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TMI Blog2019 (1) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... mar, Senior Manager Taxation & Authorized Signatory of the appellant. Further, through the statement dated 16.08.2012 of Shri Abhishek Kumar, it appeared to revenue that appellant had been short paying service tax. It was noticed by revenue that appellant had engaged distributers for marketing their DTH Services. The distributers were further authorized to appoint dealers. The dealers used to contact the subscriber and collect subscription from subscribers. In a typical transaction if the subscriber pays Rs. 2,950/- to dealer and dealer issues an invoice for the said amount to the subscriber. Dealer was receiving Rs. 400/- as security deposit for viewing card. The said amount of Rs. 400/- per subscriber towards viewing card was security deposit and it used to gate collected by dealer and used to reach the account of appellant and the same was treated as security deposit in the books of account of appellant. For the same transaction, the distributer used to issue invoice of Rs. 2,250/- to the dealer and used to collect said amount. The distributer remitted Rs. 2,250/- to appellant and appellant was issuing invoice to distributer for Rs. 2,250/-. Out of Rs. 2,250/- appellant was payi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing submissions:- "a) The first issue pertains to the demand confirmed on the allegation that the Dealers have been paid commission, and service tax is payable on the same for the period 2007 to 2012, the show cause notice is dated 19.10.2012, invoking the extended period of limitation. The total amount of demand confirmed is Rs. 24,57,55,162/-. b) Appellant submits that they are at all times the owners of the Customer premises equipment (CPE) namely set- top box, antenna, viewing card, low noise breaker etc. and on basis of rental, the set-top boxes are sold, after payment of VAT on transfer of right to use basis, to their distributors under invoices. Such distributors in turn sell the set-top boxes on right to use basis to the dealers under invoices and collect the amount for such right to use sales from the dealers. The dealers thereafter sell the customer premises equipment on a deemed sale basis under invoices to the subscribers of the broadcasting services of Dish TV India Ltd. Later on a commission is paid to the distributors from such realization with respect to CPE sold to them, but service tax has been paid on the entire value at which the set-top box are sold on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs make payment for the same to Dish TV and not the dealer. The dealer has to make payment to the distributor for the customer premises equipment upfront, whether he realises the amount from the subscriber or not, which is a separate transaction between the distributor and the dealer. In regard to CPE, there is no privity of contract between the dealers and Dish TV. The margin earned, if any, being the maximum margin permissible to the dealer belongs to the dealer and the dealers earn whatever the market bears. The invoices raised on the distributor by Dish TV and by the distributor on the dealer for the CPE clearly support the foregoing averments. There is no written agreement between the dealer and Dish TV nor is there any understanding or contract that any commission is being paid to them by Dish TV for the CPEs. The agreement between the distributors and Dish TV shows that the dealers are responsible for providing the customer premises equipment to the subscribers, after the distributor sells the same to the dealers. f) The Department's case is that (a) without even any entries in the books of accounts of Dish TV of receipt of any amounts in regard to CPE from the dealers, (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers from the subscribers in 2007-2008. Such a security deposit can never be any consideration for the service, but the Commissioner has reasoned a) that there is no evidence of return of any security deposit hence service tax is payable on the same b) that the viewing card is used for providing the broadcasting services and service tax is payable on the same c) that the appellants have also given time frame governing the refund of security deposit in the subscriber application form duly accepted and signed by the subscribers namely that on termination/expiration the subscriber should send the viewing card in a functional condition to the appellants, within 15 days. Further if returned within four months from the end of the 15 days, Rs. 50/- per month deducted, if return after the expiry of four months from the end of the 15 days - rupees 100 per month deducted which according to the Commissioner, shows the intention to never refund the security deposit. Appellants submit that a security deposit can never be the gross amount charged for providing the broadcasting services, since this amount is not being charged but is in the nature of a returnable deposit subject to the subscriber c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extended period of limitation and imposition of penalty in regard to both the issues is totally unsustainable as there is no contumacious conduct and all transactions are reflected in the books of accounts and the disputes only involve an interpretation of a legal issue." 4. Heard the learned A.R. for revenue. The learned A.R. has supported the impugned Order-in-Original and argued that the distributer and dealer would not work for free and that the scheme of business by appellant was designed in such a manner that monitory consideration is retained by the dealer who was working on behalf of the appellant and therefore, the amount retained by dealer should be included in the assessable value for assessment of service tax on the appellant. Further, he has submitted that though Rs. 400/- per subscriber was retained as security deposit there was hardly any case where such security amount was refunded to the subscriber. Therefore, it is justified to demand service tax on said amount. 5. Having considered the rival contentions and on perusal of records, we find that the Original Adjudicating Authority has treated the amount retained by dealers as the expenditure incurred by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, amount representing said Rs. 300/- cannot become part of the assessable value. We, therefore, set aside the demand of Rs. 24,57,55,162/- along with interest and equal penalty. 6. In respect of the demand of around Rs. 4 crores, we find that as per the terms and conditions entered into between the subscriber and the appellant through subscriber's application form, the appellant is bound to refund security deposit of Rs. 400/- per viewing card if it is claimed within 15 days from the end of the service and if it is returned in functional condition. We also find that said amount is treated as security deposit in the books of account of the appellant. We find that learned Commissioner has held that there was no evidence of return of any security deposit and hence service tax was payable. We find that Revenue should have investigated as to whether any subscriber had returned the viewing card within 15 days of end of the service and whether the appellant have refused to return the deposit. We do not find any such investigation carried out by revenue. Therefore, the presumption of revenue that there was no evidence of return of any security deposit was not sufficient ground to con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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