OFFICE OF THE COMMISSIONER,

CENTRAL EXCISE & SERVICE TAX COMMISSIONERATE,

CHANDIGARH-II, PLOT NO. 19, SECTOR-17-C, CHANDIGARH

C. No.

Dated:
DRART SHOW CAUSE NOTICE

1.
M/s B&W Cable Network, # 22, Haripur Road, Balongi, Mohali (here-in-after referred to as
the Noticee) are registered with the Service Tax Department vide Service Tax Registration No.
AAKFB0872HSD001 w.e.f. 12.11.2014 and were engaged in providing taxable services under the
category of Cable Operators as defined in Section 65B(44) of the Act 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.
M/s 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) of the Act (valid upto 30.06.2012) 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.6/2005-ST dated 01.03.2005 (as amended) (valid upto
30.06.2012) and /or 33/2012 ST 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
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been observed that the notice has not discharged the service tax liability on the gross amount so
received from the customers.
5.
Accordingly, the Noticee vide letter C. No. ST-20/CER-II/Mohali/Enquiry/B&W
Cable/5/15/725 dated 30.03.2016 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 from April 2014 to
September 2015. 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, as received from Fastway indicating the name, address and contact number of the person
concerned and the copies of ledger account of LCOs associated with them and sample copies of the
agreements executed with the LCOs 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;
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iv.

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

v.

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;

x.

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
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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 from October 2009 to March
2014 vide C. No. V/ADC/ADJ/Moh/C-II/145/2015/2465 dated 22.04.2015 for recovery of Service Tax
of Rs. 12,68,126/- on the basis of best judgment assessment as provided under Section 72 of the Act by
the Additional Commissioner, Central Excise & Service Tax Commissionerate, Chandigarh - II, Plot
No. 19, Sector-17-C, Chandigarh, which is pending adjudication with common adjudicating authority
appointed by the Central Board of Excise & Customs vide Order No. 12/2015 issued vide F. No.
137/44/2013-ST dated 18.09.2015.
10.
For the subsequent period, the Jurisdictional Range Office vide letter dated 25.03.2016
requested the Noticee to provide the amount charged by them from the customers on account of
services provided by them and Service Tax paid, if any, for the period from April 2014 to September
2015 and the Noticee failed to respond to the departmental communication. From the ST - 3 returns
filed by the party for the period April 2014 to September 2015 it has been ascertained that the Noticee
has paid Rs. 17,64,694/- (Rs. 15,61,888/- PLA + Rs. 2,02,806 Cenvat) on taxable Services of Rs.
1,38,16,277/-.
11.
In the meanwhile the Jurisdictional Range office vide letter C. No. ST-20/Enquiry/Cable
Operator/02/R-III-M/01/2014/682 dated 04.03.2016 followed by reminder of even C. No 711 dated
21.03.2016 requested the Fastway to provide the details of the amount raised by Fastway to the LCO
and the amount retained by the LCO during the period from 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 relevant period which shows the amount of billing raised by Fastway to LCOs during
the period under consideration and has the following figures.
(a)

Value means value of services provided to LCO.

(b)

Service Tax means Service Tax on Service provided.

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(c)

Gross Total means total of both (a+b) i.e. value of service provided plus service tax.

LCO collect the gross amount of bill raised by Fastway from end consumer.
LCO retained his share and the balance paid to Fastway.

From the above, it appears that MSO i.e. Fastway is only billing the amount pertaining to
service provided to LCO only, however the LCO collects the gross amount from the end consumer and
after retaining his share, pays the balance amount to Fastway as billed by them.

12.
Scrutiny of the data received from Fastway reveals that the amount for which bills have been
raised on the Noticee for the period 01.04.2014 to 30.09.2015 is as per Annexure - A as under:Sr.
No.

Period

Amount for which the payment made by the Noticee

to Fastway
(Figures in Rs.)

