Case Law Details
Commissioner of Service Tax Vs One Entertainment Network Pvt. Ltd. (CESTAT Mumbai)
The respondents are, or have been, ‘surrogate’ providers of `broadcasting’ service in India, taxable under section 65(105)(zk) of Finance Act, 1994 since 2001 (and, more especially, with retrospective effect of the amendment incorporated in 2002), in the hands of `broadcasting agency’ as defined in section 65(16) of Finance Act, 1994. The case of service tax authorities against these ‘broadcasting agencies’, representing ‘broadcasters’ outside the country, who, as per regulatory framework, are to act as surrogates and not for taxing purpose alone, is that, in addition to liability to be taxed on the consideration received for offering time slots, sponsorship of channel programmes and from the downstream carriers of broadcast/telecast signals which, admittedly, has been discharged , ‘commission’ for such handling contractually retained before remitting the dues, received as surrogate, to the overseas entity is also liable to tax as consideration for having rendered ‘business auxiliary service (BAS)’, defined in section 65(19) of Finance Act, 1994, under section 65(105)(zzb) of Finance Act, 1994.
For Revenue, it was argued that retained amount constitute consideration for acting as an intermediary for securing the earnings that are generated from telecast of signals and, according to Learned Authorised Representative, a domestic provider of the same `broadcasting’ having to utilize the services of an agent for the same collection would have to bear the burden of tax on the consideration paid to such agent requiring the overseas provider to be subject to the same burden.
The deeming fiction carries with it the burden of tax on the entire consideration receivable by the overseas entity and in the hands of the Indian entity acting as agency of such overseas entity. Respondent is deemed provider of service and the range of activities included in the taxable service comprises the very aspects that were sought to be taxed in the proceedings initiated by the show cause notices. Perceptibly, the same activity cannot be taxed twice as the classification of services itself provides, by section 66F of Finance Act, 1994, for situation in which more than one competing entry cannot be allowed to sustain.
In Union of India & Anr. v. Deoki Nandan Aggarwal, AIR 1992 SC 96, this Court observed that “It is not the duty of the Court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the Court.”
From the issues that are recorded in re Vijay Television Private Ltd are concerned, CESTAT observe that the appellant therein having raised the claim of being the provider of the service, the Tribunal, on the limited counter of Learned Authorized Representative, was content to hold that the activity constituted export and was not taxable. It is, therefore, a binding precedent for that resolution and, as the other submission was not considered, is sub silentio to that extent and CESTAT are, therefore, not bound by the facts found therein. The decision in re BBC World (I) Pvt Ltd is also lacking as a guide as the issue therein was, in the admitted context of voluntary, and uncontested discharge of tax, the claim of eligibility to CENVAT credit as ‘input service’ and the decision of Tribunal, having held that to be `output service’, is an argument in favour of the respondents herein being considered as provider of the taxable service. This, too, fails to sustain the cause of Revenue.
As far as the other contention that various aspects of a contractual transaction could be liable to different taxes, CESTAT are afraid that Revenue has got hold of the wrong end of the stick. In re Imagic Creative Pvt Ltd, it was held that the fiction of ‘deemed sale’, rooted in Article 366(29A) of the Constitution of India, could not be alienated from levy of tax on ‘sale’ by the state government merely because the limit of that deeming fiction entitled the Central Government to levy a tax on the vivisectable component of the contract as provider of service taxable under Finance Act, 1994. In the present dispute, the charge of tax does not lie between two statutes but within the same statute which is an absurdism in tax jurisprudence.
For the above reasons, we find no merit in the appeals of Revenue and dismiss them. Cross-objection is disposed off.
FULL TEXT OF THE CESTAT JUDGEMENT
In these appeals of Revenue impugning order-in-original no. 60/STC-I/SKS/14-15 dated 13th October 2014, order-in-original no. 56 to 59/STC-I/SKS/14-15 dated 7th October 2014 and order-in-original no. 61 to 66/STC-I/SKS/14-15 dated 14th October 2014 of Commissioner of Service Tax – I, Mumbai, the facts are, by and large, common as is the dispute that requires resolution. Hence, we have taken these up for disposal together in this proceeding.
