2018 (2) TMI 369 - AT - Service Tax

Export of service to foreign principal located in UKProgramme Producer Service - demand on the ground that one of the condition mainly, receipt of consideration in convertible foreign exchange has not been fulfilled in such exports - whether or not appellant received consideration for exported service in convertible foreign exchange? - Held that - FIRCs did not identify the nature and name of foreign convertible currency - It is manifestly clear that the amount credited to the account of the appellant in India is in consequence of a debit of pound sterling account maintained by participated bank in nostro mechanism in UK. The said debit of foreign exchange by the UK bank and consequent credit in Indian rupee in Indian bank as part of nostro transaction is reported to RBI and necessarily forms part of foreign exchange earning in India - the amount has not reached India from UK in Indian rupees - we find no merit in the findings by the lower authority to the effect that foreign exchange has not been received in convertible foreign currency for export of services by the appellant. Programme producer service with reference to domestic radio stations to whom the appellant gave various programmes for broadcasting - Held that - a plain reading of the statutory definition for programme producer service makes it clear that such programme producer should produce programmes on behalf of another person - In the present case, the appellants did not produce programmes for another person. There is no second person at the time of appellant producing the programme which is apparently for self - such transactions are not covered by programme producer service as the appellant did not produce programme for a third party. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Non-discharge of service tax under the category of Programme Producer Service.
2. Export of services and receipt of consideration in convertible foreign exchange.
3. Service tax liability on services provided to domestic radio stations.
4. Imposition of penalties under Section 77 and 78 of the Finance Act, 1994.

Issue-Wise Detailed Analysis:

1. Non-discharge of Service Tax under Programme Producer Service:
The appellant was engaged in broadcasting services and registered for service tax. The Revenue’s audit revealed non-compliance under the Programme Producer Service category as per Section 65 (105) (zzu) read with Section 65 (86b) of the Finance Act, 1994. The appellant contested this, arguing that their services did not fall under this category because they produced programmes independently and not on behalf of another person. The Tribunal agreed, stating that the statutory definition requires the programmes to be produced for another person, which was not the case here.

2. Export of Services and Receipt of Consideration in Convertible Foreign Exchange:
The appellant exported services to a UK-based entity but did not receive the consideration in convertible foreign exchange, leading to a tax demand of ?5,10,23,578/-. The appellant provided documentary evidence, including FIRCs from Standard Chartered Bank, showing payments through the nostro mechanism. The Tribunal examined RBI guidelines and previous case law, concluding that the nostro account mechanism satisfied the requirement for receipt in convertible foreign exchange. The Tribunal found that the credit in Indian rupees was attributable to foreign exchange received through the nostro mechanism, thus fulfilling the export condition.

3. Service Tax Liability on Services Provided to Domestic Radio Stations:
The appellant also faced a service tax demand of ?7,79,630/- for providing programmes to domestic radio stations. The appellant argued that these were independent productions, not produced on behalf of another person, and thus did not qualify as Programme Producer Services. The Tribunal agreed, noting that the programmes were produced independently and later sold to radio stations, which did not meet the statutory definition of Programme Producer Service.

4. Imposition of Penalties under Section 77 and 78 of the Finance Act, 1994:
Penalties were imposed on the appellant for the alleged non-compliance. The appellant contested the penalties, arguing that the interpretation of the nature of receipts from the UK was complex and subject to different interpretations. The Tribunal, considering the detailed analysis and the appellant’s compliance with RBI guidelines, found no merit in the imposition of penalties.

Conclusion:
The Tribunal set aside the impugned order, ruling in favor of the appellant on all counts. The appeal was allowed, and the order was pronounced in open court.