Recently, it is learnt that DG (Audit) has taken view that Local Cable Operator(LCO) is working under Brand name of Multi-System Operator(MSO) and hence not entitled for Exemption for SSI in terms of Notification 6/2005-ST and (w.e.f. 01.07.2012, 33/2012-ST). Looking to vast implication of this view, the issue is required to be examined in depth.
In the said detailed note, at Para b., it is mentioned that as MSO obtains TV programs signals, mix those creating “single transport stream” and supply the same with their own service i.e. movie/songs to LCO who further distribute the same without any modification and name or Logo of the MSO is displayed continuously during transmission and reception of TV Programs. Hence it appears that LCO undertake only the distribution service of MSO upto subscribers which are supplied under the name/trade name of MSO, and for the same reason, LCO are not eligible for the value based exemption. This observation appears as controversial and requires to be studied further before its implementation as the same is totally contradictory with para 3(iii) of Annexure-B of the said letter itself, wherein it is mentioned that LCO reportedly recover minimum Rs.200/- per month from each subscriber, hence LCO having STB count 500 and more should earn more than Rs, 10 lac which is a threshold limit for availing value based exemption.
Above both Paras are contradictory with each other and need careful study before reaching any decision as per prevailing understanding of law and practice, benefit of threshold limit is being availed by small LCO in the knowledge of departmental officers and sudden change of concept by looking the old scene with new eye will cerate Havoc in the trade as well as departmental officer. We should also think for the situation, if adopting ideology as per para b of the letter, mass-cases are booked, SCNs issued, Adjudicated and confirmed, appealed by the service providers and after some years such ideology is held wrong, there would be huge loss of precious time, manpower, stationery for both side which should be used for revenue oriented productive action only. Hence, it is necessary to examine what is Local Cable Operator(LCO), Multi System Operator(MSO), Brand/Trade Name and its significance, Provisions of value based exemption Notifications, Reason for exclusion of turnover reg. Brand/Trade Name of others from exempted turnover etc.
What is LCO and MSO and their functions: Generally LCO work on area basis and where one LCO work and own Cable Network, other LCO not enter in that area. Thus LCO has monopolized business in their area. In initial stages, LCO used to transmit movie/song by Video Cassette by their own Cable Network to Subscriber’s place. Then, they started to obtain TV signals (free to air) by Dish Antenna and to transmit the same by same Cable Network also Video Cassette is replaced by MP3/VCD/DVD time to time. Later on, when TV Company started to charge fees for receiving their programs and as the same was not affordable for some small LCO, they started to receive from another Big LCOs who had deal with TV Company/Agents. The Concept of MSO came in recent decade only who direct deal with TV Companies or their Distributor, receive, mix and make bunch of various programs and supply to LCO for further supply to subscribers.
In fact, to see TV Program, ultimate customer approach jurisdictional LCO and getting his service. LCO is responsible for Cable connection to customer place, its fitting with TV, ensuring proper reception of TV Signals, and in case of any fault or any other service related issue, for prompt service to repair/solve the same. The Customer knows LCO for service pays him for the same. Hence LCO provide various services to ultimate customer irrespective of fact how the TV signals obtained by LCO whereas MSO is service provider for LCO for limited service of supplying TV Contents.
Also, as per para 2 of Annexure-A of the said letter itself, identity and function of MSO and LCO are different. Further, LCO has to get registered with HPO under Rule 3 of the Cable Television Networks Rules, 1994 whereas MSO has to get registered under Rule 11( C) of the Cable Television Networks (Amendment) Rules, 2012.
What is Brand/Trade Name?: Brand name indicate to Brand Owner Company to which the goods/service relates. Brand building is a very long and comprehensive process covering various aspects. Brand Owner Company get reputation for their product by quality of raw material, production technology, product specification, design, utility, durability, after sale service, replacement policy, customer satisfaction and hence become famous and popular in public by their Brand/Trade name/Logo etc. so public demand product on their brand name. Even, in case to cover demand, the company may get the product manufactured from other manufacturer on job work basis on fulfillment of all the above condition and customer get the same satisfaction. The said job-work produces goods for company and handover it to company or as per direction of the company to various depot/godown/agent/distributor/franchisee/retailer and has no right to produce/sale the same with out consent of company. Customer purchasing the goods with idea that the product is of particular Brand Owner, irrespective of facts who actually manufactured it and in case of complaint/query/service, he can approach any of nominated places at jurisdictional/national, irrespective of fact from which shop-keeper the goods is purchased. In general, the product is manufactured by/for Brand owner and supplied to ultimate customer demanding such Brand as such without any value addition or modification by/for Brand owner.
To avoid possibility of evasion of duty/Tax by mis-using value based exemption by Brand Owner, by getting quantity manufactured from various small job-worker, such exemption is not given for goods manufactured for other’s brand/trade name.
Notification 6/2005-ST(as amended till 30.06.2012) and 33/2012-ST(w.e.f. 01.07.2012) give exemption to taxable service upto threshold limit of Rs. 10 lakhs, but excluding taxable services provided by a person under a brand name or trade name, whether registered or not, of another person. Wherein “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;
As discussed in forgoing para 4, identity as well as function/service of LCO and MSO are different, LCO work on their own and while providing his service, hire service of MSO as input service only. In case of dispute with MSO, LCO can approach another MSO for input service with out approval of ultimate customer. In given situation, reflecting logo of MSO on TV screen, it can not be established that such service is provided under brand/trade name of Logo Owner or such Logo is used anyhow in or in relation to such service. Also, there is no will, agreement, consent, condition from LCO to MSO to work under MSO brand/trade name or to show logo on TV screen.
Situation can be more understood by logical example. If a tour operator operate all India tour on his own, and use Indian Railways for transportation, Logo of Indian Railways will be seen on each ticket, train and station. In this case, can it be said that Tour Operator operates tour under Brand/Trade name of Indian Railways? The answer is No. Even LCO wish to remove logo from the screen, he has no such mechanism and hence is incapable to do anything in the matter.
As discussed above, the issue of non-granting threshold limit exemption to LCO is controversial and need deep study before its implementation considering above views.
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