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2024 (7) TMI 308 - AT - Service TaxLevy of service tax - Business Auxiliary services - promotion and marketing of the film produced by the FPC - scope of definition of service - extended period of limitation. Whether the services provided by the appellants are leviable to service tax under the taxable category of Business Auxiliary Service (BAS) or not, in terms of Section 65 (105)(zzb) of the Finance Act, 1994, for the period prior to 01.07.2012? - HELD THAT - The various charges incurred in promotion of the music and song video rights acquired by the appellants are purely in the nature of promoting the rights acquired by them, for commercial exploitation in terms of the contractual arrangements made between them and FPCs. These activities in no way can be termed as business auxiliary service provided by the appellants to the FPC, as their client. Further, where ever service tax liabilities have arisen it is stated by the appellants that they have duly discharged the same and the same has not been disputed by the Revenue. The agreement entered into by the appellant, it transpires that the said arrangement is between the appellants and Film Producer Companies (FPCs) for a specified period, and the scope of activities or work to be performed by the appellant is provided in the Article 2 Assignment of Rights and Article 5 Reserved Rights, clearly brings out the rights that have been offered to the appellants as defined under clause 1.17, as said works relate to only songs and song videos of the film; whereas the rights retained by FPCs include all other rights in exploiting the film for various purposes including merchandising, gaming, animation films, remaking etc.; Intellectual Property Rights (IPR) including copyrights of the producer in the film. Thus, the basis for treating the rights obtained by the appellants in the agreement and marketing of music and song video as the activity of marketing and promotion of films, in the impugned order is factually incorrect and is not based on any evidence - From the various clauses of the agreement and the number of activities carried out by the appellants, it could be clearly concluded that the appellants are carrying out the permitted activities in respect of the assigned rights of music and song videos for certain consideration detailed therein and is not providing any service for the FPCs, in any manner, and more specifically for marketing of film - such activities of the appellants cannot be considered as Business Auxiliary Service rendered for the FPCs, as their clients. Whether the services provided by the appellant is leviable to service tax under Section 66B ibid read with the definition of service under Section 65B(44) ibid from 01.07.2012 or not? - HELD THAT - The dispute in respect of the services provided by the appellants as taxable under Business Auxiliary services, has been decided by the Co-ordinate Bench of the Tribunal in the case of MCDONALDS INDIA PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF SERVICE TAX DELHI-I 2019 (9) TMI 1141 - CESTAT NEW DELHI , by holding that the amount incurred by franchisees towards advertisement expenses cannot be said to be consideration paid by the franchisee to the McDonalds, as it is the franchisee themselves who are benefitting out of such expenses and not the McDonalds. Further, Hon ble Supreme Court, in the case of PHILIPS INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, PUNE 1997 (2) TMI 120 - SUPREME COURT had held that the provisions of contract between a manufacturer and its distributor relating to advertising and the like were in furtherance of the desire on the part of both the manufacturer and distributor and in no way affected the real nature of the transaction which appeared to be of sale on principal to principal basis. Accordingly, the Hon ble Supreme Court had held that advertisement expenses incurred by dealer/distributor at its own cost, half of it borne by the manufacturer, does not call for deduction out of the trade discount and it is uncalled for. The above orders of the higher judicial forum clearly provide that the activities undertaken by the appellants with the FPCs under a contract such as marketing and promotion of music and song videos of film under a temporary transfer arrangement are not liable to service tax as Business Auxiliary Service - it is not found that sharing of part of the consideration alone under the contractual obligations would tantamount to provision of service towards Business Auxiliary Services, provided by appellants by treating the rights owner as their clients. Whether the adjudged demands and penalties imposed by the Commissioner of CGST, Mumbai West is legally sustainable or not, under the Finance Act, 1994? - HELD THAT - there was no suppression of any information, inasmuch as the appellant have provided complete details in respect of the audited accounts and the balance sheets for the disputed period. It is found from the factual details that the entire data having been provided to the investigation officers of the DGGI, there is no justification to claim suppression of facts in such a situation. Further, it is found that there is no evidence or any document to indicate that the appellants in any manner had attempted to evade service tax - invocation of extended period for demand of service tax in the present cases is not sustainable. Consequent to this, it is also found that the penalty imposed on the appellants under Section 78 ibid also does not survive on the above grounds. The activities undertaken by the appellant in the present set of facts is not liable to service tax under the taxable category Business Auxiliary service - the impugned order dated 27.02.2021 is liable to be set aside to the extent it had confirmed the adjudged demands proposed in the SCN - appeal allowed.
Issues Involved:
1. Whether the services provided by the appellants are leviable to service tax under the taxable category of 'Business Auxiliary Service' (BAS) or not, in terms of Section 65 (105)(zzb) of the Finance Act, 1994, for the period prior to 01.07.2012. 2. Whether the services provided by the appellant are leviable to service tax under Section 66B read with the definition of 'service' under Section 65B(44) from 01.07.2012. 3. Whether the adjudged demands and penalties imposed by the Commissioner of CGST, Mumbai West are legally sustainable under the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Levy of Service Tax under 'Business Auxiliary Service' (BAS) Prior to 01.07.2012: The Tribunal examined the definition of 'Business Auxiliary Service' under Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994. It was noted that the appellants acquired music and song video rights from Film Producer Companies (FPCs) and commercially exploited these rights. The appellants were not promoting the sale of goods or services belonging to the rights assignor (FPCs). The various expenditures incurred by the appellants for marketing were for their own commercial benefit and not for providing 'Business Auxiliary Service' to the FPCs. The Tribunal concluded that the appellants' activities did not fall under the category of 'Business Auxiliary Service' as they were promoting their own acquired rights and not providing services to the FPCs. 2. Levy of Service Tax Post 01.07.2012 under Section 66B: The Tribunal referred to the definition of 'service' under Section 65B(44) of the Finance Act, 1994, which requires an activity carried out by a person for another for consideration. It was observed that the marketing of music and song video rights was undertaken by the appellants for their own benefit and not for the FPCs. The Tribunal emphasized the distinction between the promotion of music and the promotion of films, noting that popularity of music does not equate to the promotion of films. The Tribunal found that the appellants' activities did not meet the criteria for being classified as 'service' under Section 66B and thus were not liable to service tax. 3. Adjudged Demands and Penalties: The Tribunal examined the imposition of penalties and the invocation of the extended period for demand of service tax. It was noted that there was no specific allegation or finding of fraud, collusion, wilful misstatement, or suppression of facts by the appellants. The appellants had provided complete details in their audited accounts and balance sheets, and there was no evidence of any attempt to evade service tax. The Tribunal referred to various judicial precedents, including the Delhi High Court's judgment in Bharat Hotels Ltd., which emphasized that mere non-payment of duties does not justify the invocation of the extended period. The Tribunal concluded that the invocation of the extended period and the imposition of penalties were not justified. Conclusion: The Tribunal set aside the impugned order dated 27.02.2021, concluding that the appellants' activities were not liable to service tax under the taxable category of 'Business Auxiliary Service' and that the invocation of the extended period and imposition of penalties were not sustainable. The appeal filed by the appellants was allowed.
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