By TIOL News Service

MUMBAI, MAY 29, 2013: THE appellants are registered providers of taxable service of “Broadcasting Services”. Audit of the records of the appellant for the period from July 2001 to September 2003 and October 2003 to November 2004 revealed that the appellant had received income on account of transmission of music clippings in between running of the programmes but had not included the same in the taxable value of the services rendered.

A show-cause notice came to be issued in February, 2006 demanding Service Tax of Rs.2.52 crores and imposition of penalty and interest.

The CCE, Thane-I confirmed the demand and imposed penalties and interest and so the appellant is before the CESTAT.

It is submitted that –

+ the appellant is an associate company of MSMS which is the owner of various television channels and undertakes broadcasting functions from Singapore; since the appellant is an agent of the foreign company in India and is engaged in the activity of sale of time slots for advertisements to be broadcasted on channels owned by the principal, they are deemed to be a broadcasting agency and, therefore, discharging service tax liability;

+ they are also engaged in producing programmes on their own account, i.e., not in capacity of an agent of MSMS. Such programs are compilations of trailers of films and music albums produced by various film producers/production houses and the appellant sells time slots on its own account for promotion of such feature films/music albums.

+ that the consideration received for such activities are not remitted to MSMS and are accounted as income of the appellants in their books of accounts and this activity came under the category of ‘sale of advertising space or time' brought under the tax net for the first time in Budget 2006. They rely on Circular 334/4/2006-TRU dated 28-2-06 and submit that the demand of service tax for the period prior to enactment of the Finance Bill, 2006 is not sustainable in law.

+ as the income received is reflected in their books of accounts, the appellant cannot be charged with suppression of facts and hence extended period of time cannot be invoked to confirm the service tax demand.

+ reliance is placed on the decision in Needwise Advertising Pvt. Ltd. = (2007-TIOL-517-CESTAT-AHM) in support.

The Revenue representative justified the order of the lower authority by submitting that sale of time slots by a broadcasting agency or organization is excluded from the scope of sale of advertising space or time under section 65(105)(zk) and 65(105)(zzzm). Reliance is placed on the decisions in Vijay Television (P) Ltd. = (2008-TIOL-2127-CESTAT-MAD), Zee Telefilms Ltd. = (2004-TIOL-159-CESTAT-DEL) and Siticable Network P. Ltd. = (2006-TIOL-1157-CESTAT-MUM).

The Bench extracted the definitions of “broadcasting”, “broadcasting agency or organization” and the contents of section 65(105)(zzzm) and observed –

“5.3 From the legal provisions extracted above, the activity undertaken by the appellant come under the scope of “broadcasting” as defined in section 65 (15) and the appellant is a “broadcasting agency” as defined in section 65 (16) of the Finance Act, 1994. Consequently the activity undertaken by the appellant is a taxable service as defined in section 65 (105)(zk). The activity of sale of space or time by a broadcasting agency is specifically excluded under section 65 (105) (zzzm). What, therefore, follows from a plain reading of the provision of law is that the activity undertaken by the appellant is taxable under section 65 (105) (zk) as a broadcasting agency. Accordingly we are prima facie of the view that the demand for service tax on the appellant under the category of broadcasting agency service is sustainable in law. We have also perused the invoices raised by the appellant on their clients. The same reveals that the transaction involved is sale of time slots and the rate of service charges is for the duration of the time of advertisement.”

Noting that the decisions cited by the Revenue support its case and that the question of time bar is an issue involving question of fact and law and that the same can be gone into at the time of final consideration of the appeal and that the appellant had not pleaded any financial hardship, the Bench directed the appellant to make a pre-deposit of Rs.84 lakhs (which is the approximate service tax for the normal period) and report compliance.

(See 2013-TIOL-800-CESTAT-MUM)