2025 (8) TMI 173 - AT - Service Tax

Service tax demand on film screening under BAS and Copyright Service set aside; extended limitation period not applicable

The CESTAT Bangalore allowed the appeal, setting aside the demand for service tax on film exhibition under Business Auxiliary Service and Copyright ... Levy of service tax on exhibition of films under the category of Business Auxiliary Service (BAS) service tax on transfer or assignment of copyright of the film produced by appellant under Copyright Service - time limitation. Copyright service - HELD THAT:- As per the agreement entered by the Appellant with Central Advertising Agency on 01.02.2012, it is an absolute assignment to the assignee or their authorized person for the telecast right and as per clause 12, the sole and exclusive right for the entire World Satellite Television Broadcast and other Broadcasting rights are connected thereof for a perpetual period. Once the agreement is for a perpetual period, as per the definition of Copyright Act and as per the Circular issued by the Board, the above said category is not falling under the category of copyright and impugned order confirming demand under copyright is unsustainable. Business auxiliary service - HELD THAT:- Said issue is also squarely covered by the Circular No. 109/3/2009-ST dated 23.03.2009 where it is clarified that screening of a movie is not a taxable service except where the distributor leases out the theatre and the theatre owner get a fixed rent. In such case, the service provided by the theatre owner would be categorized as 'Renting of immovable property for furtherance of business or commerce' and the theatre owner would be l”iable to pay tax on the rent received from the distributor. There is no allegation that Appellant had entered into any agreement to leases out the theatre and the theatre owner get a fixed rent - Further as held in the matter of M/s. Balaji Enterprise [2020 (3) TMI 17 - CESTAT NEW DELHI], impugned order confirming the demand under business auxiliary service is unsustainable in the absence of any mention regarding the specific provision under which service out of the seven services specified in the Section 65 (19) of the Act, was undertaken by the appellant. Time limitation - HELD THAT:- Since taxability under BAS and copyright service on exhibition of films was a matter of interpretation, Board was compel to issue multiple instruction on the issue. Therefore the demand of service tax under the presumption that the Appellant were aware about the tax liability and are yet fail to discharge is contradictory to facts. Since there is no allegation regarding willful suppression of the fact and also considering the dispute involved in similar cases, confirming demand by invoking the extended period of limitation is also unsustainable. The impugned order is set aside - appeal allowed. ISSUES: Whether service tax can be levied on exhibition of films under the category of Business Auxiliary Service (BAS).Whether demand can be confirmed against transfer or assignment of copyright of films produced by the appellant under Copyright Service.Whether the extended period of limitation for service tax demand is invokable in the absence of suppression or deliberate evasion.Whether permanent transfer or assignment of copyright constitutes a taxable service under the Finance Act and Copyright Act.Whether the demand under Business Auxiliary Service is sustainable without specifying the particular clause of BAS invoked.Whether exhibition of films by theatre owners amounts to a taxable service under BAS or any other category. RULINGS / HOLDINGS: Service tax cannot be levied on exhibition of films under Business Auxiliary Service without specifying the particular clause of BAS as required by Section 65(19)(zzb) of the Finance Act, 1994; the demand is prima facie unsustainable in absence of such specification.Permanent transfer or assignment of copyright, especially for a perpetual period, does not amount to rendering a taxable service under Copyright Service; such transfer is excluded from service tax liability.Extended period of limitation for service tax demand cannot be invoked without 'ingredients necessary to justify the demand' such as suppression of facts or deliberate evasion; mere failure to pay tax timely without such acts is insufficient.Exhibition of films by theatre owners is not a taxable service under Business Support Service or BAS unless there is a lease arrangement where theatre owners receive fixed rent, which is taxable under 'Renting of immovable property for furtherance of business or commerce.'Demand based solely on financial records furnished by the appellant without independent verification does not justify invoking extended limitation period.Taxability under BAS and Copyright Services on exhibition and distribution of films is a matter of interpretation with more than one view possible; therefore, presuming awareness and failure to discharge tax liability is contradictory to facts. RATIONALE: The Court applied the definitions and provisions under the Finance Act, 1994, particularly Sections 65(19)(zzb) and 65(105)(zzzt), and the Indian Copyright Act, 1957 (Sections 13, 14, 18, 21, 22, and 26), to determine the nature of services and taxability.Reliance was placed on Circular No. 109/3/2009-ST dated 23.03.2009 and Circular No. 18/10/2004-ST dated 17.09.2004 clarifying that permanent assignment of copyright does not constitute a taxable service and that exhibition of films is not a support service but an independent activity.Precedents were cited emphasizing that the extended period of limitation is invokable only upon proof of suppression or deliberate evasion, not mere non-payment or delayed payment of tax.The Court noted that the show cause notice failed to specify which of the seven clauses under BAS was attracted, contrary to the requirement under Section 65(19)(zzb), rendering the demand unsustainable.The interpretation of taxability on film exhibition and distribution remains ambiguous, as evidenced by multiple Board instructions and divergent judicial views, precluding confirmation of demand on assumption of liability awareness.The Court distinguished between temporary transfer of copyright (taxable) and permanent assignment (non-taxable), relying on the contractual terms granting perpetual rights and applicable statutory provisions.