2015 (7) TMI 392 - HC - Service Tax

Validity of Circular - whether the circular would govern the controversy or whether the controversy must be dealt with strictly in terms of the statutory provisions and the circular cannot override the same - clarification on levy of service tax on distributors/sub-distributors of films & exhibitors of movie - Circular No.148/17/2011 Service Tax, dated 13th December, 2011 - Held that - merely making a reference to some Circular would not mean that the Appellate Tribunal cannot be approached or that the Appellate Tribunal will not view the matter in its entirety and in proper perspective. In the circumstances, we are not in agreement with Mr.Dada that the Petitioner cannot approach the appellate authority. In the event the Petitioner approaches the Appellate Authority by filing an Appeal and within a period of four weeks from today, the Appellate Authority, namely, the Tribunal shall entertain the Appeal and not dismiss it on the ground that it is barred by limitation. The Tribunal shall permit the Petitioner to raise all contentions including that the issue must be examined in the light of the arrangements, prevalent practices and customs peculiar to the film industry. Such arrangements and which are in vogue for decades together do not create any relationship and which is assumed to be created by the Revenue. The Circular therefore will have no application and would not apply. Equally, an opportunity should be given to the Petitioner to rely upon such Judgments and decisions in order to support its submissions and distinguish those referred to in the Circular as well. - The Tribunal shall consider them and pass appropriate orders in accordance with law, after hearing the parties. Equally, it would be open for the Petitioner to seek such reliefs as are permissible in law and to apply for dispensation of the condition of pre-deposit of the tax amount. - Petition disposed of.

Summary

Issues:
Challenge to circular and order-in-original under Article 226 of the Constitution of India. Preliminary objection to the maintainability of the Writ Petition. Interpretation of Circular and legal provisions in the film industry for taxation purposes.

Analysis:
1. The petitioner sought a declaration that a Circular and an order-in-original were ultra vires the Finance Act, 1994 and the Constitution of India. The Respondent argued that an appeal should be made to the Appellate Tribunal according to statutory provisions. The Court noted contentions on maintainability and held that the Appellate Tribunal could address challenges to the order. The Circular could not be declared ultra vires by the Tribunal.

2. The petitioner contended that the Circular created a non-existent relationship termed Association of Persons in the film industry. They argued against taxation under this concept, citing specific legal provisions and previous judgments. The Court examined the Circular, order, and reply affidavit, finding that the Commissioner's decision was not solely based on the Circular. The Court disagreed with the petitioner's claim that the Appellate Tribunal could not be approached.

3. The Court clarified that the petitioner could appeal to the Tribunal within four weeks. The Tribunal was directed to consider all contentions, including the industry's practices, customs, and legal provisions. The petitioner could rely on judgments to support their case and seek applicable reliefs. The Court disposed of the Writ Petition, allowing the petitioner to raise all arguments before the Tribunal, emphasizing that their order did not express any opinion on the case's merits.

This detailed analysis covers the issues raised in the judgment, including the challenge to the circular, the maintainability of the Writ Petition, and the interpretation of legal provisions in the film industry for taxation purposes.