Commissioner of CGST Vs Sony Pictures Networks India Pvt. Ltd. (Bombay High Court)
The Bombay High Court dismissed the Revenue’s appeal against the CESTAT, Mumbai order dated 18 December 2019, which had allowed the respondent assessee’s claim for CENVAT credit of input services used in connection with broadcasting services. The Revenue had initially proposed four substantial questions of law concerning whether the services qualified as “input services” under Rule 2(1)(i) of the CENVAT Credit Rules, 2004, whether credit could be availed on Rent-a-Cab, Outdoor Catering and Club or Association services excluded from the definition with effect from 1 July 2012, whether payment of service tax without authority of law could entitle the assessee to CENVAT credit, and whether the Tribunal’s order was unreasoned. At the hearing, the Revenue pressed only questions (b) and (c).
The respondent was registered with the Service Tax Authorities for broadcasting, TV or radio programme production, sound recording, advertising and related services. During audit, the Revenue alleged that the assessee did not have a physical establishment for providing taxable broadcasting services while availing CENVAT credit on input services. Show cause notices dated 1 April 2015 and 21 April 2015 were adjudicated by the Commissioner of Service Tax, Mumbai-VI on 27 April 2016, resulting in disallowance of CENVAT credit, recovery of interest and imposition of penalty. The assessee appealed to CESTAT, which allowed the appeal.
Regarding the specified services, the High Court observed that there was no material on record showing that the services were used for personal consumption. The expenses were incurred for employees working for the assessee in the course of its business. Since whether a service was used for personal consumption was a question of fact, the Court held that no substantial question of law arose.
On the issue of CENVAT credit, the respondent was a subsidiary of a Singapore company and acted as its agent, procuring services in India and exporting them to Singapore. The Revenue had accepted the assessee’s entitlement to input tax credit of service tax paid on various services, but disputed its utilisation against output tax liability on the ground that the assessee lacked infrastructure to provide broadcasting services. The Court noted that the Finance Act, 2002 retrospectively amended the definitions relating to broadcasting to include an agent acting on behalf of the parent channel in India for selling advertisement time slots and collecting broadcasting charges. Since the respondent was such an agent, the amendment deemed it to have rendered broadcasting services. The Revenue therefore could not treat the assessee as a broadcaster for tax liability but deny that status while considering CENVAT credit.
The Court also noted that the Revenue had admitted that the assessee exported television programmes/serials to its Singapore parent company. Under Rule 5 of the CENVAT Credit Rules, where services were exported and service tax had been paid on input services, the assessee could claim set-off against output services or seek a cash refund of unutilised input tax credit. The Court observed that even if the Revenue’s contention were accepted, denial of the credit would require refund of the relevant amount, making the exercise tax neutral.
Further, the Revenue had admitted in the appeal memorandum that the service tax payment was made by the assessee on its own volition and without authority of law. The Court observed that, on this admission, the tax collected would be required to be refunded, again making denial of the credit a tax-neutral exercise. Accordingly, the Court held that no substantial question of law arose in relation to the CENVAT credit issue. Since no substantial question of law arose from the Tribunal’s order, the Bombay High Court dismissed the Revenue’s appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The present appeal is filed by appellant / revenue against the order no.8725 of 2016 passed by the Customs, Excise & Service Tax Appellate Tribunal (Tribunal), Mumbai dated 18th December 2019 proposing following substantial questions of law :
(a) Whether in the facts and circumstances of the case, the services provided by the respondent assessee can be treated as “input service” as defined under Rule 2(1)(i) of Cenvat credit Rules, 2004 ?
(b) Whether in the facts and circumstances of the case, the respondent assessee is entitled to avail credit on services i.e. Rent-a-Cab services, Outdoor Catering services and Club or Association services which have been specifically excluded from the definition of “input services” as defined under Rule 2(I) of Cenvat Credit Rules, 2004, w.e.f. 01.07.2012.
(c) Whether in the facts and circumstances of the case, the CESTAT was right in holding that because the respondent assessee has paid the Service tax (though on its own volition without providing any output service and without any authority of law), such a payment of service tax will entitle them to take cenvat credit of the service paid on input service.
(d) the CESTAT, being last fact finding authority, has passed unreasoned and non-speaking order ?
2. At the time of the hearing, the learned counsel for appellant/revenue pressed for questions (b) and (c) only.
3. Respondent / Assessee is registered with the Service Tax Authorities for Broadcasting Service, TV or Radio Programme Production, Sound Recording Service, Advertising etc. In the course of audit by appellant / revenue, it was noticed that respondent/assessee does not have physical establishment for providing taxable output service viz. Broadcasting service, but has availed CENVAT credit in respect of input services used for providing Broadcasting service. Pursuant thereto, show cause notices dated 1st April 2015 and 21st April 2015 were issued for disallowing CENVAT credit on Broadcasting services. The aforesaid show cause notices were adjudicated on 27th April 2016 by the Commissioner of Service Tax, Mumbai-VI by passing Order-In-Original (O-I-O) disallowing the CENVAT credit and ordering the recovery of interest. He further imposed penalty. Respondent/Assessee challenged the said O-I-O by filing an appeal to the Tribunal. The Tribunal, vide order dated 18th December 2019, allowed the appeal filed by respondent/assessee by holding that respondent / assessee is entitled to CENVAT credit of input service received on Broadcasting service. It is against the said order appellant/revenue has filed the present appeal under Section 35G of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994.
