2010 (9) TMI 666 - AT - Service Tax

Film Producer Not Liable for Service Tax on Studio Rentals

The Tribunal held that letting out vacant studio premises for film shooting did not constitute a taxable service under the category of 'video production ... Waiver of pre-deposit - Video production agency service - The appellants, are a leading Film Producer - The appellants have started letting out the open places and certain common constructed vacant areas within the studio premises on hire for shooting films, TV serials, Advertisement films etc - The issue for consideration in this appeal is whether letting out the vacant studio premises attracted service tax under the category of “video production agency”. The authorities have placed reliance on Board’s Circular F.No. B-II/1/2000-TRU dated 9-7-2001 - The clarification issued by the Board does not appear to be in consonance with the definition of video tape production which only includes services such as editing, colouring, dubbing etc. which are specified - The definition of the video tape production in the statute refers to only technical aspects of video tape production service - the authorities have been, prima facie, misguided by said clarification and the subsequent Circular of the Board bearing No. 78/08/04-S.T., dated 23-3-2004 not consider - Prima facie view that the appellants have a very good case on merit in their favour - Hence, waive the requirement of pre-deposit and stay recovery. Issues: Whether letting out vacant studio premises for shooting films constitutes a taxable service under the category of 'video production agency' as defined under Section 65(119) of the Act, and whether mere letting out of premises amounts to rendering service in relation to video tape production under Section 65(120) of the Act.Analysis:1. Issue 1 - Taxability of Letting Out Studio Premises: The appellant, a leading Film Producer, started letting out open places and constructed vacant areas within the studio premises for shooting films, TV serials, etc. The appellant's consultant argued that since the appellant did not provide any technical services related to video production and only collected hire charges for the premises, they should not be liable to pay service tax. The Tribunal examined the definitions of 'video production agency' and 'video-tape production' under Sections 65(119) and 65(120) of the Act. It was noted that the definition of video-tape production was amended with effect from 16-6-2005 to include various technical services related to video production. The Tribunal observed that the Board's Circular dated 9-7-2001, which broadened the scope of taxable services to include any service related to video tape production, was not in line with the statutory definition. The Tribunal highlighted that the subsequent Circular dated 23-3-2004 clarified that the levy of service tax on video tape production services is limited to technical functions only. Based on these observations, the Tribunal was inclined to view that letting out vacant studio premises did not fall under the category of video tape production service, as the appellant did not provide technical services.2. Issue 2 - Prima Facie Merit of the Appellant's Case: After considering the arguments and the statutory provisions, the Tribunal opined that the appellant had a strong case on merit in their favor. The Tribunal noted that the authorities below may have been influenced by the broader interpretation in the Circular dated 9-7-2001, rather than the specific technical aspects defined in the statute. Consequently, the Tribunal decided to waive the requirement of pre-deposit and stay the recovery during the appeal process, indicating a favorable stance towards the appellant's position. This decision was based on the Tribunal's prima facie view that the appellant was not liable to pay service tax for letting out vacant studio premises.In conclusion, the Tribunal's judgment focused on the interpretation of statutory definitions, the discrepancy between Board Circulars, and the limited scope of taxable services related to video tape production. The decision favored the appellant, indicating that letting out vacant studio premises without providing technical services did not attract service tax under the category of video production agency.