2. The respondents are, or have been, ‘surrogate’ providers of `broadcasting’ service in India, taxable under section 65(105)(zk) of Finance Act, 1994 since 2001 (and, more especially, with retrospective effect of the amendment incorporated in 2002), in the hands of `broadcasting agency’ as defined in section 65(16) of Finance Act, 1994. The case of service tax authorities against these ‘broadcasting agencies’, representing ‘broadcasters’ outside the country, who, as per regulatory framework, are to act as surrogates and not for taxing purpose alone, is that, in addition to liability to be taxed on the consideration received for offering time slots, sponsorship of channel programmes and from the downstream carriers of broadcast/telecast signals which, admittedly, has been discharged , ‘commission’ for such handling contractually retained before remitting the dues, received as surrogate, to the overseas entity is also liable to tax as consideration for having rendered ‘business auxiliary service’, defined in section 65(19) of Finance Act, 1994, under section 65(105)(zzb) of Finance Act, 1994.
3. We have heard Shri V Sridharan, Learned Senior Counsel, and Shri SS Gupta, Learned Chartered Accountant, for the respondents and Shri Learned Autthorized Representative at length.
4. For Revenue, it was argued that retained amount constitute consideration for acting as an intermediary for securing the earnings that are generated from telecast of signals and, according to Learned Authorised Representative, a domestic provider of the same `broadcasting’ having to utilize the services of an agent for the same collection would have to bear the burden of tax on the consideration paid to such agent requiring the overseas provider to be subject to the same burden.
5. Two propositions are posited on behalf of respondents for exclusion from the ambit of the levy that is urged by Revenue for approval. The first of these is that the respondents, who, despite not being the real ‘broadcast agency’, are taxed by a deeming fiction which, taken to its logical conclusion by discharge of tax on the entirety of the receipts, cannot be deemed to have been erased for the purpose of collecting a further tax, for another service, on a part of the consideration that was already taxed in full. The second is that the service being rendered to an overseas entity is relieved of tax burden in furtherance of Export of Service Rules, 2005.
6. Intuitively, it is not unseemly that commission received from a foreign entity, even if for service enumerated in section 65 (105) of Finance Act, 1994, should be exempt as consideration for export unless law deems it to be provision of service in India. The rationale for fastening such a burden on this retained portion, according to Learned Authorized Representative, is the taxability of the entire consideration on provision of ‘broadcasting agency’ by a domestic venture coupled with further tax liability crystallizing on identical service procured from a local entity.
7. This urging does not convince for countervailing is not a justification, of itself, for tax liability to arise. Moreover, the specific provision for such countervailing is attendant upon coverage within Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. The retained amount is not an outflow and, in the absence of outflow of consideration from the respondents herein to the overseas entity, recourse to these Rules cannot be had. Most critically, the domestic ‘broadcast agency’ and overseas ‘broadcast agency’, though taxed by the same provision, are treated differently in the range, as well as channel, through which the service is rendered. Therefore, the logic of uncalled for preference in the absence of countervailing is
8. In a series of decisions commencing with that of the Hon’ble High Court of Bombay in Commissioner of Service Tax, Mumbai-II v. SGS India Ltd [2014 (34) STR 554 (Born)] and followed in Commissioner of Service Tax, Mumbai-IV v. ATE Enterprises Pvt Ltd [2017- TIO L- 1906-HC-MUM- ST] , the factum of final delivery of the resulting activity to India was held to be insufficient to withhold from service rendered the benefit accruing to exporters. Therefore, taxability is excluded if it is established that the transaction is an export.
