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TMI Blog2013 (10) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 has filed Appeal No. ST/56999/2013 against Order-in-Original No. 1-4/GB/13 dated 10.1.2013 passed by Commissioner of Service Tax, New Delhi. 2. Brief facts of the case in Appeals of Appellant No. 1 are that Appellant No. 1 is wholly owned subsidiary of ESPN (Mauritius) Limited and is engaged in import, promotion, marketing, distribution and sub-distribution of the international ESPN network programming service (ESPN channels), STAR Sports Network programming service (STAR Sports Channel) and STAR Cricket network programming service (STAR Cricket Channel) in India through Cable TV Network, satellite master antenna and DTH platforms received via satellite. ESPN is also engaged in the business of purchase of Advertisement Time Inventory on these channels and for further sale of Ad-time to third party advertisement in India. On the basis of an intelligence that ESPN was making substantial payment to foreign based broadcasters namely ESS Distribution (Mauritius) SNC at Compagnie, Mauritius (hereinafter referred to as ESSD) ESPN STAR Sports Mauritius SNC at Compagnie, Mauritius (hereinafter referred to as 'ESSM') towards import of broadcasting services namely TV channel Distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how Cause Notices were adjudicated by the Commissioner, Service Tax, LTU vide Orders-in-Original No. 49/2011 dated 31.3.2011 and 18/2011 dated 13.4.2011 respectively confirming service tax amounting to Rs.225,78,99,391/- and Rs.73,97,95,551/- interest and equal amount of penalty on the appellants. Appellant has challenged these orders in the present appeals. 5. Brief facts of the case in respect of M/s Turner International India Pvt. Ltd. (hereinafter referred to as TIIPL) are that the appellant is subsidiary of M/s Turner Broadcasting System Asia Pacific, Inc., Hong Kong (TBSAP) and is engaged in import, promotion, marketing, distribution and sub-distribution of rights to the products of Time Warner Group of Companies to cable and broadcast entities, distribution of television programming services operated by Turner Entertainment Networks Asia (TENA) and Cable News Network (CNN), LP, LLLP for entertainment and news channels to customers and procurement of advertisement sales; distribution of television programming services (HBOSA) operated by HBO Pacific Partner, Netherlands (HBOPP) to customers and procurement of advertisement sales and production, display and related support se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal. 7. Ld. Sr. Advocate Shri V. Sridharan appearing on behalf of the Appellants No. 1 submits that by a legal fiction appellant is already being taxed on service actually being provided by the foreign broadcasting agency and therefore there is no question of demanding service tax again on the same activity. He submits that definition of broadcasting can be divided into three parts, first being meaning assigned to it under Section 2 of Prasar Bharti Act, Second being programme selection, scheduling or presentation of sound or visual matter and third being service undertaken by the branch office or subsidiary or representative in India if any broadcasting agency is having its Head Office abroad. As per the third leg of definition activity of selling of Time slots to advertisers and collection of subscription charges (in real terms broadcasting means dissemination of any audio video content through signal) which does not involve any dissemination of signals on part of the appellant, through legal fiction created by legislature, has been brought under tax net as if appellant is rendering this activity on behalf of foreign broadcasters. He further submits that broadcasting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remittance sent to foreign entities was known to the Department, suppression cannot be inferred in this case. He therefore submits the demands are not sustainable on merit as well as on limitation. 11. Ld. Sr. Advocate Shri R. Venkatraman appearing for Appellant No. 2 submits that TENA and other foreign entities are owners of channels through which programmes are beamed. These programmes are played out at a play stations located outside India and communication signals are uplinked to satellite located outside India. By telecasting these channels revenue is generated by owners of the channels by entering into distribution agreement for distribution of channels and collecting subscription and procurement of advertisement. Appellant No. 2 is based in India and has entered into an agreement with TENA. Appellant No. 2 in turn entered into an agreement with Zee Turner to promote, market, distribute and provide distribution rights in India. Zee Turner enters into agreements with Multi System Operators (MSO)/Direct to Home (DTH) for distribution of channels and MSOs had entered into agreements with Cable operators who connect these channels direct to individual customers. Technologicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by MSO/DTH etc. and it is not permissible to read or interpret the inclusive part of the definition to include both the foreign channel and its representative for the simple reason that the foreign channel cannot do any of catalogued services in the inclusive part in India, because of the prohibition imposed by Ministry of Information and Broadcasting. Only the Indian entities falling under the inclusive clause and who have marketing and distribution rights can render these services and therefore Indian entities are service providers and not service recipients. Therefore demand on the ground of recipient of broadcasting service is not sustainable. 