By TIOL News Service

MUMBAI, SEPT 30, 2014: A Service Tax demand of Rs.7.49 crores along with interest and penalties was confirmed against the appellant by the CCE, Thane-I and, therefore, the appellant is before the CESTAT.

Facts: Investigation by DGCEI revealed that appellant SIPL had entered into an agreement with M/s Star Ltd., Hong Kong and in terms of which appellant had been appointed as their representative in India to solicit advertisements for the channels telecast by the former and also to collect and remit the advertisement charges. The invoices for the advertisements telecast would be raised by Star Hong Kong with instructions to the advertisers to make the payment to SIPL in Indian Rupees where such advertisers were Indian and directly to Star Hong Kong where such advertisers were not Indian. SIPL discharged service tax liability on such charges collected by it on behalf of Star Hong Kong under the taxable service category of "broadcasting services". Thereafter SIPL remitted the charges to Star Hong Kong after retaining their commission. However, in the case of charges collected in US dollars and remitted directly to Star Hong Kong by the advertisers, no service tax liability was discharged and SIPL received their commission from Star Hong Kong. On such charges,SIPL started discharging service tax liability from July, 2006 onwards.

It is the view of the department that the activity of selling time slots for advertisements by SIPL on behalf of Star Hong Kong, irrespective of the manner of receipt of consideration either through SIPL or directly is covered under the category of ‘Broadcasting services' and is taxable with effect from 16.07.2001. Accordingly, SCN dated 23.04.2008 for the period October, 2002 to June, 2006 demanding service tax of Rs.7,48,56,620/- was issued and adjudicated as mentioned in the opening paragraph.

After considering the elaborate submissions by both sides, the CESTAT observed -

On Merits:

++ From the statutory provisions, it is abundantly clear that so long as the radio or television programme is received in India and intended for listening or viewing by the public in India, such activity shall be taxable service even if the physical activity of broadcasting such as encryption of signals or beaming thereof takes place outside India and any branch office, subsidiary, representative, agent or any person who is appointed by the broadcaster for selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of the broadcaster will be liable to pay service tax. The notes on clauses, CBEC circulars dated 9-7-2001 and 27-7-2005 also clarify this position. The definition of taxable service under section 65(105)(zk) makes it crystal clear that if any activity is undertaken in any manner in respect of sale of time slots or obtaining of sponsorships or collection of broadcasting charges for the broadcaster situated abroad will be liable to service tax at the hands of its agent/representative in India.

++ From the terms and conditions of the agreement, it can be easily seen that SIPL was engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of Star Hong Kong as its Representative. Thus SIPL fell squarely within the definition of Broadcasting Agency or organization as defined in section 65(16) and the activity undertaken by SIPL came within the definition of taxable service as defined in section 65 (105)(zk). The appellant's contention that in respect of foreign advertisers who paid advertisement charges in USD directly, they were not liable to pay service tax is bereft of any logic or sound reasoning. The definitions of ‘broadcasting agency' and ‘broadcasting service' do not make any distinction based on how the payment is made or to whom it is made. So long as any activity in relation to selling of time slots or obtaining sponsorships or collecting and remitting charges is undertaken, the liability to pay tax is attracted.

++ From theadvertisement release orders from the foreign advertisers and the invoices issued for the advertisement charges, it is very clear that the sale of time slots for advertisement has taken place in India for broadcast of the programme for viewing/listening by the Indian public. Thus the fact that the appellant has indulged in selling of time slots is proved beyond doubt and, therefore, in terms of the statutory definitions of ‘broadcasting agency' and ‘broadcasting services', the appellant is liable to discharge the service tax liability even in respect of foreign advertisers and we hold accordingly.

++ An argument has been adduced that since the appellant is not collecting the service charges, they are not liable to pay service tax. This argument is completely misplaced. The taxable service includes engagement in any manner in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting broadcasting charges on behalf of the broadcasting agency or organization situated outside India. The preposition used is 'OR' which is disjunctive in nature and, therefore, if any one of the activities is undertaken, liability to service tax is attracted and we hold accordingly.

++ It has also been argued that since the payment is made in foreign currency, the tax is not leviable in India. The mode of payment of the consideration for the service rendered cannot be the criteria for determination of taxable event. The taxable event is rendering of taxable service as defined in 65 (105)(zk). Merely because the payment is made in foreign currency, the nature of the taxable event does not undergo any change. …Therefore, merely because the measure of the levy is in a foreign currency, it cannot be said that the taxable event has not taken place.

++ We also note that the issue involved herein is also settled by the decision of this Tribunal in the Zee Telefilms Ltd.- 2004-TIOL-159-CESTAT-DEL relied upon by the Revenue…We do not find any reason to take a different view in the present case from that taken by the Tribunal earlier.

Whether services are Export?

This argument is not tenable. During the period involved in the present appeal, to qualify as export of service, two conditions were required to be satisfied in terms of notifications 6/99-ST dated 9-4-99 and 21/2003-ST dated 20-11-2003. The conditions were that the payment for the service rendered should be received in convertible foreign exchange and no part of such payment is repatriated outside India. In the present case, payment for the service rendered has been made to Star Hong Kong which implies, no payment is received in India and even if it is assumed that the payment has been received, the same has been repatriated outside India. The same position would accrue when the Export of Service Rules, 2005 were notified in March, 2005. Under the said rules also, to constitute exports, the service should have been delivered from India for use outside India and payment for the services rendered should be received in convertible foreign exchange. In the present case the condition of receipt of convertible foreign exchange in India is not satisfied. Therefore, the transactions would not constitute exports as provided for in the law.

Limitation:

The contention of the appellant is that they were only required to declare the consideration received in the ST-3 return and in the case of foreign advertisers the consideration was paid directly to Star Hong Kong, there cannot be any mis-declaration on their part. This contention is obviously wrong. In the ST-3 return, there was a column wherein the appellant was required to declare the amount charged to the service recipient, apart from the amount received. As per the agreement dated 1-4-1999, SIPL was appointed as non-exclusive independent Representative in the territory of India to solicit television advertising for the channels, namely, Channel V, Star World, Star Plus, Star News, Star Movies etc. and to collect and remit advertisement charges. The responsibility also included delivery of the invoices to the advertisers on a timely basis. Thus the appellant obviously knew the amount charged for the broadcasting services. Thus the appellant was operating under self-assessment procedure during the impugned period. The appellant has failed to declare in the said return the complete particulars with regard to the services rendered to the foreign advertisers. The invocation of extended period of time to confirm the tax demand cannot be faulted at all.

The appeal was dismissed.

(See 2014-TIOL-1886-CESTAT-MUM)