Case Law Details
Radaan Media Works India Limited Vs Commissioner of GST and Central Excise (CESTAT Chennai)
In a landmark decision by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, Radaan Media Works India Limited emerged victorious against the Commissioner of GST and Central Excise. The crux of the matter revolved around the eligibility of CENVAT credit on service tax payments related to broadcasting fees. This ruling sets a significant precedent for media production companies regarding CENVAT credit utilization.
Analysis
Radaan Media Works Pvt. Ltd., engaged in both creating their own TV programs/serials and producing content for others, found themselves in a legal tussle over the availing of CENVAT credit on service tax paid for broadcasting fees. The company pays service tax under “TV or Radio Programme Production Service” for content produced for others. For their own programs, they pay telecasting fees to broadcasters, who levy service tax under “Broadcasting Service.”
The heart of the dispute lay in the CENVAT Credit Rules, 2004, specifically the interpretation of input and output services in relation to the production and broadcasting of television programs. The Department contended that the appellant’s production of its own programs, being exempt from service tax, does not qualify for CENVAT credit on the telecast fees paid to TV channels. Conversely, Radaan Media argued for the eligibility of credit, citing the essential role of broadcasting fees in generating revenue through the sale of Free Commercial Time (FCT) to advertisers.
Conclusion
The CESTAT, Chennai, in its ruling, supported Radaan Media’s contention, allowing the CENVAT credit on the service tax paid for broadcasting fees. The tribunal referenced prior decisions in Radaan Media’s favor, establishing that the telecast fees related directly to the output service of ‘sale of space or time for advertisement’ and thus qualify for CENVAT credit.
This decision not only vindicates Radaan Media’s stance but also clarifies the application of CENVAT Credit Rules for media companies engaging in similar transactions. By recognizing the interconnectedness of program production, broadcasting, and advertisement sales, the ruling provides a clearer path for media entities to claim CENVAT credit, fostering a more supportive tax framework for the industry.
FULL TEXT OF THE CESTAT CHENNAI ORDER
M/s. Radaan Media Works Pvt. Ltd., Chennai (the appellant herein) are engaged in producing their own Programmes/Serials and assign the rights to television channels for telecasting. They are also engaged in producing programmes/serials for other persons. They have obtained Service Tax registration under categories of “TV or Radio Programme Production” and “Sale of Space or Time for Advertisement” services.
1.2 The Appellant pays Service Tax on the programmes/serials produced by them on behalf of other persons under “TV or Radio Programme Production Service”. For telecasting their own programmes, the Appellant pays telecasting fees to the Broadcasters who collect Service Tax on the said telecast fees under “Broadcasting Service”. The Broadcasters give Free Commercial Time (FCT) which is usually 240 seconds per episode of 30 minutes which in turn is sold by the Appellant to different customers for broadcasting their advertisements. Service tax is paid by the appellant on the revenue generated by way of sale of the said Free Commercial Time to various advertising agencies.
1.3 There is no dispute regarding the production of TV programmes/serials on their own account and for assigning the rights to Television channels for broadcasting and paying telecast fees to TV channels. The output service is production of programmes/serials and no Service Tax is payable by the appellant as producing a programme for themselves is not taxable under “Programme Production Service”. Similarly, the appellant is not considered as a Broadcaster as they are not broadcasting the programme. Thus, the business activity of the Appellant is to produce programmes for themselves and telecast the same through TV channels for which they get compensation in the form of Free Commercial Time (FCT) which is sold to advertising agencies to recover their charges of programme production.
1.4 The arrangement between the Appellant and the TV channels is that the telecaster pays for the entire episode inclusive of free commercial time and when the Appellant sells the FCT, Service Tax is paid on the revenue generated under the category of “sale of space or time for advertisement´ service. The Appellant has contended that availment of credit of Service Tax paid to the Broadcasters /TV Channels in the form of telecasting fees is in accordance with the law. It is seen that the television channel charges telecast fee only for the actual telecasting time of the programme and no telecast fee is charged for the commercial time which is given as free. The production of own programme/serial is not a taxable activity and it becomes an exempted service in terms of the definition 2(e) of CENVAT Credit Rules, 2004. The Department is of the view that in terms of Rule 6(1) of CENVAT Credit Rules, 2004, the appellant seems to be not eligible for the CENVAT Credit on such quantity of input or input services which are used for the provision of exempted service and as such the Appellant’s contention regarding its eligibility for CENVAT Credit on the telecast fees paid appears to be not correct.
