Case Law Details
South City Projects (Kolkata) Limited Vs Commissioner of Service Tax (CESTAT Kolkata)
In a recent judgment, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Kolkata, in the case of M/s. South City Projects (Kolkata) Ltd. vs. Commissioner of Central Excise & Service Tax, Kolkata, Service Tax Appeal No 75130 of 2014, ruled that copyright services associated with original artistic works are exempt from service tax. The ruling, dated September 21, 2023, provides clarity on the taxability of copyright services under Section 65(zzzzt) of the Finance Act, 1994.
Facts:
M/s. South City Projects (Kolkata) Ltd., (“the Appellant”), is registered under Service Tax for providing services including “Renting of Immovable Property Service”, “Maintenance and Repair Service”, “Architect Service”, and “Club or Association Service”.
A Show Cause Notice (“the SCN”) dated October 18, 2011 was issued demanding service tax and cess amounting to Rs. 1,48,07,289/- for Renting of Immovable Property on the taxable value of Rs. 14,37,60,081/- for the FY 2010-11 (“the Impugned Period”).
The Commissioner of Service Tax (“the Respondent”) vide Order-in-original dated August 20, 2013 (“the Impugned Order”) confirmed the service tax and cess amounting to Rs. 91,23,642/- along with interest and penalty under Section 76 of the Finance Act, 1994 (“the Finance Act”) and appropriated Rs. 79,68,379/- paid by the Appellant.
Aggrieved by the Impugned order the Appellant filed the appeal before this Tribunal.
The Appellant contended that a significant portion of the confirmed demand, amounting to Rs. 8,41,684/- is related to Copy Right Services, for which no demand shall be made. Furthermore, the Appellant contended that the copyright services provided by the Appellant pertained to “Original Artistic Works”, which are exempt from service tax.
Issue:
Whether the copyright services provided by the Appellant subject to service tax?
Held:
The CESTAT, Kolkata in the case of Service Tax Appeal No 73130 of 2014 held as under:
- Observed that, no service tax can be demanded on “Copy Right Service”. The definition under Section 65(zzzzt) of the Finance Act specifically excludes rights covered under Section 13(1)(a) of the Finance Act which deals with copyrights related to “Original literary, dramatic, musical, and artistic works”.
- Held that, the Copyright Services rendered by the Appellant were related to “Original Artistic Works”, which fall within the exclusion from the payment of service tax. Further allowed the appeal by quashing the demand for service tax imposed on copyright services, alongside invalidating the penalty imposed.
Conclusion: The CESTAT Kolkata’s judgment in the case of M/s. South City Projects (Kolkata) Ltd. provides a definitive clarification regarding the taxability of copyright services related to original artistic works. It reinforces the exemption under Section 65(zzzzt) of the Finance Act, making it clear that such services are not subject to service tax. This ruling serves as a valuable reference for individuals and entities involved in copyright services and is likely to have wider implications in the field of intellectual property and creative works.
Relevant Provisions:
Section 65(zzzzt) of the Finance Act:
to any person, by any other person, for—
(a) transferring temporarily; or
(b) permitting the use or enjoyment of, any copyright defined in the Copyright Act, 1957, except the rights covered under sub clause of clause (1) of section 13 of the said Act.
Section 76 of the Finance Act:
Penalty for failure to pay service tax:
Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a penalty which shall not be less than one hundred rupees for every day during which such failure continues or at the rate of two per cent. of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax.
Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable in terms of this section shall not exceed fifty per cent of the service tax payable.
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s. South City Projects (Kolkata), (The Appellants) have been registered under Service Tax for providing ‘Renting Of Immovable Property Service’, ‘Maintenance and Repair Service’, ‘Architect Service’ and ‘Club or Association Service’. A Show Cause Notice dated 18.10.2011 was issued to the Appellant demanding service tax and Cess totally amounting to Rs.1,48,07,289/-,under the category of ‘Renting of immovable property service’, on the taxable value of Rs.14,37,60,081/- received during the period April 2010 to March 2011. The Notice was adjudicated vide Order-in-Original dated 20/08/2013, wherein Service Tax and Cess amounting to Rs. 91,23,642/- was confirmed along with interest and Rs. 79,68,379/- already paid by the Appellant was appropriated against the confirmed demand.
Penalty was imposed under Section 76 of the Finance Act, 1994. Aggrieved against the impugned order, the Appellant filed the present appeal.