9. Considering the rival pleas, the Tribunal in Zee Telefilms Ltd v. Commissioner of Central Excise [2006 (3) STR 252 (Tri-Del)] held that
‘9. Finance Act, 2002 made amendments to the provisions relating to broadcasting with retrospective effect from 16th July, 2001. The amended provisions read as follows :
Section 65(1)(14)
‘broadcasting’ has the meaning assigned to it in clause (c) of section 2 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner.
Section 65(1)(15)
‘broadcasting agency or organisation’ means any agency or organization engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, 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 the said agency or organisation.
Section 65(1)(90)
‘taxable service’ means any service provided :
(zk) to a client, by broadcasting agency or organisation in relation to broadcasting in any manner and, in the case of broadcasting agency or organisation, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, 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 the said agency or organisation.
‘Explanation’. – For the removal of doubts, it is hereby declared that so long as the radio or television programme broadcast is received in India intended for listening or viewing, as the case may be, by the public such service shall be a taxable service in relation to broadcasting, even if the encryption for the signals of beaming thereof through the satellite might have taken place outside India.”
We are not able to accept the contention raised by the appellant and give a restricted meaning to the word “broadcasting” or “dissemination of any form of communication” even as they stood prior to amendment by Finance Bill, 2002. As pointed out by the learned DR meaning given to the word “disseminate” in all the dictionaries referred by the appellants would clearly show that unless the information or knowledge reaches the receiving end dissemination will not be complete. Meaning given to the word “dissemination” in Indian Edition 2001 the New Oxford Dictionary is ‘spread or disperse (something especially information) widely’. Therefore, when the television programme and advertisements in the form of signals are encrypted and beamed from outside India and telecast outside India but are received in India through decoders by Multi System Operators and Cable TV operators, it would come within the meaning of definition of “broadcasting” under Section 2(c) of Prasar Bharati Corporation Act, 1990. Under the amended definition, the word “broadcasting” includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intented for public listening or viewing, as the case may. In the case of broadcasting agency or organisation, having its head office situated in any place outside India, the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner are also brought under net of the term “broadcasting”. The activities as carried on by the appellants herein are not in dispute. Such activities would strictly come within the definition of the term “broadcasting” as amended. They will also come within the definition of the term “broadcasting agency or organisation” in view of the nature of activities carried on by them. It is not disputed that the appellants are engaged in the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme and are collecting broadcasting charges on behalf of ATL/EXPAND/STAR. Therefore, there is no merit in the contention of the appellants that they are not providing taxable service.
10. In the light of the above view which we are inclined to take on the status of ATL/Expand/Star and the appellants with reference to the term ‘broadcasting’ and ‘broadcasting agency’, we find no merit in the contention of the appellant that the value of their service has to be limited to the payment made to it by ATL/Expand/Star. The entire amount paid by the advertiser/sponsorer to ATL/Expand/Star has to be treated as value of Taxable Service.’
10. The deeming fiction carries with it the burden of tax on the entire consideration receivable by the overseas entity and in the hands of the Indian entity acting as agency of such overseas entity. Respondent is deemed provider of service and the range of activities included in the taxable service comprises the very aspects that were sought to be taxed in the proceedings initiated by the show cause notices. Perceptibly, the same activity cannot be taxed twice as the classification of services itself provides, by section 66F of Finance Act, 1994, for situation in which more than one competing entry cannot be allowed to sustain.
11. On behalf of Revenue, Learned Autthorized Representative, relying on the decision of the Hon’ble Supreme Court in Sant Lal Gupta Modern Cooperative Group Housing Society Ltd [2010 (262) ELT 6 (SC)], contends that
’14. The Legislature in its wisdom has not enacted any deeming provision providing that in case the resolution is not considered and finally decided by the Registrar within a period of six months, the resolution shall become effective and operative. It is the exclusive prerogative of the Legislature to create a legal fiction meaning thereby to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist. Even i f a legal fiction is created by the Legislature, the court has to ascertain for what purpose the fiction is created, and it must be limited to the purpose indicated by the context and cannot be given a larger effect. More so, what can be deemed to exist under a legal fiction are merely facts and no legal consequences which do not flow from the law as it stands. It is a settled legal proposition that in absence of any statutory provision, the provision cannot be construed as to provide for a fiction in such an eventuality. More so, creating a fiction by judicial interpretation may amount to legislation, a field exclusively within the domain of the legislature. (Vide; Ajaib Singh v. Sirhind Coop. Marketingcum-processing Service Society Ltd. & Ors., (1999) 6 SCC 82).