April,2014 to March, 2015

1,79,42,293/-

April, 2015 to May, 2015

28,86,722/-

June, 2015 to September, 2015

59,51,519/-

Total

2,67,80,534/-

13.
On scrutiny of ST-3 Return (April-Sept 2014 , Oct-Mar 2015 and April-Sept 2015) filed by the
Noticee, it appears that the noticee in their ST-3 return declared the value of taxable services as Rs.
1,38,16,277/- and paid Service total Tax of Rs. 17,64,694/- (Rs. 15,61,888/- PLA + Rs. 2,02,806
Cenvat). Since, the Noticee have not assessed their Service Tax liability correctly, service tax liability
is to be worked out, in terms of the provisions of Section 72 of the Act 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, service tax liability
of the Noticee is Rs. 67,54,503/- which is worked out as per Annexture- B attached:-

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. 67,54,503/- as arrived on the basis of statement
of 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 recorded on 28.02.2015 by applying the 40/60 ratio. Service Tax of Rs. 67,54,503/appears to be recoverable from the Noticee under Section 73 of the Act.

14
From the above, it appears that the Noticee have failed to pay service tax amounting to Rs.
67,54,503/- for providing the said taxable services under a brand name, 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
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the Service Tax Rules, 1994 which appears to be recoverable from them under Section 73 of the
Finance Act, 1994. On the said Service Tax interest also appears to be recoverable from the Noticee
under Section 75 of the Act. The Noticee also appears to be liable for penal action under Section 78 of
the Act as the Noticee in the ST-3 returns filed by them / figures supplied by them, appears to have
suppressed the value of Taxable Services provided by them and have not provided the correct amount
collected from the subscribers. The noticee willfully suppressed the value of taxable services by not
adding the amount charged by Fastway to the amount retained by the Noticee with an intent to evade
payment of Service Tax..

15.

Thus, it appeared that the Noticee have contravened the provisions of:

(i)

Section 72 of the Act in as-much-as they have failed to assess the correct value of Taxable
services provided by them, as explained in foregoing paras for the period Apr-2014 to Sep-

2015;
(ii)

Section 68 of the Act read with Rule 6 of the Service Tax Rules, 1994 in as-much-as they have
failed to pay Service Tax amounting to Rs. 67,54,503/- as explained in foregoing paras for the
period April 2014 to September 2015, as calculated in the manner mentioned at para-13 above
to the credit of the Government within the stipulated time limit;
Thus, the noticee have rendered themselves liable to penal action under Section-77 and
Section78 of the Act and Rule-15(3) of the Cenvat Credit Rules, 2004 for contravention of the
provisions referred supra.

16.
Now, therefore, M/s B&W Cable Network, # 22, Haripur Road, Balongi, Mohali. are hereby
called upon to show cause to the Commissioner, Central Excise & Service Tax Commissionerate,
Chandigarh-II, Plot No. 19, Sector-17-C, Chandigarh within 30 days of receipt of this notice, as to why
:

(i)

Service tax amounting to Rs. 67,54,503/- (Rupees Sixty Seven Lacs Fifty Four
Thousand Five Hundred and Three Only) should not be recovered from them under
Section 73 of the Finance Act, 1994.

(ii)

Interest on the Service Tax recoverable should not be recovered from them under
Section 75 of the Finance Act, 1994.

(iii)

Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 for
suppressing the value of taxable services with intent to evade payment of Service Tax;

(iv)

Penalty should not be imposed upon them under section 77 of the Finance Act, 1994 for
contravention of the provisions explained supra.

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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 Noticee 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.

Commissioner
Through Division Office:M/s B&W Cable Network,
# 22, Haripur Road, Balongi,
Mohali.

Copy to:1.

The Assistant Commissioner, Central Excise & Service Tax Division, Mohali alongwith copy
meant for noticee. It is requested that SCN may please be got delivered alongwith Annexure(s)
and RUD(s) under proper receipt. Receipt so obtained may please be sent to this office for
record.

.
2.

The Superintendent, Central Excise & Service Tax Range V, Mohali

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Superintendent (Adj.)
Additional Commissioner Competency

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