TaxTMI 
TaxTMI 
2026 (9) TMI 1484
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....tant Commissioner of State Tax. Also under challenge are two Orders in Original dated 17th March 2025 and two Orders in Appeal dated 19th March 2025 passed by respondent No. 4 - the Deputy Commissioner of State Tax. The impugned Orders in Appeal reject the petitioner's Appeals and uphold the demand confirmed under the impugned Orders in Original. 2. The facts of the case in brief are as under:- The period involved in this Writ Petition, which forms the basis of the Orders in Original, is FYs 2017-2018 to 2020-2021 (i.e., the period prior to 1st October 2021, when Entry 17(i) and 17(ii) of the Rate Notification carried differential rates of 12% and 18%). The amount of tax which is under dispute is Rs. 79,72,68,337/-, plus interest and penalty. The issue involved in the present Writ Petition is "whether the licensing of copyright in cinematographic films, by the petitioner as Producer and original copyright holder, is classifiable as - (i) licensing of intellectual property rights in goods other than Information Technology Software - taxable at 12% GST (6% CGST + 6% SGST) under Entry 17(i) of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 ("Rate Notif....
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.... such transfer. 6. As per Entry No.5(c) of Schedule II to the CGST Act, the temporary transfer or permitting the use or enjoyment of any IPR is treated as a supply of service. The petitioner, being the original owner of copyrights in cinematographic films, licenses such films to various third parties, including broadcasters and other distributors, for limited durations and specific territories. These licensing agreements involve only a temporary transfer of rights and are in the nature of permitting the use of IPRs. Accordingly, the said supply is classified by the petitioner under Service Accounting Code (SAC) 997332, namely, "Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes and the like." The petitioner has consistently adopted this classification in respect of its licensing transactions and accordingly discharged GST @ 12% under Heading 9973 - 'Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology Software'. Post 1st October 2021, the said Entry was amended and GST was leviable @ 18%. 7. The petit....
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....Advocate for the petitioner submitted that the Orders in Appeal are erroneous and call for interference. We shall deal with the decisions relied upon by the learned Senior Advocate in support at a later stage of this Judgment. 13. On the other hand, learned Additional Government Pleader raised a preliminary objection to the maintainability of this Writ Petition in view of the availability of an alternative statutory remedy. It is submitted that the petitioner has an efficacious alternative remedy under Section 112 of the CGST Act read with Section 112 of the MGST Act before the Goods and Services Tax Appellate Tribunal ("Tribunal", for short). Reliance is placed on the decision in Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others (1998) 8 SCC 1 to support the proposition that the present case does not satisfy any of the parameters laid down therein to entertain this petition. 14. It is further submitted that classification disputes cannot be adjudicated in writ jurisdiction as the core issue in the present case is the classification of the service - whether it falls under SAC 998340 (Information Technology Software) attracting 18% GST, or SAC 9973 (Leasing....
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....oitation. The petitioner retains ultimate ownership of the underlying copyright. This constitutes a "temporary transfer" within the meaning of Entry 5(c) of Schedule II. (C) The High Court of Madras in AGS Entertainment Private Limited vs. Union of India 2019 (6) TMI 110 (Madras HC) : 2013 SCC OnLine Mad 1823 has categorically held that the temporary transfer of copyright in cinematographic films is a service and not a sale of goods. This binding precedent squarely applies to the facts of the present case. (D) The petitioner's reliance on the decision of the Hon'ble Supreme Court in Tata Consultancy Services vs. State of A.P. (2005) 1 SCC 308 is wholly misplaced. In that case, the Supreme Court was dealing with canned/off-the-shelf software sold on physical media (CDs, floppy discs), not with digital delivery of cinematographic content via software links. The petitioner does not deliver physical media. The entire transaction is executed through information technology infrastructure. The TCS judgment therefore has no application in the present case. (E) The petitioner's reliance on the erstwhile VAT regime is wholly misplaced. The treatment of IPR as "good....
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....t I via the Finance Act, 1994) and State Legislature (under Entry 62 of List II as a tax on luxuries) possess the competence to tax different aspects of the broadcasting and entertainment activity without constitutional overlap under the aspect theory and the doctrine of pith and substance." (L) Applying the Aspect Theory, the petitioner's transaction has multiple aspects : (a) The general "licensing of IPR" aspect; (b) The specific and dominant "supply of IT/OIDAR service" aspect, defined by the technological mode of delivery. (M) It is the specific IT/OIDAR aspect that determines the correct classification and tax rate. The supply is not of a physical good, but of digital content accessible only through information technology. (N) The petitioner's reliance on CBIC Circular dated 11th October 2024 and Circular dated 15th October 2024 to contend that the dispute should be regularised on an "as is where is" basis at 12% GST has no application to the present case. (O) Reliance is placed on the decision of the Hon'ble Supreme Court in Paper Products Ltd. vs. Commissioner of Central Excises (1999) 7 SCC 84 which has laid down that "....
