DECEMBER 01, 2021

By Shvetal B Parikh

1. AS per erstwhile Section 66E(e) of the Finance Act, 1994 (as amended w.e.f. 01.07.2012), following activity or non-activity had been qualified as a 'declared service':

"agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act"

Identical wordings have been adopted at Sr.No. 5(e) of Schedule II to the CGST Act, 2017, prescribing that it shall be treated as supply of service. In other words, if anyone agrees to do an act or not do an act, for a consideration, it is a service.

2. The appellant in this case before the CESTAT, Mumbai, is Mr. Javed Akhtar, who is a co-writer with Mr. Salim Khan, of story of the super hit film 'Zanjeer' produced by M/s. Prakash Mehra Productions and released in 1973. Later, a film of the same name 'Zanjeer' was produced in the year 2013 by another company. Being aggrieved, the appellant and Mr. Salim Khan jointly filed a suit before Bombay High Court for infringement of copyright and claiming damages. Out of court settlement was made and a payment of Rs. 2 crore each, was made by that company to the Appellant Mr. Javed Akhtar as well as to Mr. Salim Khan.

3. After getting information about the receipt of Rs.2 crore by the appellant as well as Mr. Salim Khan, the department initiated enquiry considering the same under the definition of 'declared services' under Section 66E(e) of Finance Act, 1994. The appellant (Mr. Javed Akhtar) under protest paid the amount of Rs.22,00,071/- as service tax alongwith interest on 31.01.2014 and requested for closure of proceedings. The Commissioner, Service Tax, Mumbai-II accordingly passed order dated 09.07.2014 under Section 80 waiving penalty u/s 76, 77 & 78 on the appellant and ordered closure of proceedings.

4. On the same set of facts, a show cause notice dated 30.9.2015 was issued to Mr. Salim Khan for recovery of service tax of Rs.22,00,071/-. He also paid the tax under protest (however, not opted for closure of proceedings). The said demand was confirmed by the Adjudicating Authority alongwith imposition of 25% penalty. On Appeal filed by Mr. Khan, the Commissioner (Appeals), vide Order-in-Appeal dated 19.6.2017, allowed the appeal and held that the amount of Rs.2 crore received by the claimant can be considered as an ex gratia and not a payment for a consideration relating to any service. No Appeal was preferred by department and it attained finality. Mr. Khan thereafter filed refund claimed, which was sanctioned vide Order dated 30.10.2017.

5. Later on, the appellant (Mr. Javed Akhtar) also filed the refund claim on 15.3.2018 on the ground that he had paid this amount under protest; and the amount paid by Mr. Salim Khan arising out of the same transaction has been held not liable for any service tax. The refund claim was rejected by adjudicating authority by observing that in case of Mr. Salim Khan due process of adjudication was followed, whereas in the present case the appellant (Mr. Akhtar) accepted his liability and the proceedings were closed vide Order dated 09.07.2014. Commissioner (Appeals) observed that the proceedings closed by Commissioner vide Order dated 09.07.2014 was not challenged by the appellant. Commissioner (Appeals) also distinguished the case of Mr. Salim Khan on the ground that in that case the process of adjudication was followed. Thus, the appeal was rejected.

6. Being aggrieved, Mr. Javed Akhtar filed appeal before CESTAT, Mumbai. Hon'ble CESTAT relied upon Article 265 of Constitution prescribing that no tax shall be levied or collected except by authority of law. The Tribunal observed that if in the case of Salim Khan, it has been held by the adjudicating authority that since it (i.e. the amount received) was not in lieu of any service provided therefore no service tax is payable, then in the instant matter, which also arises out of the same transaction, the department cannot keep the deposit under the head 'Service tax'. T he contention of Department that the assessment in this case has attained finality and hence, appellant cannot claim refund unless the assessment is challenged, is misconceived and contrary to the law.

7. Accordingly, the appeal filed Mr. Javed Akhtar has been allowed by Hon'ble CESTAT, Mumbai, Single Member with consequential relief (read-refund), if any - 2021-TIOL-767-CESTAT-MUM.

8. Tailpiece

In the case of Amar Engineering Co. Vs. Commissioner - 2018-TIOL-4158-CESTAT-AHM, Hon'ble CESTAT, Ahmedabad, Single Member, after referring to the provisions of Section 73(3) of the Finance Act, 1994, held as under:

"5. As per the above Section, once the appellant opted for voluntary payment of service tax and interest and intimate to the department, the matter shall stand closed and the department has no liberty to issue any SCN, that means the issue stand closed. Neither the assessee can dispute the same nor the department has opportunity to issue any SCN. Therefore, at a later period coming with the refund is absolutely contrary to the provision of Section 73(3) of the Finance Act, 1994. Therefore, I do not find any substance in the refund issue of the appellant. Accordingly, the impugned order is upheld and the appeal is dismissed."

[The views expressed by the author are strictly his personal views.]