2014 (3) TMI 903 - AT - Service Tax

Classification of service - Video production agency service - Invocation of extended period of limitation - appellant contended that it has sub-contracted all the services and acted merely as interface between Discovery Asia INC, USA; and video content providers in India - Held that - With regard to classification of the service provided, we are prima facie of the view that since under the agreement between the Discovery Asia and the petitioner, the obligation of dubbing, editing and executing all necessary acts to customize Discovery Asia programmes in accordance with its directions is that of the petitioner; the rendition of this service is the essence of this contractual obligation; and the outsourcing of this service to third party content providers amounts only to sub-contracting its obligation under the contract. Therefore there appears no escape from the liability to tax for having provided the video production agency service in relation to the video tape production under Section 65(105)(zi) - the case is evenly balanced, both on the classification of the taxable service aspect and on validity of invoking the extended period of limitation - Condition stay granted.

Summary

Issues:
1. Whether the petitioner provided video production agency service, a taxable service under the Finance Act, 1994.
2. Whether the invocation of the extended period of limitation was justified.
3. Whether the penalties imposed were arbitrary.

Analysis:
1. The Revenue assumed that the petitioner provided video production agency service, leading to a show cause notice for remittance of service tax, interest, and penalty. The petitioner argued that it merely acted as an intermediary between Discovery Asia INC, USA, and Indian content providers, engaging them for content customization. The agreement with Discovery Asia involved customization activities falling under the definition of video tape production, making the petitioner liable for service tax.

2. The petitioner contended that the extended period of limitation was unwarranted, as the Revenue had relevant information since 2009 but issued the notice in 2011. The tribunal found the invocation of the extended period of limitation sustainable, considering the contractual obligation of the petitioner to customize Discovery Asia's programs, making the liability to tax unavoidable.

3. The adjudicating authority confirmed a substantial service tax liability, disallowed certain cenvat credits, and imposed interest and penalties. The petitioner argued against the liability to service tax and the imposition of penalties. The tribunal found the case evenly balanced on the classification of the taxable service and the validity of invoking the extended period of limitation, ultimately granting a waiver of pre-deposit and staying further proceedings subject to the petitioner's compliance with payment conditions.