Customs, Excise & Service Tax Appellate Tribunal, Bangalore: In the present case, the issue for consideration was whether service tax could be levied on exhibition of films under the category of Business Auxiliary Service (‘BAS’) or demand could be confirmed against transfer or assignment of copyright of the film produced by the appellant under copyright service. The two-member Bench of P.A. Augustian (Judicial Member)* and R. Bhagya Devi (Technical Member), set aside the order of Adjudication Authority and held that the agreement for absolute assignment of right for perpetual period would not fall under the category of copyright service thus, demand of service tax was unsustainable. Further, the order confirming demand under BAS was also held unsustainable as it was not mentioned that which service out of the seven services specified in Section 65(19) of the Finance Act, 1994 (‘the 1994 Act’), was undertaken by the appellant.
Background:
The appellant was engaged in business of cinematographic film production, film distribution, transfer or assignment of copyright of the film produced by them to various television channels, music companies, etc. A how cause notice was issued, and proceedings were initiated against the appellant alleging that the activity carried out by the appellant was taxable under the category of Copyright or BAS and the appellant had failed to pay appropriate service tax for the period from 2009-2010 and 2012-2013. The Adjudication Authority, by order dated 18-2-2025, confirmed the demand of duty, against which the present appeal was filed. The show cause notice concluded that after introduction of Negative list of services from 1-7-2012, the service tax on temporary transfer permitting the use of copyright in respect of cinematography films were fully exempted from 1-7-2012 to 31-3-2013.
The Adjudication Authority held that the activity of the appellant of receiving income from transferring temporarily or permitting the use of the right vested in the film produced by them to their clients fell under the definition of copyright service under Section 65(105)(zzzt) of the 1994 Act.
The appellant submitted that a film “Jawan of Vellimala” was produced by them and vide an agreement dated 1-2-2012 with Central Advertising Agency assigned exclusive telecast rights to assignee for consideration with perpetual period. Thus, constructing permanent sale or transfer of copyright rendering it not taxable in accordance with Circular No. 109/3/2009-ST issued by Central Board of Excise and Customs. Further, with regard to demand under the category of BAS, the appellant submitted that the show cause notice had not invoked any specific clause in definition of BAS in terms of Section 65(19(zzb) of the 1994 Act under which cinematographic film distribution activity of the appellant were liable to service tax.
Whereas the respondent submitted that the act of temporary transfer of permitting the use or enjoyment of copyright of cinematographic film and sound recording services were taxable under copyright services in terms of Section 65(105)(zzzt) of the 1994 Act from 1-7-2010 read with Section 18 of Copyright Act, 1957 (‘the 1957 Act’).
Analysis, Law, and Decision:
The Tribunal noted that as per the agreement entered by the appellant with Central Advertising Agency, it was an absolute assignment to the assignee or their authorized person for the telecast right and the sole and exclusive right for the entire World Satellite Television Broadcast and other Broadcasting rights were connected thereof for a perpetual period. Therefore, it would not fall under the category of copyright service in accordance with the 1957 Act and the Circular No. 109/3/2009-ST, and thus the order confirming demand of service tax under copyright was unsustainable.
The Tribunal observed that in accordance with the Circular No. 109/3/2009-ST, screening of movie was not a taxable service except where the distributer leases out the theatre and the theatre owner get a fixed rent. The Tribunal noted that in such case, the service provided by the theatre owner would be categorized as ‘Renting of immovable property for furtherance of business or commerce’ and theatre owner would be liable to pay tax on the rent received from the distributor. The Tribunal stated that there was no allegation that the appellant had leased out the theatre and the theatre owner got fixed rent. The Tribunal relied on Balaji Enterprises v. CCE and CST, 2019 SCC OnLine CESTAT 6251, and set aside the order of Adjudication Authority and held that demand under BAS was unsustainable as it was not mentioned that which service out of the seven services specified in Section 65(19) of the 1994 Act, was undertaken by the appellant.
With regards to limitation, the Tribunal held that taxability under BAS and copyright service on exhibition of films was matter of interpretation. Therefore, the demand of service tax under the presumption that the appellant was aware of tax liability and yet failed to discharge, was contrary to facts. The Tribunal stated that as there was no allegation regarding wilful suppression of the fact, therefore, confirming demand by invoking the extended period of limitation was unsustainable. The Tribunal thus set aside the impugned order.
[Play House Motion Pictures (P) Ltd. v. CCE and CST, 2025 SCC OnLine CESTAT 2208, decided on 30-7-2025]
*Order by: P.A. Augustian (Judicial Member)
Advocates who appeared in this case:
For Appellant(s): M.S. Nagaraja, Advocate
For Respondent(s): Rajesh Shastry, Authorised Representative
