By TIOL News Service

MUMBAI, SEPTEMBER 16, 2014: THE appellant, BCCI, entered into agreements for provision of services with M/s. Taj TV Ltd., Dubai/Mauritius, M/s. TWI-U.K. Ltd. London and Nimbus Sports International Pte. Ltd., Singapore. BCCI also entered into agreements with M/s Hawkeye Innovations Ltd., U.K. and IMG Media, London and IMG, South Africa for coverage of Indian Premier League Matches. As per these agreements, the service providers mentioned above, who were non-residents, were required to produce audio-visual coverage of the cricket matches conducted by BCCI and the digitalized images of the coverage were uploaded for broadcasting for the viewers of the cricket match all over the world. The appellant paid consideration for the services received to these non-resident service providers.

The department was of the view that the services received by the appellant came within the purview of "programme producer's service" and, therefore, the appellant was required to discharge service tax liability on reverse charge basis.

Accordingly, SCN dated 15.10.2009 [for the period 2004-05 to May, 2009], 31.5.2010 [for the period 15-4-08 to 17-4-2010], 23-10-2010 [for the period June, 2009 to March, 2010] and 18-6-2010 [for the period April 09 to March 2010] were issued in respect of the said services received from various service providers mentioned therein.

These notices were adjudicated by the CST, Mumbai-I and the service tax demands were confirmed [total demand is Rs.20,70,22,328/-]for the period on or after 18.04.2006 [when section 66A was inserted in the statute] along with interest and also by imposing penalties.

The appellant is in appeal before the CESTAT.

We had reported the Stay order [2013-TIOL-1361-CESTAT-MUM] thus -

ST - Applicant entered into contract with Taj TV Ltd., Dubai/Mauritius & TWI Ltd. of UK to produce audio-visual coverage of the cricket match for broadcasting the same - as the service providers are non-residents, applicant as a recipient was held liable to pay Service Tax u/s 66A of the FA, 1994 - applicant are not disputing the nature of activities noted in the adjudication order - prima facie there is no merit in the contention of the applicants that the applicants are not covered under the scope of 'programme producer service' - since applicants have not made out a case for total waiver of the adjudged dues, pre-deposit ordered of 50% and report compliance: CESTAT [para 11]

The appeal was heard recently.

There were submissions galore by both sides.

After considering the same, the Bench observed -

++ From the terms of the contracts entered into by BCCI, it is amply clear that the non-resident service providers were producing a programme for and on behalf of BCCI. The question is whether this activity would come within the definition of "programme producer services".

++ From the reading of the contract, we find that the service provider has installed 30-32 cameras in the stadium to capture the images of the cricket match. The appellant has set up a broadcast control room (BCR) in the stadium where the match is played. The images taken by the cameras are transmitted to vision colour correction unit and the same are viewed by the experts and after processing, these images are transmitted to the director's vision desk.

++ The taxable service has been defined under Section 65(105)(zzu) as "any service provided or to be provided to any person, by a programme producer, in relation to a programme". In other words, these are expressions of width and amplitude and cover within its scope any activity which is connection with the main activity. In this view of the matter, the activities undertaken by the non-resident service providers squarely falls within the definition of "programme" as defined in section 65 (86a) and the service providers are 'programme producers' as defined in section 65 (86b).[Doypack Systems Pvt. Ltd. 2002-TIOL-389-SC-MISC & ONGC vs. CCE, Raigad [2013-TIOL-202-HC-MUM-ST] refers.]

++ As regards the contention that in respect of Hawkeye Innovations Ltd., they were only supplying software programmes for recording, this contention does not seem to be flowing from the contract entered into with Hawkeye Innovations Ltd. A perusal of the agreement with Hawkeye Innovations Ltd. shows that Hawkeye Innovations was required to supply four units in connection with the production by IMG Media for BCCI of the world feed live coverage on the IPL in the seasons 2008, 2009 and 2010. Hawkeye Innovations was also required to supply three engineers for the recording of the events and the consideration was paid for supply of the equipment and the personnel for recording purposes. As already noted any service in relation to 'programme producer's services' would also fall within the definition of "taxable service". Therefore, the services provided by Hawkeye Innovations by way of supply of equipment and personnel for recording the live programme and actually participating in such programme production would also fall within the definition of 'programme producer's services' and we hold accordingly.