14. Ld. Sr. Advocate submits that demand has also been confirmed under Intellectual Property Right service on 98% of licensing/sub licensing fees because predominant nature of licensed property was held to be trade mark and not copy right. He submits that licensed products by TENA to TIPL are cartoon network characters (all Cartoon Network Originates and sesame characters) and these characters are nothing but artistic work as defined under Copyright Act 1957 and not trademarks. Therefore this demand is also not sustainable. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Cenvat credit of tax paid by them and can utilise such credit for payment of service tax demanded from the Appellant. He further points out that the Commissioner in para 39.10 conceives the Cenvat eligibility and transaction as revenue neutral. On the basis of Cenvat eligibility and if transaction is revenue neutral, the extended period cannot be invoked since revenue neutrality exists for the same Appellant and consequently penalties are also not imposable on the Appellant. Ld. Sr. Advocate further submits that interest under Section 75 also is not payable in the present proceedings. 20. Shri Somesh Arora, Special Counsel for Revenue submits that Appellant No. 1 is discharging service tax liability under Indian Leg of activities under Distribution Agreement and Ad-Time Inventory Purchase Agreement but is not paying tax on import of services from ESSD and ESSM. He submits that selling of time slots and distribution of services are part of broadcasting service even at the time of import independently and in the case of Ad-Time Inventory Purchase Agreement. ESSD and ESSM sell them time slots in bulk, as such selling of time slot is covered under Broadcasting Services and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various case laws submitted during the course of hearing. 25. Shri Pramod Kumar, Jt. CDR appearing for Revenue in ESPN Appeal No. ST/279/2012 and the TIIPL Appeal adopts arguments advanced by Shri Somesh Arora. Shri Kumar further reiterated the findings of the Commissioner in Order-in-Original No. 18/2011 dated 29.11.2011 passed by Commissioner, Service Tax, LTU and Order-in-Original NO. 104/GB/13 dated 10.1.2013 passed by Commissioner, Service Tax, Delhi. 26. We have heard both sides. Major issue to be decided in these appeals is whether Appellant No. 1 and No. 2 are liable to pay service tax as recipients of broadcasting Service under reverse charge mechanism. Broadcasting and Broadcasting agency or organisation has been defined under Section 65(14) and Section 65(15) as under (prior to 2005). 65(14) Broadcasting has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharati (Broadcasting Corporation of India) Act 1990 (25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the case of a broadcasti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in relation to broadcasting in any manner and, in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges or permitting the rights to receive any form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multisystem operator or any other person on behalf of the said agency or organisation. Taxable service is defined under 65(105)(zk) of the Finance Act as under :- Any service provided or to be provided to a client, by a "broadcasting agency or organization" means any agency or organization in relation to broadcasting in any manner and, in the case of a broadcasting agency or organization, having its head office situated in any place outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anch office; (ii) Subsidiary; (iii) Representative in India; (iv) Any agent appointed in India; or (v) By any person who acts on its behalf. b. List of activities performed by the service providers mentioned (i) to (v) above which are 'the activity of selling of time slots, obtaining sponsorship for broadcasting of any programme, collecting the broadcasting charges, permitting the right to receive any form any communication like sign, signal, writing, picture, image and sound of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means' c. last limb of the definition enumerates the list of recipients of the service namely cable operators, multi-system operators or any other person The cumulative effect of these three limbs results in rendition of broadcasting service under the second inclusive part of definition and in these appeals before us we note that (i) Appellant No. 1 and Appellant No. 2 are based in India and are having head offices outside India. (ii) They provide the service of selling time slots, obtaining sponsorship, collecting subscription charges and permitting the right to receive commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'TV Channel distribution rights' and 'Advertisement Time inventory', appear to be consideration for import of broadcasting services, liable for payment of service tax by ESPN under reverse charge mechanism, in terms of provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 and Taxation of services (provided from outside India and received in India) Rules, 2006. 30. Para-11 shows the narration of the allegation by the Department in the Show Cause Notice. Commissioner straightway concluded that demand was made with reference to the transaction between ESSD as a service provider and Appellant as a service recipient. These conclusions drawn from the allegations in the Show Cause Notice are prima facie not sustainable. 