2. In their submissions, the Appellant stated that out of the confirmed demand of Rs.91,23,642/-, they have already paid Rs.79,68,379/- which has been appropriated in the impugned order. Thus, the present appeal deals with the remaining amount of Rs.11,55,263/- confirmed in the impugned order along with interest and penalty under Section 76 of the Finance Act, 1994 imposed in the order.
3. The Appellant furnished the break-up for the demand of Rs.11,55,263/- as under:
(i) Amount relatable to Copy Right Services – Rs.8,41,684/-
(ii) Amount already paid and not adjusted – Rs.1,91,121/=
(iii) Short Claim of Property Tax – Rs. 82,362/-
(iv) Amount already paid but not adjusted – Rs. 40,087/-
4. The Appellant submits that out of the confirmed demand of Rs.11,55,263/- an amount of Rs.8,41,684/-are relatable to Copy Right Services , for which there was no demand in the Notice. On this ground itself, this portion of the demand confirmed in the impugned order is liable to be set aside. On merits, they stated that as per Section 65(zzzzt) of the Finance Act, 1994, Copy Rights Service specifically excludes the right covered under sub-clause(a) of clause(1) of Section 13 of the said Act, which deals with copy rights related to ‘Original literary, dramatic, musical and artistic works’. The Copy Rights service rendered by them are related to ‘Original Artistic Works’ which are excluded from payment of service tax. Accordingly, they contended that this part of the demand is not sustainable.
5. They further stated that as per the direction of the Hon’ble Supreme Court, the Lessees paid Rs.1,91,121/- which has not been taken into account by the adjudicating authority. They further stated that the adjudicating authority has excluded Property Tax amounting to Rs.56,83,647/-. However, actual property tax paid was Rs. 57,66,009/- Thus, Rs 82,362/- has also to be excluded on account of property tax. They also stated that there was a short adjustment of Rs.40,087/-. If we take all the above into account, there won’t be any further liability of payment of service tax. When there is no liability of service tax, the question of interest payment and imposing penalty under section 76 of the Act does not arise. Accordingly, they prayed for setting aside the impugned order.
6. The Ld. A.R. reiterated the findings in the impugned order.
7. Heard both sides and perused the appeal records.
8. We observe that the Notice has demanded service tax of Rs. 1,48,07,289/-,under the category of ‘Renting of immovable property service’, on the taxable value of Rs.14,37,60,081/- received during the period April 2010 to March 2011. There was no service tax demand on ‘Copy Right Service’. Copy Rights Service as defined under Section 65(zzzzt) of the Finance Act 1994, specifically excludes the right covered under sub-clause(a) of clause(1) of Section 13 of the said Act, which deals with copy rights related to ‘Original literary, dramatic, musical and artistic works’. We find that the Copy Rights service rendered by the Appellant are related to ‘Original Artistic Works’ which are excluded from payment of service tax. Accordingly, we hold that that the demand of service tax amounting to Rs.8,41,684/- is not sustainable. Even otherwise, there was no demand of service tax under the category of ‘Copy Right Service’ in the Notice. Hence, the demand of service tax of Rs.8,41,684/- confirmed in the impugned order is not sustainable on this count also.
9. Regarding the remaining demand confirmed in the impugned order, the Appellant stated that as per the direction of the Hon’ble Supreme Court, the Lessees paid Rs.1,91,121/- which has not been taken into account by the adjudicating authority. They further stated that the adjudicating authority has excluded Property Tax amounting to Rs.56,83,647/-. However, actual property tax paid was Rs. 57,66,009/- Thus, an additional amount of Rs 82,362/- has also to be excluded on account of property tax. They also stated that there was a short adjustment of Rs.40,087/-paid by them which has not been appropriated. If we take all the above into account, there won’t be any further liability of payment of service tax. We observe that the claim of the Appellant on these counts needs to be verified by the adjudicating authority. For that purpose, the matter needs to be remanded back to the adjudicating authority.
10. In view of the above findings, the matter is remanded back to the adjudicating authority with a specific direction to verify the claims made at (ii), (iii), and (iv) at Para 3 supra. The demand confirmed at (i) in Para 3 supra is set aside. Consequently, the interest and penalty under section 76 of the Finance Act, 1994 is also set aside for this part of the demand which is set aside. The appeal filed by the Appellant is disposed of on the above terms.
(Dictated and pronounced in the open Court).
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