The Madras High Court recently rejected the pleas of three well-known music composers, AR Rahman, G V Prakash Kumar, and Santhosh Narayan, who challenged the proceedings initiated by the Commissioner of the GST Department.
The department was seeking to impose a service tax on the transfer of copyright in musical works for the period between 2013 and 2017.
The composers argued that they were exempt from this tax due to their receipt from temporary transfer or use of copyright, as stated in clause (15) of Notification No. 25 of 2012. Additionally, they claimed that they were exempt as a service under Section 65B(44) of the Finance Act 1994.
However, the GST Department asserted that the composers were not the owners of the musical works and, as such, no copyright vested in them as per Section 13(1)(a) of the Copyright Act.
The matter was heard by Justice Anita Sumanth who noted that to resolve the issue, a closer examination of the agreements between the composers and third parties was necessary. This examination was better handled by the authority, rather than the writ court, which could not interpret the contractual clauses.
The petitioners also challenged the jurisdiction of the Director General of GST Intelligence for issuing a show cause notice under the Finance Act 1994 and Section 174(2) of the CGST Act. They argued that the source of power for the DGGI to issue the notice was invalid in law, as the notifications that gave this power were not explicitly saved with the implementation of the GST regime.
However, after examining the proviso to Section 174 (2) (c), which states that repeal will not affect rights, privileges, obligations, or liabilities acquired, accrued, or incurred under the old act, the High Court ruled that the assumption of jurisdiction by the DGGI was valid.
In conclusion, the Madras High Court dismissed the petitions of the three music composers, AR Rahman, G V Prakash Kumar, and Santhosh Narayan, and ruled that the proceedings initiated by the Goods and Services Tax (GST) Department were valid. The liberty of the composers to follow the appellate procedure was preserved, but the interpretation of contractual clauses were left to the authority.
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