2016 (2) TMI 729 - AT - Service Tax

Export of services or not - providing radio programmes for broadcasting to the principal BBC World located in UK - Receipt of consideration through Standard Chartered Bank in Indian Rupee vostro mechanism - leasing out their copyright to the local broadcaster - Held that - appellant has received the payment in foreign convertible exchange in the light of RBI circular dated 06.02.2008. Therefore, applicants are not liable to pay service tax to the tune of ₹ 5,10,23,578/-. We further find that a demand of service tax has been confirmed against the applicant for ₹ 7,79,630/-on account of leasing out their copyright to the local broadcaster and some period in dispute has implication thereafter. Therefore, at this stage without discussing the merits of the case, we direct the applicant to pre-deposits of ₹ 3,50,000/- (Rupees Three lakh fifty thousand only) - Stay granted partly.

Summary

Issues:
1. Waiver of pre-deposit of demand of service tax.
2. Qualification of payment as export of service.
3. Liability for service tax on providing broadcast radio programs.
4. Validity of demands under relevant provisions of the Finance Act, 1994.

Analysis:

Issue 1: Waiver of pre-deposit of demand of service tax
The appellant sought waiver of pre-deposit of service tax demand amounting to &8377; 5,18,03,208/- confirmed against them, along with interest and penalties. The Tribunal considered the submissions of both parties and observed that the appellant had received payment in foreign convertible exchange as per RBI circular dated 06.02.2008. Consequently, the Tribunal held that the appellant was not liable to pay service tax amounting to &8377; 5,10,23,578/-. However, a demand of service tax of &8377; 7,79,630/- on leasing out copyright to local broadcasters was confirmed. The Tribunal directed the appellant to make a pre-deposit of &8377; 3,50,000/- within four weeks, with the balance amount of service tax, interest, and penalty stayed during the appeal's pendency.

Issue 2: Qualification of payment as export of service
The appellant contended that the payment of &8377; 5,10,23,578/- received for providing services to their principal located in the UK qualified as export of service. The appellant argued that since they received the payment in whole convertible exchange as per RBI guidelines, they were not required to pay service tax on services provided to M/s. BBC, UK. The Tribunal, prima facie, agreed with the appellant's submission, holding that the payment was received in foreign convertible exchange, thereby exempting the appellant from paying service tax on this amount.

Issue 3: Liability for service tax on providing broadcast radio programs
The appellant also argued that they were not liable to pay service tax for providing broadcast radio programs to local broadcasters, as they were licensing ready programs for broadcasting, which were considered goods and not subject to service tax. The appellant further contended that the leasing of copyright to Indian broadcasters was not liable for service tax during the relevant period. The Tribunal did not delve into the merits of the case but directed the appellant to make a pre-deposit on the demand related to leasing out copyright to local broadcasters.

Issue 4: Validity of demands under relevant provisions of the Finance Act, 1994
The appellant raised concerns regarding the demands not being sustainable as they were not demanded as per IPR or under section 65 (105) (zzzt) of the Finance Act, 1994. The Tribunal did not specifically address this argument in the order but focused on the pre-deposit requirement based on the nature of the demands and the submissions made by both parties.

In conclusion, the Tribunal granted partial relief to the appellant by waiving the pre-deposit on a significant portion of the service tax demand while directing a pre-deposit on a separate demand related to leasing out copyright to local broadcasters. The Tribunal's decision was based on the interpretation of relevant legal provisions and RBI guidelines regarding foreign exchange payments, highlighting the importance of compliance and procedural requirements in tax matters.