TaxTMI 
TaxTMI 
2024 (7) TMI 308
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....iliary Services, Sponsorship services etc. and for this purpose they had registered with the jurisdictional departmental authorities. Intelligence was gathered by the Directorate General of Central Excise Intelligence (DGCEI), presently known as Directorate General of GST Intelligence (DGGI), Zonal Unit, Mumbai that various Film Production Companies (FPCs) have entered into commercial agreements with various Music Production Companies (MPCs) including the appellants. Under such agreement, the FPCs grant certain rights to MPCs for commercially exploiting the music of the movie for which MPC agrees to pay specified amounts to FPC. Further, DGGI also found that such agreement also stipulate that MPC shall spend a specified amount for the purpose of marketing, publicity and promotion of the film and film music across all media. DGGI interpreted that since the marketing and publicity cost is allowed to be retained by the MPC from the royalty earned by them from selling the music or video, it appeared to DGGI that the amounts are for promotion and marketing of the film produced by the FPC, and therefore these activities are liable to service tax under the category of Business Auxil....
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....issued as above were adjudicated by the learned Commissioner of CGST, Mumbai West, in confirmation of the adjudged demands. Being aggrieved with the above order, the appellants have preferred this appeal before the Tribunal. 3.1 Learned Senior Advocate representing the appellants has submitted that the appellants are engaged in the activity of acquisition and exploitation of copyrights subsisting in sound recordings and audio visuals of the same along with musical and literary works contained and embodied therein. He submitted that this is done by the appellants by acquiring the copyrights from the authors/owners and by paying the stipulated consideration; these copyrights are then commercially exploited by assigning/licensing their rights in the works of various clients. He further submits that production of film and creation of film song video or an album, which is independent of film, are independent art, literary, drama, music works within the meaning of Copyright Act, 1957. By explaining various clauses of the agreements entered into by the appellants with the FPCs, learned Senior Advocate stated that the appellants only acquire certain rights from FPCs in respe....
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....that the appellant would promote the film, the rights of which are not the subject matter of this agreement executed by the appellant with FPC. Thus, he stated that there is no element of rendition of service involved on which any service tax would be leviable. Accordingly, he submitted that the demand of service tax in the impugned order is without any basis in law and contrary to the charging provisions of the Finance Act. Thus, he claimed that there is no case for provision of Business Auxiliary services by the appellants to the FPCs and therefore the demand of service tax on this head is not sustainable. 3.3 For the period w.e.f. 01.07.2012, levy of service tax is on all the services except negative list of services, and the term 'service' is defined in terms of Section 65B(44) ibid wherein the essential ingredient of services are 'any activity carried out by a person for another' and 'consideration for undertaking such an activity'. It is submitted by the learned Senior Advocate that in their case, the activity has been undertaken by the appellants on their own account for themselves and it cannot be said to be an activity undertaken by the appellants for another. The....
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....nd marketing of film produced by the FPC and therefore the service tax is righty leviable on such services. Thus, he pleaded that the impugned order is sustainable and the appeal filed by the appellants may be rejected. 4.2 Learned AR further relied upon the following judgements in support of their stand: (i) Infosys Technologies Ltd. Vs. The Special Commissioner and Commissioner of Commercial Taxes - 2008-TIOL-509-HC-MAD-CT. (ii) Tata Consultancy Services Vs. State of Andhra Pradesh - 2004TIOL-87-SC-CT-LB (iii) Housing & Dev. Corporation Ltd. (HUDCO) Vs. C.S.T. Ahmedabad - 2012 (26) S.T.R. 531 (Tri. - Ahmd.) (iv) Commissioner of C. Ex. Surat-I Vs. Neminath Fabrics Pvt. Ltd. - 2010 (256) E.L.T. 369 (Guj.) 5. Heard both sides and perused the records of the case. We have also perused the additional written submissions in the form of paper books submitted in this case by both sides. 6. The issues involved in this appeal is to determine the following issues viz., (i) whether the services provided by the appellants are leviable to service tax under the taxable category of 'Business Auxiliary Service' (BAS) or ....
