uplinking facility and also resorting to misclassification of the service as ‘BSS’ to evade payment of service tax.
The appellant entered into back-to-back agreements with the above broadcasting companies for undertaking uplinking services and these broadcasting companies were also registered with the service tax authorities under the category of Broadcasting Service. These broadcasting companies (M/s.Fortune Media Pvt. Ltd. and M/s.Mindscape Creations Pvt. Ltd.) were accordingly discharging service tax on the entire receipts.
The documents/records showed that M/s.Fortune Media Pvt. Ltd. is owned and operated by the appellant itself and the agreement entered by the appellant contending that they provide uplinking services for the ‘SS Music’ channel is only a sham document.
“The agreement entered by M/s.Coxswain Technologies Ltd. with M/s.Fortune Media Pvt. Ltd. and M/s.Mindscape Creations Pvt. Ltd. has to be considered as a sham document to cover up the ‘broadcasting service’ rendered by the appellant. Proceedings before quasi-judicial authority are not tied up in the heavy shackles of the Procedures and Evidence Act. The same should not be taken advantage of by parties to misrepresent facts and furnish fabricated and sham documents.”, the bench held.
The CESTAT upheld the demand invoking an extended period and imposition of penalties and dismissed the appeal.
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