++ As regards the contract entered into with IMG S.A., the said agreement was for booking of hotel accommodation and transport of personnel in connection with the recording of cricket matches to be recorded by IMG U.K . These services per se will not qualify as 'programme producer's services' and they are in the nature of supporting services. The contract was a separate one and the service provided and received consisted of booking of hotel accommodation and arrangements for transportation. Therefore, though these services were in connection with the production agreement with IMG Media, U.K. for recording of matches, they cannot be considered as production of any programme. The said service availed by the BCCI by sub-contracting the work to a different service provider would not come within the purview of "programme producer's services" and therefore, the demand of service tax on the consideration paid for the services under the category of programme producer's services service cannot be sustained in law. Therefore, demand to this extent has to be set aside.

++ The appellant has contended that since the definition of "programme" refers to audio or visual matter, if recording is done of both, i.e. audio as well as visual, the same would fall outside the definition of 'programme'. This contention is quite absurd. If audio recording can be a programme and a visual recording also can be a programme, a combination of both would also be a programme. Applying the principles of statutory interpretation to the facts of the present case, to give effect to the manifest intention of the legislature, the expression "audio or visual matter" can be read as "audio and visual matter" . Therefore, we do not find any merit in the contention raised in this regard by the appellant.

++ As regards the contention that since the programme is produced on behalf of BCCI, there should be a third person, which is lacking in the present case, this contention is also not tenable. The statutory definitions of 'programme' and 'programme producer services' do not envisage the presence of a third party . Whether the programme is produced for BCCI or on behalf of BCCI, the transaction is complete. In any case, the programme is produced for dissemination by way of broadcasting to the general public and it is for the BCCI who has the rights over the programme, to decide and entrust the task of broadcasting to a third party. Thus the third party involved would be the broadcaster who will actually undertake dissemination of the programme produced by the non-resident service providers. The third party involved is the Broadcaster authorized by BCCI. From the specific clauses mentioned in the agreement the programme has to be delivered to the Broadcaster authorized by BCCI. We do not find any merit whatsoever in the contention that there is no third party involved and therefore, the production of the programme is not on behalf of BCCI. Consequently the reliance placed by the appellant on various decisions completely fails and in fact, they are not at all relevant.

Limitation:

It is not the case of the appellant that the appellant took registration and gave details of the various contracts entered into to the department. The details of the services received from the non-resident service providers and the consideration paid therefor was never declared to the department in the statutory returns filed by BCCI. In terms of the provisions of section 66A read with section 68 of the Finance Act, 1994, the appellant BCCI was the person responsible for paying service tax and it was their duty to comply with the statutory requirements which they failed to do. Only after the commencement of the investigation by the department, the true nature of the various transactions undertaken by the appellant came to light. Information relating to the transactions was given to the department in August 2009 and thereafter. After completion of investigation, the show cause notices were issued without any undue delay. In these circumstances, invocation of extended period of time cannot be faulted at all. Though the appellant has claimed bonafide belief, no material has been placed before us, either by way of expert opinion or otherwise, as to the basis for entertaining such belief. A belief can be said to be bona fide only when it is formed after all reasonable considerations are taken into account.Blind belief cannot be a substitute for bona fide belief. Therefore, we not accept the plea of bonafide belief claimed by the appellant. Consequently the demand of service tax confirmed in the impugned order is clearly sustainable in law and we hold accordingly. The reliance placed by the appellants on the various decisions is of no avail as in the present case there is deliberate withholding of information.

Simultaneous Penalties u/s 76 & 78 of FA, 1994:

Since the law has been amended prospectively w.e.f. 10.5.2008 so as to bar the imposition of penalties simultaneously, only one of the penalties would survive and not both, after the amendment.

Conclusion:

• The services received by the appellant, BCCI from the non-resident service providers, namely, M/s. Taj TV Ltd., Dubai/Mauritius, M/s. TWI-U.K.Ltd. London, Nimbus Sports International Pte. Ltd., Singapore, M/s. Hawkeye Innovations Ltd., U.K. and IMG Media, London merit classification under 'programme producer's services as defined in sections 65 (86a), 65(86b) read with 65(105)(zzu) of the Finance Act, 1994 and the appellant is liable to pay service tax along with interest thereon on the consideration paid for the services received under the provisions of section 66A of the said Finance Act. However, the services of hotel booking and transportation received from IMG, South Africa do not fall within the scope of the said service and hence demand of service tax on this service under the category of programme producer's service is not sustainable in law.

• Appellant has suppressed material facts from the department and hence, extended period of time has rightly been invoked for confirmation of service tax demand.

• Appellant is liable to penalty under sections 76, 77 and 78 of the Finance Act, 1994.

The appeals were disposed of.

In passing: Quite likely that the matter would be referred to the Third Umpire! -Also, re-computing demand by excluding that which is not 'programme producer's service'&re-determining penalty for the period applicable.

(See 2014-TIOL-1774-CESTAT-MUM)