4. Insofar as question (b) is concerned, admittedly there is no material on record to show that these services were utilised for personal consumption to deny credit. Respondent/Assessee is a company and therefore issue of personal consumption does not arise. These expenses are admittedly incurred for its employees who are working for the respondent/assessee in the course of its business to render output services. It is also settled position that an assessee cannot prove negative when the appellate / revenue alleges that the respondent /assessee has failed to prove that these services were not used for personal consumption of its employees. Whether any service is used for personal consumption or not is certainly question of fact. Furthermore, on other services, the appellant / revenue has not disputed this position. In view thereof, this being question of fact, no substantial question of law arises from the impugned order of the Tribunal.
5. Insofar as question (c) is concerned, respondent / assessee is a subsidiary of Singapore Company. Being agent of Singapore Company, respondent / assessee procures various services in India and exports the same to Singapore. Respondent / Assessee discharges service tax liability on various amount collected from sale of time slot, subscription charges etc. before remitting the money to Singapore. Respondent / Assessee takes input tax credit on the aforesaid service tax paid and same has been accepted and admitted by appellant / revenue. Appellant / Revenue has also admitted that respondent/assessee is entitled to input tax credit of the said service tax liability paid. However, appellant / revenue is denying the set-off of this input tax credit against output tax liability on the ground that the respondent / assessee does not have infrastructure to render broadcasting services. Appellant / Revenue has admitted in appeal memo that the service tax paid by respondent / assessee and claimed as input tax credit has been collected by Revenue without authority of law. Appellant / Revenue in the show cause notice has also admitted that the respondent / assessee has exported these services and as per Rule 5 of CENVAT Credit Rules an assessee can either claim set-off or claim refund in cash. It is on these facts, we are called upon to decide whether substantial question of law raised in (c) arises.
6. We have perused the impugned order of the Tribunal dated 18th December 2009 and more particularly, the findings of the Tribunal from paragraph 15 onwards of the impugned order. The Tribunal has given a finding that appellant / revenue has not disputed that the provider of ‘broadcasting service’ is entitled to CENVAT credit of the service tax paid on specified services. It is also important to note that by the Finance Act, 2002, the definition of ‘Broadcasting’, ‘broadcasting agency and organisation’ and ‘taxable service’ was retrospectively amended to include the agent acting on behalf of the parent channel in India selling advertisement time slots and collecting the broadcasting charges. There is no dispute that respondent/assessee is an agent of its parent principal for the purpose of service tax and therefore, the service tax paid by the agent on Broadcasting service is deemed to have been utililsed by respondent / assessee for rendering broadcasting service by deeming fiction as per the amendment of the Finance Act, 2002. Appellant / revenue cannot contend that for tax liability respondent / assessee is a broadcaster, but while claiming set-off of these liability, they are not a broadcaster. Therefore, the contention of appellant / revenue that respondent / assessee does not have the physical establishment for rendering the Broadcasting service is misconceived since the retrospective amendment itself deems that respondent / assessee has having rendered broadcasting services.
7. Alternatively, in the show cause notice, appellant / revenue has admitted that respondent / assessee has exported the television programme / serials to its Singapore parent company. The said transaction is undisputedly admitted by appellant/revenue as export on which the respondent / assessee is not liable to pay any service tax. However, as per Rule 5 of the CENVAT Credit Rules, in case of the export of service, if an assessee has paid service tax on input services, he can either claim the setoff against output services or is entitled in alternative to get refund in cash on unutilised input tax credit. Even if the contention as raised by appellant / revenue is to be accepted then they would be required to refund the CENVAT credit which they propose to disallow since there is no dispute that the said CENVAT credit is taken on input services and the services on which the service tax has been discharged were exported. Therefore the effect of denial of credit would be that the appellant / revenue will have to refund the said credit amount resulting into whole exercise being tax neutral.
8. Appellant / Revenue in appeal memo and in substantial question of law (c) has admitted that the payment made by respondent / assessee is on its own volition and without any authority of law. If that be so, then on this admission itself, the CENVAT credit which is sought to be disallowed is required to be refunded because it is settled position that no tax can be collected without authority of law. If it is the admission of appellant/revenue that service tax paid by respondent / assessee on input services is without authority of law then they are liable to refund the same and therefore the impugned action of denying credit of such taxes would only result into the respondent/assessee being eligible for refund of tax collected without authority of law. This again would result into tax neutral exercise.
9. Therefore looked from any angle, in our view, no substantial question of law arises in as much as on account of retrospective amendment, respondent/assessee is deemed to have rendered the broadcasting services and in the alternative based on the admission of appellant /revenue, the amount of input tax credit of which is taken has been collected without any authority of law and therefore would be required to be refunded. Even otherwise, since respondent/assessee has exported the services, they are eligible for refund of unutilised input tax credit in cash which they have utilised for setting off against their output liability. Therefore looked from any angle, no substantial question of law arises from the impugned order in so far as question (c) is concerned.
10. In view of above, since no substantial question of law arises from the impugned order, the present appeal is dismissed.