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....have heard Mr. Darius Shroff, learned Senior Advocate and Ms. Jyoti Chavan, learned Additional Government Pleader for the respondent-State at length. We have perused the memo of the petition, impugned Order and the materials on record. 20. Before we proceed to analyze the submissions, it would be appropriate to seek guidance from the decisions relied upon by learned counsel for a proper appreciation of the controversy. 21. Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others (supra) is relied upon in support of the proposition that "writ petition may be entertained despite the existence of an alternate remedy only when the statutory authority has acted without jurisdiction, in violation of the principles of natural justice, or whether the impugned order is a nullity. The existence of an alternative remedy is sufficient ground for the High Court to decline interference under Article 226. In paragraph Nos. 14 and 15, Their Lordships observed thus:- "14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Cou....
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....and which classification of the Customs and Central Excise Tariff Act its product will fall and declaration to that effect. The petitioner therein had challenged the findings of the appellate authority where it has been held that the petitioner's claim on PPSB bed sheet are produced in a finished stage by processing the non woven fabrics manufactured by the petitioner. In that context, His Lordship made an observation that this Court in the exercise of writ jurisdiction under Article 226 of the Constitution of India should not act as an expert to scrutinise the composition and mode of manufacture of product like of this nature and do the job of classifying the products under which classification list of the Customs Tariff Act such product falls. Since it requires scientific and technical analysis to be conducted by the expertise in such scientific and technical field. 24. In AGS Entertainment Private Limited vs. Union of India (supra), the Madras High Court in paragraph Nos. 14, 16, 18, 21 and 23 which are relevant, held thus:- "14. An alternate submission was made that even if there is an element of service, the dominant intention of the parties/transaction is to be....
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....ly to avoid pre-deposits cannot be encouraged. 26. It is the submission of learned Senior Advocate for the petitioner that the show cause notices, the Orders in Original and the Orders in Appeals all proceed on fundamental erroneous premise that the licensing of copy right in cinematographic films amounts to licensing "Information Technology Software". For the reasons we have stated hereinafter, we are satisfied that this is not a disputed question of fact but an error of law going to root of the jurisdiction. The authority that assumes the power to tax a transaction by misconstruing the governing statutory entry and definition, acts without jurisdiction. If the authority acts without jurisdiction, the resultant show cause notices and orders are void ab initio. The vitiating character of such jurisdictional error and its consequence for the sustainability of the entire proceeding is illustrated by the Hon'ble Supreme Court in M/s. Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer-Cum-Assessing Authority & Ors. [2023 (2) TMI 64 (SC)], where an authority proceeding on a legally unsustainable premise was held to have exceeded its jurisdiction, an interference was warranted d....
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....ive writs under Article 226 is plenary in nature. Any limitation on the exercise of such power must be traceable in the Constitution itself. Profitable reference in this regard may be made to Article 329 ordainments of other similarly worded articles in the Constitution. Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. While it is true that exercise of writ powers despite availability of a remedy under the very statute which has been invoked and has given rise to the action impugned in the writ petition ought not to be made in a routine manner, yet, the mere fact that the petitioner before the high court, in a given case, has not pursued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. It is axiomatic that the high courts (bearing in mind the facts of each particular case) have a discretion whether to entertain a writ petition or not. One of the self-imposed restrictions on the exercise of power under Article 226 that has evolved through judicial precedents is that the high courts should normally not entertain a writ petition, where an effective and efficacious alter....
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....e fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. ***" 6. At the end of the last century, this Court in paragraph 15 of the its decision reported in (1998) 8 SCC 1 (Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others) carved out the exceptions on the existence whereof a Writ Court would be justified in entertaining a writ petition despite the party approaching it not having availed the alternative remedy provided by the statute. The same read as und....
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....State supply of specific services with Service Code Tariff (SAC) is concerned, in exercise of the powers conferred in sub-section (1) of Section 9, sub-section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Act, 2017, issued a notification dated 28th June, 2017, on the intra-State supply of services of description as specified in column (3) of the Table in the notification, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table. The relevant portion viz. Serial No.17 of the Heading No. 9973 reads thus:- 01.07.2017 to 30.09.2021 SI.No. Chapter, Section or Heading Description of Service Rate (per cent) Condition (1) (2) (3) (4) (5) 17. Heading 9973 (Leasing or rental services, with or without operator) (i) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in resepct of goods ot....
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...., books, etc; using patented designs in production processes to produce new goods and so on. Limited end user licences, which are sold as part of a product (e.g., packaged software, books) are not included here. This group does not include: - licence fees as integral part of consumer goods (e.g., end-user licenses for books, records, software) - preparation, drafting and certification services concerning patents, trademarks, copyrights and other intellectual property rights, cf. 998213 - legal services related to drawing up or certification of patents, trademarks, copyrights and other intellectual property rights, cf.998213 - management services for copyrights and their revenues (except from motion pictures), cf. 998599 - management services for rights to industrial property (e.g., patents, licences, trademarks, franchises etc.), cf.998599 - management services for motion picture rights, cf 999614 - management services for artistic rights, cf. 999629" 32. The Service Code Tariff 997331 as regards licensing services for the right to use computer software and databases reads thus:- " This service code....
