1. The appellants are registered with the service tax department for providing output services. In the course of investigations carried out, it was noticed that the appellant has not paid service tax on certain tele serials produced by them and also has not discharged correct service tax by arriving the taxable value of services in a wrong manner. It was also noticed that the appellants have wrongly availed credit on input services. Show cause notice was issued raising the above allegations which after due process of law, confirmed the demand of tax, interest and imposed penalties. Aggrieved, the appellants are before this Tribunal.
1.1 On behalf of the appellant, Ld. counsel Shri V.S. Manoj submitted that the demand is raised on three main allegations raised in the show cause notice which are (i) The amount received for transfer of copyright of programmes to various TV channels amounts to service under the category of "TV or Radio Programme Production service" (it) the appellant has not correctly paid service tax on the gross amount realized for discharging service tax on the output service "Sale of space or time for Advertisement" service by including the three components, variable cost, fixed cost and profit sharing and (iii) the appellant is not eligible for cenvat credit of service tax paid on telecasting fee which was paid for broadcasting tele serials.
1.2 On the first issue, Ld. counsel adverted to the definition of 'programme producer' under Section 65(86b) of the Finance Act and submitted that to attract levy of service tax under the programme production service, the programme must be produced on behalf of another person. The appellant is not engaged in producing programmes of another person. They produce all the programmes by themselves and no person engages them to produce programme on their behalf. The definition clearly uses the word "on behalf of which indicates a representative capacity or in other words, an agency capacity. Since the appellant is producing programmes/serials on their own, it cannot be said that they are producing programmes on behalf of another. Later the appellants have assigned copyright in the tele-serials for consideration. The department proposes to levy service tax on the consideration received for transfer of copyright under the category 'programme production service' which is highly erroneous. During the relevant period, the temporary transfer of Intellectual Property Right (IPR) was not subject to levy of service tax. Even after, the said activity became taxable under the category of "Intellectual Property Service", it excluded the temporary transfer of copy right.
1.3 On the second issue that the appellant has not discharged service tax on all three segments namely fixed cost, variable cost and profit sharing, the Ld. counsel submitted that this allegation is factually incorrect; that in the reply to show cause notice itself, the appellant has stated that they have discharged service tax on all the components.
1.4 The third allegation is that appellant has wrongly availed cenvat credit of service tax paid on telecast charges. The telecast charges were paid to the broadcaster for telecasting programme. The appellant is given time slots as consideration for telecasting programme. Apart from such free commercial time, the appellant does not receive any other consideration for the broadcast of the programmes. The main revenue generated is from output service of 'Sale of time and space for Advertisement'. The appellant cannot provide this output service unless the free commercial time slot is obtained by telecast of the programmes. Therefore indeed, the telecast fees as well as service tax paid thereon is input service for the appellant for providing output service of 'Sale of space and time for Advertisement'. That therefore the credit availed is right and proper.
2.1 The Ld. Commissioner (A.R.) Ms. P. Hemavathi appeared on behalf of Revenue and reiterated the findings in the impugned order. She submitted that from the records it is seen that the appellant has entered into agreement for sale of tele serials to various broadcasters as Copy Right Assignment Agreement. In reality, these agreements are for sale of programmes produced by them. The Board in its circular No. 80/10/2004-ST dt. 17.09.2004 has clarified that services provided by TV or Radio programme producer for telecasting/radio transmission of a broadcaster would fall under "TV or Radio Programme Production Service" including the programmes which are sold to the broadcaster. Since the appellant has assigned the copy right of the programme to the broadcaster, the consideration received is classifiable under the category of "Programme Production Service" and not under "Intellectual Property Right Service". The levy of service tax on the consideration received from broadcaster under copy right assignment agreement has been rightly subjected to levy of service tax.
2.2 On the second issue, she submitted that as per the agreement entered with advertising agencies the appellant received the charges under three heads namely variable cost, fixed cost and profit share. The variable cost represents the cost of production of programme, fixed cost represents telecast fees payable to the broadcaster for the slot allotted to the appellant and profit sharing is sharing of revenue earned from free commercial time between appellant and advertising agencies. As per Section 67 of the Finance Act, 1994, the taxable value shall be the gross amount charged. In this case, the gross amount charged would include all the above three segments. Appellant has discharged service tax only on the variable cost and not on the other two elements. Verification of accounts revealed that appellants have not paid service tax on fixed cost and profit sharing.
2.3 On the third issue of irregular availment of cenvat credit, Ld. AR submitted that the output service of programme producers service is liable to levy of service tax. Similarly, the activity of 'Sale of space or time for Advertisement' is also subject to levy of service tax on which appellants are discharging service tax. They have availed credit on the service tax paid on the telecast fees and contends to have used such services for 'Sale of space or time for Advertisement' services. The telecasting programmes is after production of the serials and therefore the telecasting fees paid is not input service for production of programmes. Therefore, the credit has been rightly denied.
