2017 (1) TMI 436 - AT - Service Tax

Whether the payment received for allotment of time-slots to music companies by the assessee as fillers in programmes broadcast from outside the country is liable to service tax in the hands of the appellant as provider of broadcasting agency service? - Scheme of private broadcasting in India - appellant has the option of inserting non-programme material of specified duration in the programme so produced for broadcasting and the time so available is sold to producers of music who resort to these fillers as means of providing a preview of proposed entertainment. Held that - Only a scrutiny of the contract terms relating to those programmes for which fillers are sold to music companies, and was the subject matter in the proceedings before the adjudicating authority, will attest to the veracity of the claim. If such ascertainment of the nature of commercial engagement between the appellant and the overseas broadcasting agency reveals that of a client, and not that of an agent, and the ascertainment of the nature of the relationship between the appellant and the music companies who supply advertisement fillers in the programme produced by the appellant reveals that of a client, and not that of a fee remission agency, the claim of the appellant to be an independent service provider delinked from the foreign broadcasting service provider would sustain. In the absence of any such findings on the contract or similar evidence, it will be improper for us to come to that conclusion. There is a lack of precise conclusion on this submission in the impugned order. The matter needs to be remanded back to the original authority to take note of the distinction between the appellant as a representative of overseas broadcasting agency and the appellant as a commercial production-house selling slots in programs that are produced on its own account for broadcast through the overseas broadcasting agency and ascertain tax liability subject to the constraints of the show cause notice. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the payment received for allotment of time-slots to music companies by the assessee as fillers in programmes broadcast from outside the country is liable to service tax under 'broadcasting agency service.'

Analysis:
The dispute revolved around the liability of the appellant to pay service tax on the income received from music companies for allotting time-slots as fillers in programs broadcast from outside the country. The service tax authorities alleged non-payment of tax on this income, claiming it was chargeable under section 65(105)(zk) of the Finance Act, 1994. The appellant argued that they were liable to tax only from 1st May 2006 when a new section was introduced, and not from 1st July 2001 as contended by the authorities.

The regulatory scheme for electronic media required the establishment of a branch, subsidiary, representative, or agent in India if the broadcasting agency was situated outside the country. The authorities held that the appellant, as the deemed service provider of 'broadcasting agency service,' was taxable under section 65(105)(zk) of the Finance Act, 1994 from 1st July 2001. The appellant, however, contended that their activities extended beyond the scope of 'broadcasting agency service' and included production of programs independently without reference to the overseas agency.

The Tribunal emphasized the need to ascertain the exact nature of the contract between the overseas broadcasting agency and the appellant to determine the tax liability. It was noted that the adjudicating authority had not examined this aspect thoroughly. Therefore, the Tribunal set aside the impugned order and remanded the matter back to the original authority for a detailed examination of the commercial engagements between the parties to determine the appellant's tax liability accurately.

In conclusion, the appeal was disposed of with the direction to reexamine the contract terms between the parties to establish whether the appellant operated as an independent service provider or as an agent of the overseas broadcasting agency. The lack of precise findings on this aspect in the impugned order necessitated a remand for a comprehensive assessment of the appellant's tax liability in accordance with the show cause notice.