2009 (6) TMI 152 - AT - Service Tax

The demand arises as a result of holding that the applicants, who are rendering video post-production services such as graphics, special effects, animation etc. according to the specifications of their customers, were rendering Video Tape Production Services appellant undertake the services such as restoration, giving special effects etc. to the inputs received via internet, hard discs, tapes of old films and, therefore, prima facie the activity carried out by the applicants is rightly classifiable under Video Tape Production Services and not either under Photography Service or under Business Auxiliary Service under the category of Information Technology Related Service . - No taxable service has been performed by the applicants outside India, so exemption under Export of Services Rules, 2005, not arises plea on limitation is also not tenable for the reason that non-payment of service tax came to the notice of the department only when department officials visited the unit of the applicants we are of the view that no strong prima facie case for unconditional waiver has been made out by the applicants either on merits or on limitation. pre-deposit partly waived

Summary

Issues:
- Application for waiver of pre-deposit of service tax
- Classification of services as "Video Tape Production Services"
- Claim of service being treated as "Export of Services"
- Bar on limitation for demand
- Financial hardship plea

Waiver of Pre-deposit of Service Tax:
The judgment dealt with an application for waiver of pre-deposit of service tax amounting to Rs. 1,96,09,018, along with interest and penalty under relevant sections of the Finance Act, 1994. The Tribunal heard arguments from both sides and observed that the applicants were providing video post-production services like graphics, special effects, and animation as per customer specifications. The demand was raised based on the classification of these services as "Video Tape Production Services" during the disputed period from 15-3-05 to 30-9-07.

Classification of Services:
The Tribunal referred to Section 65(120) of the Finance Act, 1994, which defines "Video Tape Production." Despite not engaging in recording programs on magnetic tapes, the applicants were found to provide services like restoration and special effects to inputs received through various mediums. Consequently, the Tribunal deemed the activity to fall under "Video Tape Production Services" rather than other categories like "Photography Service" or "Business Auxiliary Service."

Export of Services Claim:
The applicants contended that their service should be treated as "Export of Services." However, the Tribunal noted that the relevant rule applies only when services are performed outside India, which was not the case here. The plea was dismissed as no taxable service was performed by the applicants outside India.

Limitation for Demand:
Regarding the limitation on the demand, the Tribunal rejected the argument that the show-cause notice issued on 25-2-2008 partly barred the demand. The department became aware of the non-payment of service tax to foreign clients only upon an official visit to the applicants' unit, rendering the limitation argument invalid.

Financial Hardship Plea:
Lastly, the Tribunal found the plea of financial hardship unsubstantiated. Consequently, the Tribunal concluded that the applicants did not establish a strong prima facie case for unconditional waiver on merits or limitation. They directed a pre-deposit of Rs. 50,00,000 towards the service tax demand within eight weeks, with the balance tax, interest, and penalty pre-deposit dispensed with during the appeal's pendency.

The judgment was delivered on 2-6-2009, with non-compliance leading to the vacation of stay and dismissal of the appeal without prior notice, emphasizing the importance of compliance by 11-8-2009.