TaxTMI 
TaxTMI 
2024 (6) TMI 307
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....nts 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 services provided to the film production and ....
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.... 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 stated that the appellant had treated the services....
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....ion' 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. 65. In this Chapter, unless the context otherwise requires,- (119) "video production agency" means any p....
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....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 lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act,....
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....f 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 the provider of service, in order to provide the service: Provided that when such services are provided from a remote location by way of electronic means the place of provision shall be the location where goods are situated at the time of provision of service: Provided further that this clause shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs and are exported after the re....
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....,- (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 by the provider of service in convertible foreign exchange, and (f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act. (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification." EXPORT OF SERVICE....
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....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 outside India, payment of service provided is received in convertible foreign exchange, this would be treated as export of services, and there is no levy of service tax thereon. In the present case, it is not disputed that the services were rendered to the clients situated abroad who are located outside India and the consideration were received in convertible foreign exchange as evidenced by purchase orders, invoices and Certificate of Foreign inward remittances provided by the City Union Bank Limited, International Banking Division, Chennai with which the appellants had held current account. 6.6 We had also examined the issue of what constitutes export from....
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....ed 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: "I am directed to draw your attention to the above subject and to explain the manner in which the place of provision has to be determined in case of development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software. 2. Software being intangible, does not have a unique existence and can exist on different servers at the same point in time. The version being customised, adapted, upgraded etc. will only be a copy of the original. Servers themselves are of different types, ranging from file servers (which make files available to workstations on a network), web servers (computer systems that host ....
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....vice 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 situated abroad. 7.2 Further, under the scheme of Negative List regime, the essence of indirect taxation is that a service should be taxed in the jurisdiction of its consumption. This principle is more or less universally applied. In terms of this principle, exports are not charged to tax, as the consumption is elsewhere, and services pay tax on their importation into the taxable territory. 8.1 We find that the dispute in respect of determining the location export of services in respect of services of imparting special effects, digital restoration services etc. is no more open to debate, as the Tribunal has held the same as export of services and not chargeable to service tax in the case of Prime Focus Lt....
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.... 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 is of essence in the said Rule. 21. The judgments in re Bharat Sanchar Nigam Ltd. and in re Tata Consultancy Services, cited by Learned Authorized Representative, were rendered in disputes over attempted escapement from levy of tax on 'sale of goods' which, but for deeming provision in Article 366 6 of the Constitution, is restricted to physical goods and, in determining the scope of escapement, held so in specific context. That does not hold for specific tax on 'services' within the legislative jurisdiction of Union of India and would certainly not for ascertainment of services having been exported within the prescription in rule 6A of Service Tax Rules, 1994. The premise on which Revenue has put forth its ap....