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.... point of sale material. It is very apparent that the platform chosen for publicity is the virtual media where images (visuals) are displayed and the publicity therefore is not limited merely to audio content. In fact I find that the promotion of the music is therefore incidental to the promotion of the film. xxx xxx xxx xxx 44. Further, the time of release of music is also a vital factor in deciding whether M/s Sony Music has caused the marketing and promotion of the film The Noticee Company themselves in their replies have stated that invariably, music is released prior to the release of the film. The objective for the music company is make a few songs extremely popular so that by the time the movie is released, the songs are already playing across TV, radio and online. It is akin to the trailer of the film which is played prior to film release, the sole purpose behind it to publicize, market and promote the forthcoming feature film. Vide letter dated 10.04.2015, M/s. Sony Music provided a copy of ledger showing Media expenditure for marketing and promotion of Music in respect of the movie ' Student of the Ye....
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....e instant case, I observe that the Noticee company has caused promotion and marketing of Feature Films (movies) which are goods produced by the FPCs (client) and hence the services provided by the Noticee Company to the FPCs fall under the category of Business Auxiliary Services as defined under Section 65(19)(i)of the Finance Act, 1994. In this connection, I draw reference to Section 2(7) of Sale of Good Act, 1930 whereby "Goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Goods are in a deliverable state within the meaning of this Act when they are in such a state that the buyer would, under the contract, be bound to take delivery of them. Further I rely on the ruling in the case of M/s. Infosys Technologies and Ltd (2008-TIOL-509-HC-MAD-CT) and that of Hon'ble Supreme Court in the case of M/s. TATA Consultancy Services vs. State of Andhra Pradesh (2004-TIOL-87-SC-CT-LB), Wherein, both these rulings warrant that utility/marketability/capacity of being brought and sold, by ....
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.... relation to- (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation..-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of, the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in subclauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods. (105) "taxable servi....
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....tion, 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, 1998 (17 of 1998); (b) by a foreman of chit fund for conducting or organising a chit in any manner.] Explanation 3.- For the purposes of this Chapter,- (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Explanation 4.- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory; Section 66B. There shall be levied a tax (hereinaft....
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....if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket (c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise." 8.1 On careful reading of the definition of taxable service, under Section 65(19) ibid read with Section 65(105)(zzb) ibid, as applicable for the period prior to 01.07.2012, it is clearly provided therein that the services under the taxable category is 'Business Auxiliary service' and such services are brought in the scope of service tax levy as taxable category of service if such services, which are being provided or to be provided, by any person to a client. In the definition of 'Business Auxiliary Service' the activity of promotion or marke....
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....agreed share payable to FPCs are paid to them as recoupment charges, and the FPC pay service tax on such overflow. From the above, it could be seen that the various charges incurred in promotion of the music and song video rights acquired by the appellants are purely in the nature of promoting the rights acquired by them, for commercial exploitation in terms of the contractual arrangements made between them and FPCs. These activities in no way can be termed as 'business auxiliary service' provided by the appellants to the FPC, as their client. Further, where ever service tax liabilities have arisen it is stated by the appellants that they have duly discharged the same and the same has not been disputed by the Revenue. 8.3 In order to further examine whether the services provided by the appellants is covered under the scope of any other services or not, particularly after introduction of negative list with effect from 01.07.2012, wherein the levy of service tax on all services other than those contained in the negative list, we have also examined the relevant provisions of the Finance Act, 1994 and Rules framed thereunder. We find that in order to qualify that the activities unde....
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....ax levy on temporary transfer of copy rights, on which the appellants have claimed that due service tax has also been discharged. 8.5 Further, the question of treating various amounts paid under a contract as consideration by the department for determining the value of service tax for imposition of service tax as 'Business Auxiliary Service', is of no consequence when the levy of service tax itself has been discussed in the above paragraphs and we had come to the conclusion that the activities undertaken by the appellants are not covered under the category of service for which levy under Section 66B ibid would apply. Further, such amount in the absence of provision of any service, cannot convert a consideration not wholly or partly consisting of money, to be taxable value for payment of service tax. 9.1 We have perused the relevant clauses of the aforesaid agreements submitted as a part of the appeal paper book. The relevant clauses of the said agreement are extracted and given below: "MUSIC AND SONG VIDEO RIGHTS LIMITED PERIOD ASSIGNMENT AGREEMENT This Music and Song Video Rights Limited Period Assignment Agreement ("Agreement") made this day of April 19, 2012, ....
