N.B. Narayan Rao, Chairman -
(1.) THIS is the second appeal filed against the first appeal orders of the Appellate Deputy Commissioner of Commercial Taxes, Vijayawada ('ADC for short) vide his Appeal No. VJA.II/182/05 -06, dated 29 -11 -2008 whereby the first appeal filed against the final assessment orders of the Commercial Tax Officer, Governorpet Circle, Vijayawada ('CTO' for short) vide his Assessment No. NIL/2002 -2003/APGST, dated 17.09.2005 under A.P. General Sales Tax Act, 1957 ('Act' for short) for the year 2002 (sic) is dismissed.
The appellant is a joint venture incorporated under the Companies Act, 1957. Its registered office is at Mumbai. It is engaged in the business of distribution of television channels in India of M/s. Set India Private Limited and M/s. Discovery Communications India. M/s. Set India Private Limited and M/s. Discovery Communications India ('DCI' for short) are the two service providers/broad casters of television channels. The appellant distributes in the assigned territory the programming services of Set India Private Limited and DO. The programming services of these two service providers are known as M/s. Sony Entertainment Television. The appellant entered into an agreement, as an agent, with M/s. Set India Private Limited and DCI vide the agreement dated 09 -03 -2002. The appellant had appointed M/s. Master Care Electronics, Vijayawada ('MCE' for short) to distribute the said programming services as provided by M/s. Set India Private Limited and DCI in the territories of Prakasham, Gunrur, Krishna, Khammam, West Godavari Revenue Districts of A.P. State. The appellant had distributed the programming services of the said two services providers in the said 5 districts of the State of A.P. through its agent called distributor i.e. MCE. The MCE had actually distributed the programming services of the said two service providers to the cable operators, hoteliers, institutions and individuals through certain instruments called Integrated Receiver Decoders ('IRDs' for short). These IRDs are kept in the premises of the said cable operators, hoteliers etc. The cable operators gave connections to the individual household customers in the relevant city/town or village and the hoteliers gave connections to the various television sets in the various rooms available in their hotels, lodges, etc. The interested cable operators, etc., express their willingness to use the services of the service providers with the distributor and such willingness is communicated to the appellant. Periodically, depending upon the requirement of the field, the appellant had sent the IRDs to MCE after receiving certain amount towards security deposits of the IRDs. The MCE delivered the IRDs to the cable operators, hoteliers, etc., to be installed in their premises. The necessary technical backup is given by the person of the MCE and the appellant. With the help of these IRDs the individual cable operators, hoteliers, etc., transmit the T.V. programme signals to the individual households in the city/town or village and to the individual rooms in the lodges, hotel rooms, etc. The cable operators, etc., have paid certain monthly subscription fees at certain rule the form of the bank cheques, demand drafts, etc. The same were handed over to MCE who had in turn deposited the same in the bank account of the appellant with HDFC bank at Vijayawada. Besides, the amounts collected allegedly towards the security deposits of IRDs from the cable operators etc., were also collected in the form of bank cheques and DD's and the same were also deposited in the said HDFC bank account of the appellant at Vijayawada. The MCE received certain monthly fees, which is variable, from the appellant for the distribution services rendered by it on behalf of the appellant as its agent.
(2.) THE appellant is not a registered dealer under the provisions of the Act. Nor it had filed any returns under the Act. The business premises of MCE was inspected by the CTO on 03 -02 -2005 and the affiliation agreements entered into by the cable operators, hoteliers, etc., with the appellant were seen at the time of inspection of the said business premises of the MCE. The whole above described procedure was also obtained by the inspecting authority during the course of the said inspection. Besides, MCE had also stated that in the year 2002 -2003 the appellant had received Rs. 3,89,26,628 from the cable operators, hoteliers, institutions, etc. This amount is treated as the consideration for transfer of right to use the IRDs in A.P. received by the appellant in favour of the ultimate customers like cable operators, hoteliers, etc.,. Accordingly, the pre -assessment show -cause notice was issued, and subsequently the tax as proposed was confirmed under Section 5E of the Act, Aggrieved of the said final assessment orders of the CTO, the first appeal was unsuccessfully preferred before the ADC who had dismissed the said appeal under Section -19 of the Act. The appellant filed the present second appeal before us against such dismissal orders of the ADC. The appellant did not produce its books of accounts not only before the CTO and the ADC but also before us.
TECHNICAL ASPECTS: -
The service providers prepare certain T.V. programmes and the same are converted into signals which are fired to the relevant transponders placed in the artificial satellites located at certain heights in the sky. The said transponder beams the said signals to a particular area on the earth. The signals so beamed back to the earth are collected by the dish antenna. The signals so collected by the dish antenna are received and strengthened by the IRDs and thereafter fed to the televisions of the ultimate/end customers. The said television sets convert back such signals into the respective programmes which are viewed on the monitors of the televisions. Normally, the signals collected by the fed horn of the dish antenna are weak and hence, they are amplified by a device called low noise block converter. The IRD(sic) also converts the signals received from the transponders located in the satellite into usable signals. In short, the signals are modulated into proper frequency and later distributed to the subscribers for viewing the programmes. Thus, in between the producer of the signals of television programmes and the ultimate consumer of the said signals in the individual households, hotel rooms, etc., the appellant and its distributor/agent and the cable operators are located offering their services required therefor. The MCE is the distributor of the appellant and he is acting only as an agent of it. He receives the IRDs of the appellant installs them in the premises of the cable operators, hoteliers, etc., with or without viewing cards, so as to facilitate the proper receipt and feeding of the signals beamed by the said two service providers into the television sets of the ultimate consumers in the individual households, etc., through the IRDs, duly modulated and amplified, facilitating the individual television programme viewing customers to view the relevant television programmes with quality.
(3.) THE CTO stated that the cable operators, hoteliers, etc., entered into the affiliation agreements with the appellant; that the appellant is leasing out the decoders (IRDs.) involving transfer of right to use them in favour of the cable operators, hoteliers, etc.,; that the appellant supplied IRDs to the cable operators, etc., through MCE against security deposits and brought them into function in their premises; that if the cable operators are not inclined to continue with the IRDs for any reasons, the appellant takes them back and either return such security deposits or adjust the same towards monthly subscription fees dues from the said cable operators; that all the 3 essential ingredients of 'leasing of goods' are present in these transactions; that the appellant gave physical possession of IRDS to the cable operators, etc., and activated them to function, and the cable operators used them for relaying the T.V. programmes of the 2 said service providers/broadcasters; that the appellant is supplying IRDs against security deposits and collecting monthly rents for using them for relaying the television channels of the said 2 service providers; that the appellant is thus dealer under Section 2(e) of the Act; that the appellant is collecting monthly rent/subscription fees in town/cities @ Rs. 55 -65/ - connection given to the ultimate customers and in rural areas at certain rate in 2 spells/year basing on the number of channels allowed to be supplied to the ultimate customers by the cable operators; that the appellant is collecting monthly rent for relaying the television programmes of the 2 service providers; and that the activity of television relays through decoders supplied to the cable operators against the security deposits and collection of monthly rents therefor involves transfer of right to use the IRDs in favour of the cable operators, etc.;