TaxTMI 
TaxTMI 
2024 (6) TMI 307
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....e of discharge of service tax, the appellants were registered with jurisdictional CGST/Service Tax Commissionerate and was paying service tax under the taxable service category of video production agency, video tape production service, Supply of Tangible Goods for Use (STGU) service. The services provided by the appellants were in the nature of editing, cutting, colouring, dubbing, title printing, adding/modifying or deleting sound, imparting special effects etc. on the post-production of film shots, record of performance in film in order to make the movie fit for release. Some of the techniques used in such activities include (i) roto-scoping i.e., tracing over motion picture footage, frame by frame, to produce certain realistic action or isolate an image or add different background etc., (ii) compositing and painting i.e., Combining separate single image or sequence, to create an illusion that all those elements are parts of same scene; and (iii) 3D tracing or match move i.e., technique of insertion of computer graphics into live action footage, all of the above involving manipulation of recorded images, film scenes by use of information technology software. In respect of the ser....
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....d, imparting special effects etc. by rendering Visual effects (VFX) on already shot film or recorded performance which are provided to the appellant as a mere frame i.e., without sound. Inasmuch as the services provided by the appellant are received by their clients abroad, who is the sole user of such film or movie after merging the audio and video part of the frames, and as these frames as provided to the appellants and their contents do not have any value to be used as intangible goods, such services worked upon by the appellant cannot be treated as taxable under the Finance Act, 1994. Further, all material provided by overseas clients are stored abroad in their servers and the appellant is only given user id &password protected access for working upon them and these are restored in their server and hence, these cannot be transacted by the appellant as intangible goods. Hence, he pleaded that taxation of such services is not feasible under the Finance Act, 1994. 3.2 Learned Advocate also submitted that the Tribunal has held that service tax is not leviable on such activity in a similar case of Prime Focus Ltd., which was also upheld by the Hon'ble Supreme Court. He further st....
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....lier covered under the specific category of taxable service viz. 'video tape production' by 'video production agency' services. 6.2 It can be seen from the factual matrix of the case that the appellants have rendered the services to both domestic film production and media houses located in India as well as to such clients located abroad. It is not in dispute that in respect of the services provided to the domestic clients, the appellants had duly discharged the service tax liability. The dispute is limited in respect of the services provided to overseas clients, which the Department had interpreted that it is not export of service in terms of Rule 4(a) of POPS Rules, inasmuch as the place of provision of service should be the location of performance of the service. 6.3 In order to address the above issues, we would like to refer to the legal provisions covering levy of service tax, export of services under the Finance Act, 1994 and the rules framed thereunder viz. Place of Provision of Services Rules, 2012, Service Tax Rules, 1994 as it existed during the disputed period in respect of the taxable services under dispute. Finance Act, 1994 "Definitions. ....
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....the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. Explanation 2.- For the purposes of this clause, the expression "transaction in money or actionable claim" shall not include- (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out- (a) by a lott....
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....enerality of the foregoing power, such rules may provide for all or any of the following matters, namely :- ... (hhh) the date for determination of rate of service tax and the place of provision of taxable service under section 66C." Place of Provision of Services Rules, 2012 "Place of provision generally. Rule 3 . The place of provision of a service shall be the location of the recipient of service: Provided that in case Inserted by Notification No.46/2016-ST, dated 9-11-2016, w.e.f. 1-12-2016. [of services other than online information and database access or retrieval services, where] the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service. Place of provision of performance based services. Rule 4. The place of provision of following services shall be the location where the services are actually performed, namely:- (a) services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of th....
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....ovider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service. Place of provision of specified services. Rule 9. The place of provision of following services shall be the location of the service provider:- (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (c) Intermediary services; (d) Service consisting of hiring of all means of transport other than,- (i) aircrafts, and (ii) vessels except yachts, upto a period of one month". Service Tax Rules, 1994 "Export of services. Rule 6A. (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received b....
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....o overseas clients is covered under the scope of export of services or not, we have examined the relevant provisions of the Finance Act, 1994 and Rules framed thereunder. For the period prior to 01.07.2012, it was specifically provided under Rule 4 of Export of Services Rules, 2005 that any taxable services could be exported without payment of service tax. During the period subsequent to 01.07.2012, the charging provision under Section66B ibid specifically provided that all services other than those in the negative list, when provided in the taxable territory is liable to be pay service tax. In other words, the provision of services that were covered under the net of service tax were those services provided within the territory of India except the State of Jammu and Kashmir. Thus, services provided to any person situated outside taxable territory, as a corollary, are not liable to be pay service tax. Thus, it is clear that when any services are provided outside the taxable territory and when such services fulfil the specified conditions provided Rule 6A of Service Tax Rules, 2005 to qualify as 'export' including the essential requirements that the recipient of service is located ou....
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....present factual matrix of the case, the appellants have got access to the various film clippings upon which they work upon by accessing the specific requirement such as editing, cutting, colouring, dubbing, title printing, adding/modifying or deleting sound, imparting special effects etc. for the post-production of film shots, in order to make the movie/ film fit for release as per the requirements of the service receiver. As the appellants have got limited access through electronic means, duly restricted through user id & password, user access, and the goods remain with the service receiver situated abroad, the place of provision in this case is clearly proved to have been situated outside India. 7.1 We further find that the Central Board of Indirect Taxes and Customs (CBIC) had provided certain clarification in the matter of Place of Provision of Services Rules, 2012 vide Circular dated 04.05.2018, stating that in case where services on software involving testing, modification, customisation, adaptation, enhancement etc., then the place of provision of service is the location of recipient of such service. The relevant extract of the said CBIC Circular is extracted below: ....
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....location of the recipient of the service. 3.2 in the case of services on software involving testing, debugging, modification etc. i.e. customisation, adaptation, upgradation, enhancement, implementation of information technology software, the place of provision of service is the location of the recipient of the service. 4. Therefore, in both the above cases, the place of provision of service is the location of the recipient of the service." From the above clarification issue by CBIC, and the factual details of the present case, it is clear that in case of intangible goods such as software or files or certain film/movie clippings which are accessed through different servers by the service provider for a limited purpose of working upon them, through restricted control or access, it is clearly proved that the service providers in India are providing the services to the service recipients situated abroad and they do not physically handle any goods in India, i.e., within the taxable territory. Hence, the above clarification is in support of appellants stand that the services provided are export of services, the location of services being the at service recipient sit....
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....of taxing imports or exempting exports; they are intended for taxing all manner of services within the frame of section 66B of Finance Act, 1994. The Hon'ble Supreme Court, in All India Fedn. of Tax Practitioners v. Union of India 2007 (7) S.T.R. 625/2008 taxmann.com 1072 (SC) has held levy under Finance Act, 1994 to be 'destination-based consumption tax' and, therefore, requiring consummation of the service to be linked to acknowledgement by recipient of the service. Consequently, by default, rule 3 of Place of Provision of Services Rules, 2012, holds the service to have been rendered at the place of the recipient and other rules substitute in specific circumstances. It would not be consistent with the intent of tax if the location of the tangible object, on which service is contractually intended to be performed on, is ignored in favour of the default provision. Hence the deviation in rule 4(a) of Place of Provision of Services Rules, 2012 and, considering the specific circumstance of determination by tangible presence, it would not be amenable to stretching for coverage of 'deemed goods', if any, owing to that limitation of pinpointing 'service' which....