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....satellite or traditional, AM/FM/DAB. All India Radio and Internet Radio) and in any and all manner and media now and hereinafter known in the future. 1.7 "MG Amount" shall have the meaning as ascribed in Clause 7.1 herein. 1.8 "Marketing Spend" shall have the meaning as ascribed in Clause 9.2 herein. 1.17 "Said Works" shall mean the Song(s), its remix, dialogues in the Songs and Song Video(s), whether singly or collectively as well as any Background Music Score in the Film, if it comprises also of the Song(s) and the works and performances embodied therein, song Videos is annexed in Schedule 5. The list of the Songs and Song Videos shall be provided separately in the Producer to Sony Music. 1.18 "Song(s)" shall mean sound recording of synchronized musical and lyrical works being the song(s) incorporated in the Film. 1.19 "Song Video(s)" means the audio-visual(s) of the Song(s), i.e. 'song married print' forming part of the Film and includes the performances and works contained therein. Song Video(s) includes part(s) thereof. 2. ASSIGNEMENT OF RIGHTS 2.1. In consideration of part MG Amount (def....
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....oit the Background Music Score; 5.2.3 To exploit the Film for the purpose of merchandising: 7. CONSIDERATON 7.1 In consideration of the Rights exclusively assigned herein, Sony Music shall pay minimum guaranteed sum of Rs. 10,00,00,000/- (Rupees Ten Crores only) ("MG Amount") in the manner and on the dates specified in Schedule 1 but subject to receipt of invoice for the MG Amount. 7.2 The MG Amount shall be exclusive of all applicable taxes including service tax and Value Added Tax ("VAT"). It is clarified for avoidance of any doubt that any and all such taxes (like service tax and/ or VAT as and when applicable) shall be paid by Sony Music in addition to the MG Amount. Sony Music shall be entitled to deduct only the applicable tax deductible at source before making the payment of the MG Amount to the Producer. 8. RECOUPMENT & ROYALTIES. 8.1. It has been agreed between the Parties that Sony Music shall be entitled to recoupment of the MG Amount and other Marketing Spend and advertising expenditure in the manner and as provided for in Schedule2 herein. 9. OBLIGATIONS OF TH....
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....nant to the context or meaning thereof, include its successors-in interest, and assigns) of the FIRST PART. 2. RAKYESH OMPRAKASH MEHRA PICTURES PVT. LTD., a company incorporated under the Companies Act, 1956, having its office at 14 Pali Village, Bandra (West), Mumbai 400 050 bearing Pan Number AADCM8879K (hereinafter referred to as "ROMPPL" Which expression shall, unless repugnant to the context or meaning thereof, include its successors in interest, and assigns) of the SECOND PART 3. SONY MUSIC ENTERTAINMENT INDIA PVT. LTD., having its office at at 92, Main Avenue, Santacruz (West), Mumbai - 400 054, bearing Pan Number AAICS1766Q (hereinafter referred to as "Assignee" which expression shall, unless repugnant to the context or meaning thereof, include its successors-in interest, legal representatives, administrators, executors, nominees and assigns) of the THIRD PART. The First Part and the Second Part are jointly referred to as Assignors. The First Part, Second Part and Third Part are jointly referred to as Parties BACKGROUND (A) WHEREAS the Assignors are the equal and joint owners of the copyright of the Audio & Audio-v....
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....or any other law governing rights in intellectual property and exploitation thereof, as independent rights, irrespective of whether such rights are remunerative or non-remunerative Assignee shall be the owner of the original plate, within the meaning of the Copyright Act 1957 and any extensions or modifications thereof, and of each Contract Works for the Term and Territory. 3. CONSIDERATION 3.1 In lieu of the Copyrights in the Contract Works assigned hereby by the Assignors to the Assignee, the Assignee agrees to pay to Viacom18 a non-refundable (subject to termination clause below) sum of Rs. 6,50,00,000/- (Rupees Six Crore Fifty Lack only) exclusive of all taxes as a minimum guaranteed Royalty amount (Royalty MG Amount), Which sum shall be payable in the following manner and treated as a debt, which will cease, on the delivery of the deliverables by the Assignors; 4. DELIVERABLES 4.1 The Assignors shall deliver the following delivery material, publicity and promotional material free of charge to the Assignee on or before the Delivery Date: 4.2 The Masters containing all the Songs, forming part of the Film, in CD....
