2019 (1) TMI 445 - AT - Service Tax

Demand of Service Tax - T.V. and Radio Programme Production Service - sharing of revenue - case of the department in this appeal is that the Commissioner s finding is not correct as a perusal of the contract shows that the respondent was receiving a consideration in the form of a share of income from M/s UEL - Held that - The arrangement in this specific case can be seen from the MOU entered into between the respondent and M/s UEL. The obligations and rights of the respondents are in Clause 1 of the agreement while those of UEL are in para 2 and sharing advertisement revenue is in clause 3 - In this case there is no evidence of whatsoever that the respondent is producing the programmes on behalf of M/s UEL but the evidence in the MOU show that they are producing the programmes as a part of joint venture which are telecast and the revenue is shared. The argument in the appeal that the department could have continued further investigation to attain the facts of ownership and consideration paid, does not carry their case any further. This only suggests that they could have suspicions about the arrangements made as per the MOU but any possible suspicion which is not brought out in the show cause notice substantiated by evidence cannot form the basis for confirming the demand. Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against dropping of service tax proceedings for TV and Radio Programme Production Service.

Analysis:
The appeal was filed by Revenue against dropping service tax proceedings by the Commissioner for alleged non-payment under "T.V. and Radio Programme Production Service." The respondent was registered for Business Auxiliary Services and TV Programme Production. The show cause notice accused them of not paying service tax for producing programmes for M/s UEL. The Commissioner dropped the proceedings, leading to the appeal. The respondent argued they produced programmes as their share of work in a joint venture with M/s UEL, not for M/s UEL directly. The Revenue contended that the respondent received a share of income from M/s UEL, proving they produced programmes exclusively for M/s UEL. The MOU between the parties clarified the arrangement, showing the respondent retained copyright and had the right to commercially exploit the programmes. The Revenue's appeal was based on the belief that further investigation was needed to determine ownership and consideration paid. However, the Tribunal found no merit in the appeal, as the MOU indicated a joint venture with revenue sharing, not production on behalf of M/s UEL.

The Tribunal analyzed the MOU clauses, emphasizing the principal-to-principal basis of the agreement. The respondent retained copyright and could exploit the programmes commercially, while M/s UEL could also source programmes from other producers. The revenue sharing arrangement for advertisements further supported the joint venture nature of the agreement. The MOU did not suggest the respondent produced programmes on behalf of M/s UEL, aligning with the definition of Programme producers under Section 65(86b) of the Finance Act, 1994. The Tribunal concluded that the Commissioner correctly dropped the demands, as the evidence pointed towards a joint venture with revenue sharing, not production for M/s UEL. The Revenue's argument for further investigation was dismissed, as suspicions without substantial evidence could not support the demand. Therefore, the appeal by Revenue was rejected, upholding the Commissioner's decision to drop the service tax proceedings.