VAT paid on Sale of Copyright of ‘Kolangal’ Dubbed Serials: CESTAT Quashes Service Tax Demand on Ananda Vikatan [Read Order]
Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become “goods”
The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has quashed the service tax demand raised on Ananda Vikatan Productions Pvt. Ltd. relating to the sale of copyright observing once the intangible copyright is cooped and marketed, then it qualifies as goods. Thus, VAT (Value Added Tax) attracts.
The bench observed that “We find that payment of service tax and VAT are mutually exclusive. In a contract for supply of services there is no sale of goods If sale of goods are involved and VAT has been paid correctly; the activity would be outside the preview of Service Tax.”
The department, during verification of records of Sun TV Network (Gemini TV and Surya TV) noticed that Ananda Vikatan had received consideration for supplying recorded commercial productions of “Kolangal” after dubbing them into Telugu and Malayalam.
The same was treated as “sale of programmes” taxable under TV or Radio Programme Producer Service and confirmed service tax demand for the period 2005-06 to 2009-10, with interest and penalty under Section 78 of the Finance Act, 1994.
The demand was upheld by the Commissioner (Appeals), prompting the appeal before the Tribunal.
The appellant’s counsel said that In the present case, the sale of copyright (goods) on a perpetual basis constitutes a permanent transfer and is subject to VAT which the appellant has paid.
Allowing the appeal, appellate held that service tax under “programme producer service” applies only when a programme is produced on behalf of another person, whereas in this case Ananda Vikatan produced the serial on its own and there was no evidence that the broadcasters had commissioned or scripted the serial.
The Tribunal noted the principle that an activity carried out by a person for itself cannot be treated as a “service” rendered to another.
The bench, on the issue of copyright assignment, observed that “the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become “goods”.
It found that the appellant had assigned exclusive rights in the dubbed serials for a perpetual period, amounting to a sale, and therefore the authority should have verified VAT payment instead of taxing the same transaction under service tax.
Accordingly, the service tax demand was set aside by the tribunal.
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