15. In Union of India & Anr. v. Deoki Nandan Aggarwal, AIR 1992 SC 96, this Court observed as under
“It is not the duty of the Court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the Court.”
This Court explained the distinction between the ‘deeming provisions’ and ‘presumption’ and held that the distinction is well discernible.’
but, in the absence of applicability, leaves us with no option but to follow
’24. We have, however, a different problem at hand. Appellant admittedly is a service provider. When it provides for service, it is assessable to a tax known as service tax. Such tax is leviable by reason of a Parliamentary statute. In the matter of interpretation of a taxing statute, as also other statutes where the applicability of Article 246 of the Constitution of India, read with Seventh Schedule thereof is in question, the Court may have to take recourse to various theories including ‘aspect theory’, as was noticed by this Court in Federation of Hotel & Restaurant Association of India, etc. v. Union of India & Ors. [(1989) 3 SCC 634].
25. If the submission of Mr. Hegde is accepted in its entirety, whereas on the one hand, the Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. A distinction must be borne in mind between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and clause 29A had to be inserted in Article 366, must be kept in mind.
26. We have noticed hereinbefore that a legal fiction is created by reason of the said provision. Such a legal fiction, as is well known, should be applied only to the extent for which it was enacted. It, although must be given its full effect but the same would not mean that it should be applied beyond a point which was not contemplated by the legislature or which would lead to an anomaly or absurdityl
in the decision of the Hon’ble Supreme Court in Imagic Creative Pvt Ltd v. Commissioner of re Commercial Taxes [2008 (9) STR 337 (SC)] .
12. It was further contended that the decision of the Tribunal in BBC World (I) Pvt Ltd v. Commissioner of Service Tax, New Delhi [2009 (14) STR 152 (Tri-Del)] and Vijay Television Private Ltd v. Commissioner of Service Tax, Chennai [2018-TIOL-2897-CESTATMAD] have settled the dispute as far as the subsistence of the second service is concerned.
13. From the issues that are recorded in re Vijay Television Private Ltd are concerned, we observe that the appellant therein having raised the claim of being the provider of the service, the Tribunal, on the limited counter of Learned Authorized Representative, was content to hold that the activity constituted export and was not taxable. It is, therefore, a binding precedent for that resolution and, as the other submission was not considered, is sub silentio to that extent and we are, therefore, not bound by the facts found therein. The decision in re BBC World (I) Pvt Ltd is also lacking as a guide as the issue therein was, in the admitted context of voluntary, and uncontested discharge of tax, the claim of eligibility to CENVAT credit as ‘input service’ and the decision of Tribunal, having held that to be `output service’, is an argument in favour of the respondents herein being considered as provider of the taxable service. This, too, fails to sustain the cause of Revenue.
14. As far as the other contention that various aspects of a contractual transaction could be liable to different taxes, we are afraid that Revenue has got hold of the wrong end of the stick. In re Imagic Creative Pvt Ltd, it was held that the fiction of ‘deemed sale’, rooted in Article 366(29A) of the Constitution of India, could not be alienated from levy of tax on ‘sale’ by the state government merely because the limit of that deeming fiction entitled the Central Government to levy a tax on the vivisectable component of the contract as provider of service taxable under Finance Act, 1994. In the present dispute, the charge of tax does not lie between two statutes but within the same statute which is an absurdism in tax jurisprudence.
15. For the above reasons, we find no merit in the appeals of Revenue and dismiss them. Cross-objection is disposed off.
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