OFFICE OF THE ASSISTANT COMMISSIONER

CENTRAL EXCISE & SERVICE TAX DIVISION,

SCF-57, PHASE-5, MOHALI.

C. No.

Dated:
DRAFT SHOW CAUSE NOTICE

M/s Friends Cable (Tony), SCF 52, Top Floor, Phase- 3B2, Mohali (here-in-after referred
to as the Noticee) are registered with the Service Tax Department vide Service Tax Registration No.
BOKPG1983FSD001 w.e.f. 16.01.2015 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.
5.

Accordingly, the Noticee vide letter ST-20/Enquiry/Cable Operators/38/R-V-M/2014/1642 dated

23.03.3015 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 & Service Tax Commissionerate, Chandigarh II,
provided the details of LCOs based in the jurisdiction of Central Excise & Service Tax Range V,
S.A.S. Nagar, Mohali 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. V(ST)SCN/Durali/Div/Mohali/17/2015/424 dated 22.04.3015 for recovery of Service
Tax of Rs. 3,65,871/- on the basis of best judgment assessment as provided under Section 72 of the
Act by the Deputy Commissioner, Central Excise & Service Tax Division, Mohali.
10.
For the subsequent period 2014-15, the Jurisdictional Range Office vide letter C. No, ST20/CER-II/Mohali/Enquiry/Ladran Cable/2/2015/649 dated 16.02.2016 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 and 2015-16 (up to Sep, 2015), but the Noticee failed to respond
to the Departmental communications.
11.
In the meanwhile the Jurisdictional Range office vide letter C. No. ST-20/Enquiry/Cable O
perator/02/R-III-M/01/2014/682 dated 04.03.2016 followed by reminder of even C. No 711 dated
21.03.2016 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 April 2014 to September
2015. The Fastway vide their e-mail dated 07.04.2016 & 08.04.2016 provided the copies of Noticees
ledger account for the said period. On scrutiny of ledger accounts revealed that the noticee was
debited for Rs. 55,75,483/- 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 period April 2014 to
September 2015.
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., 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 per Annexure- A
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. 51,41,243/- 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. 6,64,322/- 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 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 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;

14.2
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 supra.
15.
From the above, it appears that the Noticee have failed to pay service tax amounting to Rs.
6,64,322/- 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 alongwith interest under Section 75 of the Act. The Noticee also appears to be liable for penal under
Section 77 & 78 for the aforementioned contraventions.
16.
Now, therefore, M/s Landran Cable Network, H. No. 70, Village- Lakhnour, P. O.
Sohana, SAS Nagar, Mohali are hereby called upon to show cause to the Additional
Commissioner, Central Excise & Service Tax Commissioner, Chandigarh-II, SCO-19,
Chandigarh 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. Rs. 6,64,322/- (Rupees Six lacs sixty four thousand
three hundred and twenty two 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(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.

Additional Commissioner
Registered A.D.
M/s Landran Cable Network,
H. No. 70, Village- Lakhnour,
P. O. Sohana, SAS Nagar, Mohali.

Copy to :1. The Assistant Commissioner, Central Excise & Service Tax Division, Mohali.
2. The Superintendent, Central Excise & Service Tax Range-V, Mohali.

Additional Commissioner