ST - Usage of programme after delivery to overseas entity is irrelevant in deciding tax liability as 'programme producer' - eligibility for exemption of a taxable service as export is predicated upon providing specific service to an entity outside India who makes consideration in convertible foreign currency for service so rendered: CESTAT
By TIOL News Service
MUMBAI, MAR 22, 2016: THIS is a Revenue appeal against the order passed by CST, Mumbai dropping the Service Tax demand of Rs.63,48,39,755/-.
The respondent had claimed that the service for which consideration of Rs. 516,37,53,000/- had been received from M/s. SGL Entertainment Ltd., Hongkong during the period April 2006 and March 2008 were exports as per Export of Services Rules, 2005 and in pursuance of a contract between the two dating back to April 2006.
In terms of the said contract, the assessee produced television programmes which were, admittedly, to be uplinked by the Hong Kong entity for the benefit of viewers.
The case of Revenue is that the production of these programmes were taxable under Finance Act, 1994 since 2004 under section 65(105)(zzu) of the FA, 1994.
Revenue contends that these were not exports because these transactions did not lie within the ambit of Export of Services Rules, 2005 by failure to comply with conditions stipulated in the said Rules, namely rule 3(2).Inasmuch as the usage condition and currency condition, both common to the pre-amendment and post-amendment provisions, had not been satisfied in the transaction between M/s Balaji Telefilms Ltd. and M/s SGL Entertainment Ltd because the programmes were in Hindi with intent to be distributed to viewers in India through channels in India and the contract designated the currency of payment in Indian rupees.
The adjudicating authority held that the appellant provides 'programme production service' to M/s SGL Entertainment Ltd while the up-linking from Hong Kong by M/s SGL Entertainment Ltd for beaming to the distributors in India was in the course of rendering 'broadcasting service' taxable under section 65(105)(zk) of Finance Act, 1994; that the service rendered by the assessee being different from the service rendered by the overseas entity, it was held that the inference in the show cause notice that the destination of the service exported from India was ultimately to be India is not acceptable. Relying on the 'Master Circulars' of the Reserve Bank of India and paragraph 2.40 of the Foreign Trade Policy, the adjudicating authority also held that the consideration had been received in freely convertible currency.
Aggrieved, Revenue is before the CESTAT.
The Bench did not find any merit in the appeal filed and observed thus -
++ The activity that is liable to tax must be one which is specifically listed in section 65 (105) of Finance Act, 1994 and which, with reference to the business of the appellant is described in sub-clause (zzu). The appellant is a 'programme producer' within the meaning of section 65(86b) and contracted with the overseas entity in that capacity.
++ There can be no doubt that, if the programme producer or any other person were to further disseminate the programme to others, such dissemination would be liable for tax as a separate and distinct service. Consequently, the usage of the programme after delivery to the overseas entity is irrelevant indeciding upon the tax liability as 'programme producer'.
++ In the present appeal, Revenue seeks to blur the distinction between the programme delivered abroad by the appellant and the subsequent broadcasting of that programme. We respectfully follow the settled law and reject the contention of Revenue that the distinction should remain blurred. Therefore, the services rendered by the respondent is delivered or provided from India to the overseas entity and thus conforms to the first part of the outflow condition. [FIL Capital Advisors (India) Pvt. Ltd. - 2015-TIOL-795-CESTAT-MUM, AMP Capital Advisors Pvt. Ltd. - 2015-TIOL-1001-CESTAT-MUM & Greater Pacific Capital Pvt. Ltd. - 2014-TIOL-1726-CESTAT-MUM refers.]
++ The majority decision of the Tribunal in re: Paul Merchants Ltd. - 2012-TIOL-1877-CESTAT-DEL has laid down that eligibility for exemption of a taxable service as export is predicated upon the providing that specific service to an entity outside India who makes over the consideration for the service so rendered. Therefore, the respondent in this appeal, having completed the rendering of the service of 'programme production' to the overseas entity has complied with the second leg of the first condition i.e. usage outside India.
++ The respondent did produce a certificate from Hongkong and Shanghai Banking Corporation Ltd. their bankers, indicating that inward remittance from the overseas entity was in convertible foreign currency. The original authority rendered its findings after acknowledging this certificate. In the light of this, it is surprising that Revenue has chosen to argue that the condition of inward remittance in Export of Service Rules, 2005 had not been fulfilled.
Holding that both the conditions for export as laid down in Rule 3(2) of Export of Services Rules, 2005 had been complied with, the Revenue appeal was dismissed.
(See 2016-TIOL-685-CESTAT-MUM)