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....under SAC 9996 and attracts GST at the rate of 18% 10.2 Prior to 1st October 2021, GST at the rate of 18% was leviable on "Motion Picture, videotape and television programme distribution services" under Heading 9996 whereas 12% rate of GST was leviable on "temporary or permanent transfer or permitting the use or enjoyment of intellectual property right in respect of goods other than IT technology software" under Heading 9973. It was observed that both entries apparently covered services by way of licensing of rights to broadcast or show films. This issue was discussed in the 45th GST Council meeting held on 17-9-2021 wherein, the Council recommended to keep a uniform rate of 18% on both these entries with effect from 1-10-2021. 10.3 The GST Council in its 54th meeting held on 9th September 2024 has recommended to regularize the payment of GST on transaction between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centers on 'as is where is' basis from 1-7-2017 to 30-9-2021" 35. Circular No. 236/30/2024-GST dated 11th October, 2024 issued by the Board provides the meaning of "as is where is". Clauses 4 an....
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.... Kendras are requested to ensure that GST on royalty payment for the films is paid @12% under SAC-997332 or 997339. Also, input tax credit of the GST so paid should be availed timely by the Kendras as per the extant procedure." 37. We make it clear that the Office Memorandum issued by the Prasar Bharati is relied upon by the learned Senior Advocate for the petitioner only for its persuasive value and has fairly submitted that the same cannot be said to have a binding force. 38. We may now refer to Agenda for 54th GST Council Meeting dated 9th September, 2024. Recommendations were made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to services. Annexure VI provides as under:- SI.No. Proposal Details of request Discussions in Fitment Committee and its recommendations 1 To clarify that for the period prior to 01.10.2021, the tax rate applicable is 12% where the film distributor or sub-distributor acts on a principal basis to acquire distribute films. • Feature films distribution is undertaken based on arrangement entered into between producers of such feature films and distributors and also by way....
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....ransacted between the distributor and the exhibitor, television network, television station, video rental store etc. This service code does not include licensing services (by the copyright holder) for the right to reproduce, distribute or incorporate audiovisual originals, cf. 997332. • SAC 997332- Licensing services for right to broadcast and show original films, sound recordings, radio and tv programmes etc. includes: • Licensing services for the right to reproduce, distribute or incorporate entertainment, musical such as broadcasting and showing of original films, sound recordings, radio and tv programmes, prerecorded tapes and videos. • The GST rates on these services were discussed in the 45th GST Council meeting held on 17.09.2021 wherein, the Council recommended to rationalize the GST rate and keep uniform rate of 18% on both entries. It was also mentioned that there is an overlap between explanatory notes to services codes 999614 and 997332. • It was noted that while "granting permission to exhibit, broadcast and rent audiovisual works protected by copyrights" is covered by Service code 999614 and "licensing servi....
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.... the Post-production Head, the link to expedite the films in digital format is created in software format. 42. The impugned orders do not deal with the definition of "Information Technology Service" at all. There is no finding, much less a finding, as to how a cinematographic film, a passive audio visual work, incapable of execution, manipulation or inter-activity could ever satisfy the statutory definition "information technology software". The scheme of Classification of Services confirms the distinction. Group 99733 ("Licensing services for the right to use intellectual property and similar products") separately lists SAC 997331 ("Licensing services for the right to use computer software and databases") and SAC 997332 ("Licensing services for the right to broadcast and show original films, sound recordings, radio and television programme etc"). The existence of a separate, specific SAC for cinematographic films demolishes the respondents' assumption that such licensing can be subsumed within "software". The impugned orders neither analyse these two distinct entries nor explain why they are being collapsed into one - they merely reproduce the show cause notices without inde....
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....y the distributor to the exhibitor. The distinction sought to be raised by the adjudicating authority is therefore flawed. In any event, once the classification and taxability is regularised on an "as is where is" basis, the Circular 236/30/2024-GST having confirmed the benefit, such benefit cannot be selectively withheld from one link in that chain while extended to another paying at the same rate under the same competing entries. 47. Administrative clarifications support SAC 997332 for licensing by the original copyright holder. The Alert Circular dated 13th October, 2020, issued by the Principal Chief Commissioner, Central Tax, Bengaluru Zone and the Office Memorandum dated 8th January, 2019 issued by Prasar Bharati, (obviously having a persuasive value) confirm that royalty/licensing payments to the original rights holder/producer for the right to broadcast and show cinematographic films fall under SAC 997332 (or 997339), taxable at 12%. The Alert Circular expressly distinguishes this from "distribution of films" by a distributor to an exhibitor (classifiable under SAC 999614 / Heading 9996 at 18%). Thus, the Petitioner, as producer/original copyright holder licensing rights....