1.5 Per Contra, the Appellant’s contention is that they are entitled for credit as the definition for input service covers any activities relating to business; that Rule 6(5) of CENVAT Credit Rules allows taking of credit in respect of 16 services which are not even included in the main definition of input service. It is an admitted fact that telecast fee is charged by the TV channel only in respect of the programme produced by the appellant which is not a taxable service. In respect of programme produced on behalf of the TV channel, the appellant is paying Service Tax and neither telecast fees is paid nor FCT is given to the appellant. Therefore, the telecast fees charged by the TV channel is relatable to exempted service of production of TV programmes/serials on their own account and they being an exempted service, the appellant cannot take credit in terms of the provisions of Rule 6(5) of CENVAT Credit Rules, 2004 is the allegation of the Department. Thus, the dispute involved in these appeals is whether the telecast activity is solely used for exempted service or not?
2. The appellant was issued with a Show Cause Notice No. 71/2012 dated 02.04.2012 demanding an amount of Rs.1,75,66,341/- availed as CENVAT Credit during the period from October 2010 to September 2011 which was utilized towards payment of Service Tax on their output service i.e, ‘selling of space or time for advertisement’ which was followed by a Statement of Demand No. 94/2013 dated 15.04.2013 proposing to demand Service Tax of Rs.1,75,17,828/- which was availed as CENVAT Credit during the period from October 2011 to September 2012 and utilized towards payment of Service Tax on output service apart from demanding interest and proposing imposition of penalties under Section 76 of the Finance Act, 1994 and also under Rule 15(1) of the CENVAT Credit Rules, 2004.
3. After due process of adjudication, a common order was passed by the Commissioner of Service Tax vide Orders-in-Original Nos. 55&56-13-14 dated 30.01.2014 confirming the demand of Rs.3,50,84,169/- being the CENVAT Credit wrongly taken and utilized for the period from October 2010 to September 2012 under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 73(1) of the Finance Act, 1994 and Section 73(2) of the Finance Act, 1994. Further, a penalty of Rs.10,00,000/- was imposed on the appellant under Rule 15(1) of the CENVAT Credit Rules, 2004 for taking ineligible credit along with confirmation of interest under Section 75 of the Finance Act, 1994 from the date of taking ineligible credit.
4. Being aggrieved by the order of the Commissioner of Service Tax, the appellant came on appeal before this forum.
5. 1 The Ld. Advocate Ms. Janani N. representing the Appellant has submitted that the denial of CENVAT Credit of Service Tax paid is not in accordance with the law and demand was confirmed without considering the nature of their transactions. Unless the programme/serial produced by the Appellant is telecast, the appellant will not get time slot to provide the service under the category of ‘sale of space or time for advertisement’. In their case, the output service is not TV or Radio Production Programme Service in respect of their own production of programmes/serials which were assigned for telecasting on payment of telecasting fees to TV Channels but was sale of space and time for advertisement service.
5.2 Apart from reiterating the grounds of appeal, the Ld. Advocate has adverted to earlier decisions of the Tribunal Chennai in their own case for the prior periods which were decided in their favor. She has submitted that Tribunal Chennai in the Appellant’s own case i.e, M/s. Radaan Media Works (I) Ltd. Vs. Commissioner of Central Excise and Service Tax, Chennai vide F. O. No. 41705- 41707/2018 while deciding the identical issue of denial of CENVAT Credit of Service Tax paid on telecast fee for discharging the Service Tax liability on ‘sale of space or time for advertisement service’ and ‘TV and radio production programme service’ for the period from October 2007 to September 2010 has held that the impugned orders were liable to be set aside by relying again on the Appellant’s own case vide Final Order No. 40341/2018 dated 06.09.2018. The appellant prayed for allowing the appeals.
