2021 (1) TMI 384 - AT - Service Tax

Non-payment of service tax - service rendered to foreign customers - tax not paid under the belief that it amounted to export of services - Video Tape Production Service - HELD THAT - Issue decided in the case of PRASAD CORPORATION LTD. VERSUS COMMISSIONER OF SERVICE TAX CHENNAI 2017 (11) TMI 435 - CESTAT CHENNAI where it was held that we are not able to fathom how the adjudicating authority having stated that the appellants are not engaged in the recording of any programme etc. has concluded that services or restoration giving special effects etc. on the old films would be a Video Tape Production . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability on services rendered to foreign customers under the belief of export of services; Interpretation of "Video Tape Production Service" under Section 65(105)(zi) of the Finance Act, 1994.

Issue 1: Service Tax liability on services rendered to foreign customers under the belief of export of services

The appellant, engaged in data processing services, paid Service Tax on services to domestic customers but not on services to foreign customers, believing it was export of services. The Revenue considered these services as "Video Tape Production Service" and issued Show Cause Notices. The demand of &8377;45,77,295/- was confirmed for the period from 01.04.2010 to 31.03.2011 by the Commissioner of Service Tax (Appeals-II), Chennai.

Analysis: The appellant argued that similar issues were decided in their favor previously by the Tribunal. They contended that services to foreign clients did not fall under Video Tape Production Service. The counsel highlighted that the appellant's activities did not meet the definition of Video Tape Production Service as they were not involved in recording any program, event, or function. The Tribunal, in a previous case, had ruled in favor of the appellant, stating that the services provided did not fall under Video Tape Production Services. The Tribunal emphasized that the definition of Video Tape Production Service was clear and unambiguous, leading to the appeal being allowed with consequential benefits.

Issue 2: Interpretation of "Video Tape Production Service" under Section 65(105)(zi) of the Finance Act, 1994

The Authorized Representative for the Department argued that the appellant's activities, including restoration and special effects on old films, fell under Video Tape Production Service, as per Rule 3(ii) of the Export of Service Rules. The Department contended that the appellant's services involved cutting, coloring, special effects, and post-production activities, thus coming under the purview of Section 65(105)(zi) of the Finance Act, 1994.

Analysis: The Tribunal examined the definitions of "programme," "event," and "function" to determine if the appellant's activities aligned with Video Tape Production Service. The Tribunal found that the appellant's services did not involve recording programs, events, or functions, but rather post-production film activities for foreign service recipients. The Tribunal concluded that the appellant's services did not fall under Video Tape Production Services, as determined in previous cases, and set aside the impugned order. The Tribunal noted that no stay had been granted on the Department's appeal, leading to the decision in favor of the appellant.

In conclusion, the Tribunal allowed the appeal, providing consequential benefits as per law, based on the interpretation of Video Tape Production Service and the appellant's activities not meeting the criteria for taxation under Section 65(105)(zi) of the Finance Act, 1994.