2020 (12) TMI 698 - AT - Service Tax

Tribunal grants refund of service tax for movie production services, rules in favor of appellant

The Tribunal allowed the appeals in favor of the appellant, holding that the appellant was entitled to a refund of service tax paid on input services ... Refund of Cenvat credit - export of service - benefit was accrued in India - refund denied on the ground that there was no export of service and thus, the case of the appellant falls outside the scope and ambit of the statutory provisions, disentitling it to claim the refund benefit - period January to June' 2017 - whether, the requirement of Rule 5 ibid read with the notification issued there under had been complied with by the appellant for grant of refund of service tax paid on the input services? HELD THAT:- It cannot be said that the beneficiary from the movie is an Indian entity i.e. the appellant herein inasmuch as the sole rights of the movie belong to M/s Apple & Orange (an overseas entity) and the appellant is only charged with the task of carrying the production activities of the film for a specific consideration - it is evident that as well as India, the subject movie was also shot at different foreign locations. Further, apart from India, the movie had also been released in various other countries internationally, especially in U.K. and U.S.A., wherefrom it had made a substantial gross collection. Therefore, the impugned order holding that the movie was produced/released and the benefit was accrued only in India is factually incorrect. The impugned order at paragraph 8.3 and 8.4 has referred to Rule 8 of the Place of Provision of Services Rules, 2012 and the guidelines provided in CBEC Education Guide to conclude that in the case of a service receiver, the place relevant for determining location is the place where the service is 'used' or 'consumed'. Insofar as Rule 8 ibid is concerned, the statute recognizes the location of the recipient of service, in case, where both the provider as well as the receiver of service are located within the taxable territory i.e. India - In the case in hand, the contents of the agreement clearly provide that the main producer and the beneficiary of the subject movie is M/s Apple & Orange. Since, such recipient of service is located in United Kingdom, which is a place outside the geographical limits of India, in my considered view, the provisions of Rule 8 ibid shall not be applicable to the present case. On the other hand, by close scrutiny of the rules framed under the Place of Provision of Services Rules, 2012, the case of the appellant will not be governed under Rule 4 to Rule 12 itemized therein. Rather, the place of provision of service will more appropriately be categorized under Rule 3 ibid inasmuch as the service recipient has its business establishment in United Kingdom and thus, the place of provision of service is outside India, which would be considered as export of service for grant of refund of service tax paid on the input services. There are no merits in the impugned order, in so far as it has upheld the adjudication order on the ground that the appellant should not be entitled for refund benefit provided under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 27/2012- C.E. (N.T.) dated 18.06.2012 - appeal allowed - decided in favor of appellant. Issues involved:1. Whether the appellant complied with Rule 5 for a refund of service tax paid on input servicesRs.Analysis:The appellant, a service provider registered for taxable services, entered an agreement with a UK entity for line production services for a movie. The appellant claimed a refund of service tax paid on input services, contending that the output services were exported, hence no service tax was due. The Deputy Commissioner and Commissioner of GST rejected the refund, citing the film's production in India and the absence of the UK entity's name in the scenario. The CAG report was also referenced to deny export status. The Tribunal analyzed the agreement, noting the UK entity as the producer with full rights, and shooting in foreign locations besides India. It concluded that the film's main producer and beneficiary were the UK entity, making it an export of service. The Tribunal dismissed the CAG report's relevance, as it pertained to a different film. The impugned order was set aside, allowing the appeals in favor of the appellant. The judgment emphasized that the appellant was entitled to the refund under Rule 5 of the Cenvat Credit Rules.In essence, the Tribunal deliberated on the compliance with Rule 5 for a refund of service tax paid on input services in the context of the appellant's agreement with a UK entity for line production services for a movie. The judgment scrutinized the agreement terms, shooting locations, and beneficiary rights to ascertain the export status of the services provided. The Tribunal differentiated the facts of the case from the CAG report, emphasizing the UK entity's role as the primary producer and beneficiary. Ultimately, the Tribunal allowed the appeals, highlighting the appellant's entitlement to the refund under Rule 5.