6. The Ld. Authorised Representative Shri M. Ambe representing the Department has affirmed the findings of the Original Adjudicating Authority. He has argued that their own programmes/serials produced by them are exempted from payment of Service Tax and so whatever the telecast fees charged by the TV channels for telecasting them and payment of Service Tax by the appellant for telecasting their own programmes/serials cannot be taken as CENVAT Credit as there is no relation of input service and output service as contemplated in the CENVAT Credit Rules, 2004. He has prayed for dismissing the appeals.
7. We have heard both sides and considered the submissions made and evidences on record.
8. The Ld. Advocate has referred to the decisions rendered in their own cases for earlier periods on identical facts. The dispute involved in these appeals on the issue of eligibility of CENVAT Credit is resolved and it is no more res-integra as Tribunal Chennai vide F.O. No. 40341/2018 dated 06.02.2018 has held as follows:-
“7 . The third allegation is wrongful availment of credit on service tax paid input services. For broadcasting serials /programme produced by them, the appellant has to pay telecast charges to the broadcasting agency. In consideration of telecasting their programme, the appellant receives free time slots from the broadcasting agency. Using this free time slot, the appellant generates revenue by indulging in ‘Sale of space or time for Advertisement’ services. The Revenue alleges that service tax paid on telecast fees cannot be considered as input service for the output service of programme producing service and ‘sale of space or time of advertisement’ services. We are afraid that we cannot concur with this view made by the Ld. A.R. Without telecasting programmes, the appellant will not get the free time slots. Without obtaining the free time slots appellant will not be able to provide output service of ‘Sale of space or time for Advertisement’ services. Thus, the telecasting charges paid are used for providing the said output service of ‘Sale of space or time for Advertisement’. We have already found that the appellant is not liable to discharge service tax under the category of programme producing service. The contention of the department that programmes are telecast after production of the serials etc. is flimsy and not supported by any legal basis. From the above, we conclude that the disallowance of input service credit is unjustified and requires to be set aside, which we hereby do.”
9. Again in their own case, the Tribunal vide F.O.No. 41705-41707/2018 dated 01.06.2018 has followed the above decision cited supra. The relevant portion reads as follows:-
“2. The appellant is registered under the category of “TV or Radio production Programme Service and Sale of Space or Time for Advertisement service”. The appellant produced serials and assigned the copy right absolutely and permanently to various channels. The serials produced by the appellant were telecast through various channels. For this purpose, the appellant paid telecast fees to the TV channels to obtain free commercial time from the broadcaster which was being sold to various advertisement agencies and on the consideration received by the appellant, they discharged service tax and availed Cenvat credit of such service tax paid and utilized the same for payment of service tax on the telecast fees. The department was of the view that the appellant will be not entitled to avail the Cenvat credit in question since the telecasting of the serials occurs after the production of the serials. After issue of SCN, the adjudicating authority demanded service tax with interest and penalties, during the period October 2007 to September 2010. Aggrieved by the decision, the present appeal stands filed.
3. In this connection, heard the Ld. Advocate, Shri V. S. Manoj for the appellant, who submits that the identical issue for the same appellant had come up before the Tribunal and the Tribunal vide Final Order No. 40341/2018 dated 06.02.2018 was pleased to set aside the impugned order and allowed the Credit.”
After going through the final order i.e, F.O.No. 40341/2018 dated 06.02.2018 cited in Paragraph 8 above, we find that the issue involved was availing the CENVAT Credit on telecast fees paid in respect of broadcasting their own programmes/serials. The appeals of the assessee were allowed in their favor.
10. After appreciating the Tribunal’s earlier decisions and complying with judicial discipline, we cannot sustain the impugned Orders-in-Original Nos. 55&56-13-14 dated 30.01.2014 of the Commissioner of Service Tax, Chennai and the same is set aside. Ordered accordingly.
11. Thus, the appeals are allowed with consequential relief, if any, as per the law.
(Order pronounced in open court on 01.02.2024)
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