31. Commissioner has examined the distribution agreements between ESPN and ESSD, definitions of Broadcasting; Broadcasting agency or organisation and taxable service and held that ESSD, the foreign broadcaster is a broadcasting agency or organisation as per the first part of the definition (means part plus first inclusive part) and is providing taxable service to the appellant. Commissioner has further held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part is a broadcasting agency and provided the service of broadcasting and has discharged the service tax liability as service provider. He holds in para 39.8 of the order that appellant being an agent of the foreign broadcaster is liable to pay service tax as recipient of services under reverse charge mechanism. We find that appellant is covered under second inclusive part of the definition of Broadcasting. Similarly appellant is a broadcasting agency also by virtue of inclusive definition of Broadcasting agency. Taxable service under Section 65(105)(zk) means any service provided or to be provided by a Broadcasting Agency and providing broadcasting service by virtue of being based in India and having a head office outside India. The finding of the Commissioner that the appellant is service recipient on the basis of the second inclusive definition is not therefore sustainable. Moreover, the foreign broadcaster is engaged in uplinking the signal to a satellite outside India and downlinking of signal is done by MSOs/Cable operators in India and appellants technologically does not receive any broadcasting service. Appellant is covered under broadcasting agency and broadcasting and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to other provisions of this Act, a mark used or proposed to be used in relation to goods or services for the purpose of indicating or so to indicate a connection in the course of trade between the goods or services, as the case may be, and some person having the right, either as proprietor or by way of permitted user, to use the mark whether with or without any indication of the identity of that person, and includes a certification trade mark or collective mark. Section 2(m) - mark includes a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colours or any combination thereof. Copyright Act: Section 14. Meaning of copyright For the purposes of this Act, 'copyright' means the exclusive right subject to the provisions of this Act, to do or authorise the doing of any of the following acts in respect of a work or any substantial part thereof, namely:- (a) in the case of a literary, dramatic or musical work, not being a computer programme, - (i) to reproduce the work in any material form including the storing of it in any medium by electronic means; (ii) to issue copies of the work to the public not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) any other work of artistic craftsmanship. The dispute relates to Cartoon Characters. It is the contention of the assessee that Cartoon Characters are created by TENA and are the artistic work and are clearly covered under Copyright Act whereas Revenue contests that these are Trademarks and not artistic work and are thus covered under IPR Services. 38. Product Licensing Agreement and Promotional Licensing Agreements were executed between TENA and TIIPL. TIIPL i.e. Appellant No. 2 executed sub licensing agreements between TIIPL and Bombay Dyeing and Manufacturing Co. Ltd., TIIPL and M/s Brittania Industries and TIIPL and M/s Bata India Ltd. In case of Bombay Dyeing agreement was made for sub licensing the property 'Powerful Girls' for use in home furnishing. In Schedule A sub licensed properties were listed as PPG, Dexter Laboratory, Johny Bravo, Courage, Cow & Chicken, Codername Kids Next Door, CN Logo and all related Characters and Elements had been shown as Trademark of Cartoon Network. Similarly in case Brittania Industries sub licensed property is Tom and Jerry for use on erasers, pencils and magnetic slap on a wrist bands for promotion of product of Brittania Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistance in production of programme to TENA and their role is that of supervisor and these services are appropriately covered under support service of business which came into effect with effect from 1.5.2006. We find that as per Service Agreement between TENA and the Appellants, the Appellant has to create, produce and develop the concept/format creation/acquisition and to provide pre-production, production and post-production services to create programme content intended for broadcasting on TENA international channel network and in the invoices amount is charged as 'Fees for Production Services Rendered'. We therefore have no doubt in holding that the activity undertaken by them falls under taxable service of Programme Producer Service as defined under Section 65(105)(zzu). 43. Commissioner has confirmed the demand under Business Auxiliary Service on commission Income earned while working as Advertising Sale Representative of TENA. Appellant has earned some commission on revenue generated on account of Advertisement Sales during the year 2005-06. Their contention is that during the period of dispute (prior to 18.4.2006) there was no requirement under Export of Service Rules to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any service tax under Intellectual Property Service, Business Auxiliary Service in respect of Product Licensing Agent/promotion licensing Agent and on Programme Producer Service and did not file any Return for these services. We do not find any fault in finding of the Commissioner in invoking extended period of limitation and consequently Appellant is liable to interest and penalty. 46. In view of the above 1) Appeals filed by Appellant No. 1 are allowed. 2) In respect of appeal filed by the Appellant No. 2 we set aside the order-in-original in respect of following activity. (i) Broadcasting services under reverse charge mechanism. (ii) Business auxiliary service provided by the appellant to TENA on commission income earned while working as Advertising Sale Representative of TENA. (iii) Business Auxiliary Service in nature of marketing of Cartoon Network and POGO channel. (iv) Intellectual Property Service provided by the Appellants to clients in India. 3. In respect of appeal filed by Appellant No.2 (TIIPL) we uphold the order-in-original confirming service tax, interest and penalties in respect of (i) Business Auxiliary Service provided by the Appellant to TENA in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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