No Service Tax for Copyright Services on Original Artistic Works

The CESTAT, Kolkata in the case of M/s. South City Projects (Kolkata) Ltd. v. Commissioner of Central Excise & Service Tax, Kolkata [Service Tax Appeal No 75130 of 2014 dated September 21, 2023] held that the copyright services associated with the original artistic works performed by the assessee are exempt from service tax.

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 2014held 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.

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.