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.... iii. After recoupment of the above Assignee shall pay Assignor overflow royalty will be shared between Assignee and the Assignor equally in the ratio of 50:50. The overflow royalty is inclusive of all applicable taxes. SCHEDULE 1 The Contract Works 1. Master / Songs of the film wherein 8 Songs shall be original Song (along with the underlying Musical and Lyrical works) owned by Assignors (Particulars and details of the Film are given in Schedule 2). xxxx xxxx xxxx xxxx 2. Song Video / s of the film (Particulars and details of the Film are given in Schedule 2) (Song Video / s based on the songs listed above) 3. And all the Literary (lyrics of the Songs) and Musical work contained and embodied in the Songs and Song Videos, in the Film or created / composed / embodied / contained in the film. 4. Minimum 150 images derived from the Film and Song videos and those delivered hereunder as part of artworks and promotional material. 5. Dialogues subject to a maximum of 15 minutes (on the audio cinema....
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....vices provided by the appellants as taxable under Business Auxiliary services, has been decided by the Co-ordinate Bench of the Tribunal in the case of McDonalds India Private Ltd. Vs. Principal Commissioner of Service Tax, Delhi-I - Final Order No.51264/2019 dated 27.03.2019, by holding that the amount incurred by franchisees towards advertisement expenses cannot be said to be consideration paid by the franchisee to the McDonalds, as it is the franchisee themselves who are benefitting out of such expenses and not the McDonalds. The relevant paragraph of the said order is extracted and given below: 32. In the instant Appeal, as noticed above, the franchisee had to expend not less than 5% of the gross sales in a particular year towards the advertisement of its Restaurant. The amount was not required to be deposited in any fund of the franchisor for advertisement or promotion of the franchisor. Thus, the decision of the Tribunal in Subway Systems will not come to the aid of the Department. 33. What further transpires from the agreement is that there is no obligation cast upon the franchisee to incur any expenditure on advertising the brand name, service marks ....
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....le services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable. b. The amount charged should be for "for such service provided" : Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. The cost of free supply goods provided by the service recipient to the ser....
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....67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider." 37. The order has grossly erred in interpreting the franchise agreement, thereby, including the cost of advertisement in the franchise fee received by the Appellant. The amount incurred by the franchisees towards advertisement expenses, cannot, therefore, be said to be 'consideration' paid by the franchisee to the Appellant, as it is the franchisee themselves who are benefitting out of such expenses and not the Appellant. xxx xxx xxx xxx 42. It was, therefore, in the business interest of the franchisee to enhance its sale by causing advertisements. The advertisement, therefore, was for promotion of the Restaurant operated by the franchisee and merely because the trade names, service marks, trademarks of the franchisor also appear in the advertisement, no extra consideration flows to the franchisor. The order of the Principal Commissioner, therefore, suffers from a fundamental error as it ....
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....ted to for this purpose. A Writ Petition was filed challenging the vires of Rule 5 as being unconstitutional as well as ultra vires the provisions of section 66 and 67 of the Act. The Delhi High Court accepted the said contention and declared Rule 5 to be ultra vires the provisions of section 66 and 67 of the Act. The High Court noted that both the amended and the un-amended section 67 authorized the determination of value of taxable services for the purpose of charging Service Tax under section 66 as the gross amount charged by the service provider for such services provided or to be provided by him in a case where consideration for such service is money. The High Court placed emphasis on the words "for such service" and took the view that the charge of Service Tax under section 66 has to be on the value of taxable service i.e. the value of service rendered by the assessee and the quantification of the value of service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the High Court opined that the scope of Rule 5 goes beyond the scope of section 67 which was impermissible as rules could be framed only f....
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....e as a goods for the purpose of levy of sales tax/VAT; liquidated damages under a contract and the consideration received is taxable to service tax. As the factual matrix of the present case are different from the facts of those case, we are unable to appreciate the relevant of such case laws in support of the stand of the Revenue. 9.5 We also find that Hon'ble Supreme Court, in the case of Philips India Ltd. Vs. Collector of Central Excise, Pune - 1997 (91) E.L.T. 540 (S.C.) had held that the provisions of contract between a manufacturer and its distributor relating to advertising and the like were in furtherance of the desire on the part of both the manufacturer and distributor and in no way affected the real nature of the transaction which appeared to be of sale on principal to principal basis. Accordingly, the Hon'ble Supreme Court had held that advertisement expenses incurred by dealer/distributor at its own cost, half of it borne by the manufacturer, does not call for deduction out of the trade discount and it is uncalled for. 9.6 The above orders of the higher judicial forum clearly provide that the activities undertaken by the appellants with the FPC....
