Payment of Service Tax for telecasting own Programmes/Serials cannot be taken as CENVAT Credit: CESTAT [Read Order]

The Chennai bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) observed that 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.

M/s. Radaan Media Works Pvt. Ltd., Chennai (the appellant) are engaged in producing their Programmes/Serials and assigns 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 the categories of "TV or Radio Programme Production" and "Sale of Space or Time for Advertisement" services.

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.

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.

 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.

The Appellant contended 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. 

After due process of adjudication, a common order was passed by the Commissioner of Service Tax 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.  

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.

A two member bench comprising Mr P Dinesha, Member ( Judicial ) and Mr Vasa Seshagiri Rao, Member ( Technical ) held 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 favour.” 

The Appellant was represented by Ms. Janani N and the Respondent was represented by Shri M. Ambe, Deputy Commissioner.

To Read the full text of the Order CLICK HERE

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