3. Heard both sides and gone through the facts.
4. The first issue is with regard to demand raised under the category of "TV or Radio Programme Production Service". For better appreciation, the definition of "TV or Radio Programme Production Service" as defined under Section 65(105)(zzu) is as under:
'"any service provided or to be provided to any person, by a programme producer, in relation to a programme".
"Programme Producer" as defined under Section 65(86b) means "any person who produces a programme on behalf of another person" and "programme" is defined under Sec. 65(86a) as "any audio or visual matter, live or recorded, which is intended to be disseminated by transmission of electromagnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations.'
Section 65(86b) as shown above indicates that 'Programme Producer' is a person who produces a programme on behalf of another person. In the present case, the department has no case that appellant are producing programme for any other person. In fact, the demand has been raised alleging appellant has assigned their own programme and received consideration. There is no evidence placed before us to show that the appellant has produced the programme on behalf of another person. The appellant produces the programme on its own and after the completion it may or may not be accepted by the channel/broadcasting agency. After production, they have transferred the copy right in the programme temporarily to the broadcasting agency. Such transfer of copy right does not attract levy of service tax under "TV or Radio Programme Production Service". A similar issue came up for analysis before the CESTAT Bench at Delhi and by Final Order No. 58649/2017 dt. 14.12.2017 in the case of BBC World Services India (P.) Ltd. v. CCE &ST the Tribunal observed that only when the programme is produced on behalf of another person, the said levy of service tax would be attracted. The relevant portion of the above Tribunal's order is reproduced below:
"(g) On the second issue, the learned Counsel for the appellant submitted that they have produced various programmes without any reference to another person and thereafter whenever requirement arises gave such programmes to other domestic radio stations for broadcast. They received certain considerations for such transfer of programmes on temporary basis. These are specific radio programmes. They have not produced these programmes on behalf of another person, hence, they cannot be considered as programme producer in terms of Section 65(86b) of the Act. Even otherwise these are copy right materials and if at all to be subjected to service tax, the same will apply only w.e.f. 01/07/2010. The learned counsel also contested the proceedings on limitation and on imposition of penalties considering the interpretation involved with reference to actual exports undertaken by the appellant only with reference to the nature of receipt of consideration from UK.
12. On the second issue, a plain reading of the statutory definition for programme producer service makes it clear that such programme producer should produce programmes on behalf of another person. In the present case, the appellants did not produce programmes for another person. There is no second person at the time of appellant producing the programme which is apparently for self. Thereafter, such programmes were given to other broadcasters on a consideration. In our opinion, such transactions are not covered by programme producer service as the appellant did not producer programme for a third party."
From the above discussion and analysis, and following the decision of the Tribunal Delhi Bench, we are able to safely conclude that the demand under programme production services is unsustainable and requires to be set aside, which we hereby do.
5. The next issue is with regard to the short payment of service tax alleging that appellant has not included all the three elements while discharging service tax under 'Sale of space or time for advertisement' service. Ld. Counsel for appellant has strongly argued that from the beginning itself, the appellant has contended that they have been discharging service tax including on all the three components; that the same has not been considered by the authorities below. We therefore are of the view that the issue has to be verified and for this limited purpose, the matter requires to be remanded to the adjudicating authority.
6. The third allegation is wrongful availment of credit on service tax paid input services. For broadcasting serials/programme produced by them, the appellant has to pay telecast charges to the broadcasting agency. In consideration of telecasting their programme, the appellant receives free time slots from the broadcasting agency. Using this free time slot, the appellant generates revenue by indulging in 'Sale of space or time for Advertisement' services. The Revenue alleges that service tax paid on telecast fees cannot be considered as input service for the output service of programme producing service and 'sale of space or time of advertisement' services. We are afraid that cannot concur with this view made by the Ld. A.R. Without telecasting programmes, the appellant will not get the free time slots. Without obtaining the free time slots appellant will not be able to provide output service of 'Sale of space or time for Advertisement' services. Thus, the telecasting charges
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paid are used for providing the said output service of 'Sale of space or time for Advertisement'. We have already found that the appellant is not liable to discharge service tax under the category of programme producing service. The contention of the department that programmes are telecast after production of the serials etc. is flimsy and not supported by any legal basis. From the above we conclude that the disallowance of input service credit is unjustified and requires to be set aside, which we hereby do. In the result, the impugned order is modified to the extent of setting aside the demand on programme production service and also the disallowance of credit on input services and demand thereon. The issue with regard to short payment of service tax on 'Sale of space or time for Advertisement' services for the period 1.5.2006 to 30.09.2007 is remanded to the adjudicating authority for the limited purpose of verifying whether the appellant has discharged service tax including all the three components. The appellant will be given sufficient opportunity to place evidence and also for personal hearing. In case appellant has discharged service tax on all the elements, the liability would stand discharged on this count. The appeal is partly allowed and partly remanded on the above terms, with consequential reliefs, if any as per law.