By TIOL News Service

MUMBAI, SEPT 25, 2014: THE activities undertaken by the appellant include writing of scripts by engaging freelance writers, getting suitable voices approved for the purpose of recording, recording voices with artists and writers, providing background music, if necessary, and recording the programme in their studio. These programmes are mainly for the purpose of advertising such as advertisement jingles.

The above was music to the ears of the department who issued a SCN demanding Service Tax purportedly under the category of 'sound recording studio or agency service'. The adjudicating authority produced an order-in-original confirming the service tax demand of Rs.1,00,58,679/- alongwith interest thereon and topped with an imposing amount of penalty u/s 78 of the FA, 1994.

Before the CESTAT with a Stay application,the applicant submitted -

++ They have undertaken the activity of producing the entire advertising jingle by writing the script, getting artists for recording of voice, providing background music and also recording the advertising jingle. Therefore, it is not a mere activity of recording of sound by sound recording studio or agency.

++ The said activities do not fall within the definition of ‘sound recording' as defined in the statute wherein sound recording has been defined as "recording of sound on any media or device including magnetic storage device, and includes services relating to recording of sound in any manner such as sound cataloguing storing of sound and mixing or remixing or any audio post-production activity" and sound recording studio or agency means "any person engaged in the business of rendering any service relating to sound recording".

++ Since the activities have been rendered in the capacity of a sub-contractor for an advertising agency, if at all the activity is taxable, it would visit classification as advertising agency service and therefore, the demand under the category alleged is not sustainable in law.

The AR stressed on the words "includes services relating to recording of sound in any manner" contained in the definition of ‘sound recording' and submitted that the host of activities undertaken by the appellant are clearly covered therein and, therefore, the demand is sustainable.

The Bench observed -

"…We notice that the activities undertaken by the appellant involves writing of scripts, recording voices of artists, producing the program, providing musical background and recording of sound. Thus, it is a combination of activities and not merely recording of sound. Therefore, we are of the prima facie view that the appellant's activity does not fall within the statutory definition of "sound recording". The appellant has a bona fide case for grant of stay…."

In fine, the CESTAT granted unconditional waiver from pre deposit of the adjudged dues and stayed the recovery.

(See 2014-TIOL-1844-CESTAT-MUM)