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....situations in which the extended period can be invoked for demand of service tax. The relevant paragraphs in the said Order of the Hon'ble High Court is extracted and given below: "21. The meaning of the words 'wilful misstatement' and 'suppression of facts' has been a subject matter of judicial scrutiny in various Supreme Court judgments which are necessary to be discussed before proceeding to the merits of this case. However, these words have been interpreted as given in Sections 28 of the Customs Act, 1962 (hereinafter referred to as "the Customs Act") and 11A of the [Central] Excise Act, 1944 (hereinafter referred to as "the Excise Act"). In order to determine if the same interpretation extends to Section 73 of the Act the following decisions of the Supreme Court have to be looked at. In the case of Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [(2013) 9 SCC 753 = 2013 (288) E.L.T. 161 (S.C.)] the Supreme Court discussed its previous judgments to determine the applicability of the proviso to Section 28 of the Customs Act for extension of limitation period for issuing notice for payment of duties that have not been levied, short-levied or erroneously ....
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....of six months, the revenue, for its action to be legal in the eyes of law, can only take refuge under the proviso to the section." 22. Section 28 of the Customs Act like Section 73 of the Act (in this case) relates to notice for payment of duty that has not been levied, short-levied or erroneously refunded. The proviso to Section 28 of the Customs Act and the proviso to Section 73(1) of the Act, both set out conditions for extension of limitation period for issuing of a Show Cause Notice. The difference between the two sections lies in the insertion of conditions of 'fraud' and 'contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax' in Section 73 of the Finance Act, 1994. In Uniworth (supra), the Supreme Court discussed the interpretation of the proviso of a similar provision in Section 11A of the Excise Act and held that it is parimateria to the proviso to Section 28 of the Customs Act. The relevant paragraphs are excerpted below : "13. This Court, in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay [1995 Supp (3) SCC 462], while interpreting the proviso of an analogous....
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....y following words 'with intent to evade payment of duty'. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful. The aforesaid observations show that the words "with intent to evade payment of duty" were of utmost relevance while construing the earlier expression regarding the misstatement or suppression of facts contained in the proviso. Reading the proviso as a whole the Court held that intent to evade duty was essentially before the proviso could be invoked. 55. Though it was sought to be contended that Section 28 of the Customs Act is in parimateria with Section 11A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words "with intent to evade payment of duty" occurring in proviso to Section 11A of the Excise Act which are missing in Section 28(1) of the Customs Act and the proviso in particular.... 56. The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has....
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....lful' means that there should be an intention to evade payment of duty behind these acts. And, therefore, in Uniworth (supra), the judgments of the Supreme Court interpreting the proviso to Section 11A of the Excise Act were applied in the interpretation of the proviso to Section 28 of the Customs Act. 25. The meaning of the phrase parimateria has been explained in an American case in the following words: "Statutes are in parimateria which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word simlis. It is used in opposition to it - intimating not likeness merely but identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same subject." [United Society v. Eagle Bank, (1829) 7 Connecticut 457, p. 470, as cited in CRAIES, Statute Law, p. 134 (7th Edition)]. The provisos to Sections 11A of the Excise Act, 28 of the Customs Act and Section 73 of the Finance Act, refer to the same class of persons, i.e., persons from whom tax has been not been levied, or has been short-levied or erroneously refunded. The subject matter of these provisos is is....
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....hortpayment or erroneous refund, subject to it being done within one year from the relevant date. On the other hand, the demand for duty in relation to extended period is mentioned in the proviso to Section 11A(1). Under that proviso, in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful misstatement or suppression of facts, or in contravention of any provision of the Act or Rules with the intent to evade payment of duty, demand can be made within five years from the relevant date. In the present case, we are concerned with the proviso to Section 11A(1). 24. In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay [(1995) 6 SCC 117], this Court held that intention to evade duty must be proved for invoking the proviso to Section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression "fraud and collusion" but misstatement and suppression is qualified by the preceding word "wilful". Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilfu....