BROADCASTING SERVICES

[Dr. Sanjiv Agarwal]

Service tax on broadcasting services had been levied from 16th July, 2001, vide Notification No. 4/2001-ST, dated 9th July, 2001. The gross amount charged by or total consideration service providers (other than cable T.V. operators, taxed separately under a different category) for services rendered, including radio and television broadcasting received in India for listening or viewing is subject to service tax. This article analyses the service tax on broadcasting service since 2001.

 Definition of Broadcasting (as per Finance Act, 2005 w.e.f. 16.6.2005)

Amended Section 65(15) defines broadcasting as under:                                                                 

"broadcasting" has the meaning assigned to it in clause (c) of Section 2 of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990 (25 of 1990) and also includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may be; and in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges or permitting the rights to receive form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multi-system operator or any other person on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner"

Thus, the amended meaning of broadcasting —

(a) includes any form of communication through space or cable, direct to home signals (DTH) or by any other means to cable operator/customers.

(b) includes services rendered to and charges recovered from multi system operators (MSOs)

(c) includes permitting the rights to receive any form of communication by transmission.

Retrospective amendment in the provisions relating to "broadcasting service".

Vide Section 148(1) of the Finance Act 2002, the definitions of "broadcasting and "taxable service" in relation to broadcasting service had been amended retrospectively with effect from 16-7-2001 in order to clarify the scope of service beyond doubt. Further a definition of "broadcasting agency or organisation" has been inserted with retrospective effect from 16-7-2001. It is now incorporated in the definition itself that—

(a) The service in relation to programme selection, scheduling or presentation of sound or visual matter on a radio or television channel that is intended for public listening or viewing.

(b) In case of foreign broadcasting channels, broadcasting would include the activity of selling of time slots or obtaining sponsorship for, broadcasting of any programme or collecting the broadcasting charges, on behalf of such channel by its branch office or subsidiary or representative in India or any agent or any other person acting on their behalf.

It may be noted that both AIR and Doordarshan shall be liable to pay service tax and there will be no exemption in view of Section 22 of the Prasar Bharati Act, 1990. Section 22 of the said Act exempts only direct taxes and indirect taxes shall be applicable to such agencies.

The cable T. V. operator who merely retransmits the programmes is not a broadcasting agency. Such operators are taxable under separate category. Multi System Operators (MSO) are  also not a broadcasting agency so long as it only retransmits the signals. They are however, covered under cable operator's services as per Finance Act, 2004.

CBEC has clarified that in case of foreign satellite TV channels, their head office may be located outside India. However, they have their branch offices or subsidiary companies located in India. In some cases, they have appointed agents. These branch offices/subsidiary companies/agents act on behalf of these channels, selling time slots and recovering service charges and remitting the same to their head office/holding company/principals as the case may be. In such cases, these branch offices/subsidiary companies/agents are rendering the service in relation to broadcasting and therefore, they are liable to pay the service tax and comply with all other procedural formalities relating to service tax (CBEC -TRU Circular No B/11/1/2001 dated 9.7.2001)

In Star India Pvt. Ltd. v. CCE, Mumbai & Goa [2006 -TMI - 307 - Supreme Court], Supreme Court of India made the following important pronouncement in this case pertaining to broadcasting services wherein the law was amended in 2002 with retrospective effect enlarging the scope of taxable services -

(a) It is permissible to the legislature to legislate with retrospective effect but such retrospective legislation does not create an offence (non-compliance) from a retrospective date.

(b) Where the definition and scope of broadcasting services was amended by Finance Act, 2002, liability to pay interest under section 75 can not be created with retrospective effect as the assessee was entitled to a period of thirty days from Presidential assent to the Bill to make the payment of service tax arising out of such retrospective amendment. Such liability, though created retrospectively, does not entail punishment of payment of interest with retrospective effort.

(c) Liability to pay interest would only arise on default and is in nature of a quasi punishment.

Star India Pvt. Ltd. [2006 -TMI - 307 - Supreme Court] was covered under broadcasting services as it used to telecast channels in India from satellites situated outside India. It also used to sell time slots for advertising and obtain sponsors for the serials, programmes, events etc. During the course of first appeal by Star before the Commissioner (Appeals), the retrospective amendment was made making such services a taxable service. The effect of this amendment was to make agents like Star liable to pay service tax as a broadcasting agency. The amendment made by the Finance Act, 2002 read as under —

"Any action taken or anything done or omitted to be done or purported to have been under this Chapter at any time during the period commencing on and from the 16th day of July, 2001 and ending with the day, on which the Finance Bill, 2002 receives the assent of the President, shall be deemed to be and to always have been, for all purposes, as validly and effectively taken or done or omitted to be done as if sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, recovery shall be made of all such service tax which have not been collected but which would have been collected, if sub-section (1) had been in force at all material times, within a period of thirty days from the date on which the Finance Bill, 2002 receives the assent of the President, and in the event of non-payment of such service tax so recoverable, interest at the rate of fifteen percent per annum shall be payable, from the date immediately after the expiry of the said period of thirty days, till the date of payment."

It was evident from the language of the validation clause that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. The court held that it is well established that while it is permissible for the legislature to retrospectively legislate, such retrospectivity is normally not permissible to create an offence retrospectively. There were clear judgements, decrees or orders of courts and Tribunals or other authorities, which required to be neutralized by the validation clause. Court assumed that the judgements, decrees or orders etc. had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would have been so punishable if the section had not come into force.

In view of Zee Telefilms Ltd. v. CCE [2006 -TMI - 750 - CESTAT, MUMBAI], it can be said that sale of time slots on electronic media for any purpose (including advertisements) shall be taxable only under broadcasting services w.e.f. 16-7-2001 and such service is not taxable under advertising services, both before and after 16-7-2001.

In Vijay Television Pvt. Ltd v CST, Chennai [2009 -TMI - 32129 - CESTAT CHENNAI], since the definition of broadcasting was amended w.e.f. 16.7.2001, it was held that activity of programme selection, scheduling or presentation of sound or visual matter on a television channel constitutes broadcasting and that the activity of selling time slots  for telecast of programmes and obtaining sponsors is covered under the statutory definition. As such, the assessee undertaking such activities for telecast and collecting money from their sponsors/ advertisers by sale of time slots for such telecast were covered as broadcasting. By all these activities, assessee was providing service to their clients in relation to broadcasting and such service were eligible to levy of service tax.

Definition of Broadcasting Agency (as per Finance Act, 2005 w.e.f. 16.6.2005)

Amended Section 65(16) defines broadcasting agency as under -

"broadcasting agency or organisation" means any agency or organisation engaged in providing service in relation to broadcasting in any manner and, in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes its branch office or subsidiary or representative in India or any agent appointed in India or any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges or permitting the rights to receive form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multi-system operator or any other person on behalf of the said agency or organisation.

Broadcasting agencies will include satellite channels, direct to home operators, multi system operators, relay stations, radio stations, earth stations etc.

In MTV Network India Pvt. Ltd. v. CCE [2007 -TMI - 1015 - CESTAT, MUMBAI], it was held that flashing or display in media of prepared advertisement is not an advertising service but broadcasting service which was brought under service tax w.e.f. 16.7.2001. [Also see Siticable Network Pvt. Ltd. v. CCE [2007 -TMI - 811 - CESTAT, MUMBAI]

In Vijay Television Pvt. Ltd. v. CST [2008 -TMI - 2511 - CESTAT, CHENNAI], it was held that inclusive part of definition of 'broadcasting' [section 65(14)] is applicable only where broadcasting agency or organization has its head office situated in any place outside India.

Taxable Service

 Prior to 16.6.2005, Section 65(105)(zk) defined  'taxable service' as under —

"taxable service" means any service provided or to be provided to a client, by a broadcasting agency or organisation in relation to broadcasting in any manner and, in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges on behalf of the said agency or organisation.

Explanation.— For the removal of doubts, it is hereby has declared that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public, such service shall be a taxable service in relation to broadcasting, even if the encryption of signals or beaming thereof through the satellite might have taken place outside India;

Finance Act, 2002 had amended the definition of 'taxable service` in case of broadcasting retrospectively w.e.f. 16 July, 2001. In case of foreign broadcasting channels, broadcasting would include the activity of selling of time slots or obtaining sponsorship for broadcasting of any programme or collecting the broadcasting charges on behalf of such channel by its branch office or subsidiary or representative in India or any agent or any other person acting on their behalf.

The definition of taxable services in relation to broadcasting provides that so long as the radio or television programme broadcast is received in India and intended for listening or viewing, as the case may be, by the public such service shall be taxable service in relation to broadcasting, even if the encryption of the signals or beaming thereof through the satellite might have taken place outside India.

In the case of Radio Stations and Doordarshan, the billings for the service rendered is done by the Regional Stations of All India Radio or Regional Doordarshan Kendras. These Regional Offices will have to be, therefore, registered for payment of service tax and for complying with other procedural formalities.

A doubt was raised whether Prasar Bharati (AIR and Doordarshan) is liable to pay service tax since under section 22 of the Prasar Bharati Act 1990, they are exempt from any income tax or any other tax in respect of any income, profit or gains, accruing or arising out of the Fund of the corporation or any amount received by them. In this regard, CBEC has clarified that the said section 22 applies only in respect of taxes on income or profit or gains. The exemption is applied only in respect of direct tax and not in respect of indirect tax. As such the argument that AIR or Doordarshan is not liable to pay service tax is not correct. Refer CBEC Circular No B 11/1/2001 dated 9.7.2001

This was also been confirmed by Circular No. 61/10/2003 dated 14th July, 2003 issued by CBEC. (since withdrawn ) Accordingly, w.e.f. 1st April, 2003, the protection under section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is no longer available to the Prasar Bharati Corporation (Doordarshan and All India Radio) and they are liable to pay the service tax as the provider of the broadcasting services with effect from 1st April, 2003. The same has also been confirmed by CBEC vide Circular No 96 dated 23.8.2007

All the regional offices of Doordarshan, All India Radio and other Channels have to be registered for service tax purposes and will have to comply with other formalities as the billing for services rendered by these offices is done at the regional offices/stations itself.

In Zee Telefilms Ltd. v. CCE, Mumbai [2005 -TMI - 133 - CESTAT, NEW DELHI] it was held that selling of time slots, obtaining sponsorships for broadcasting programme and collecting broadcasting charges for foreign channels or on behalf of companies abraod are taxable services for the purpose of service tax. The particulars of instant case were as follows:

M/s. Zee Telefilms Ltd., appellant were representatives of M/s. Asia Today Ltd. (ATL) and M/s. Expand Fast Holdings Ltd. (EXPAND), Mauritius, in India for selling time slot for advertisement and for obtaining sponsors for serials, prorammes, events, etc., which would be played out by ATL/EXPAND in the various channels like ZEE TV, ZEE CINEMA, MUSIC ASIA. It was the case of the appellants that their programmes were telecast from satellite situated outside India. The signals were encrypted and beamed from outside India. These signals were received by the Multi System Operators (MSO) and Cable TV Operators, through decoders. These decoders enabled MSOs and Cable TV operators to retransmit the signals to the viewers subscribed to them. The signals that were broadcast may be of advertisements, serials, programmes or live events. The advertisements recorded in the videotapes by the advertising agencies and programmes/serials recorded in the videotapes by or on behalf of the sponsor were procured from advertisement agencies in India and sponsors and sent to ATL/EXPAND, Mauritius and to STAR Ltd., Hong Kong M/s. ZEE Telefilms submitted that they were engaged in collecting money due to ATL/EXPAND from its clients in India and the same was remitted to ATL/EXPAND after deducting its commission. The appellants contended that they were not engaged in the activity of broadcasting and that broadcasting done by ATL/EXPAND and STAR were from outside India and therefore, no service tax could be demanded from the appellant as agents of broadcasting agency or organisation.

The Tribunal while deciding in favour of the revenue, observed that when the television programme and advertisements in the form of signals were encrypted and beamed from outside India and telecast outside India but were received in India through decoders by Multi System Operators and Cable TV Operators, it would come within the meaning of definition of "broadcasting" under section 2(c) of Prasar Bharati Corporation Act, 1990. Under the amended definition, the word "broadcasting" includes programmes selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intended for public listening or viewing, as the case may. In the case of broadcasting agency or organisation; having its head office situated in any place outside India, the activity of selling of time slots or obtaining sponsorships for broadcasting of any programmes or collecting the braodcasting charges on behalf of the said agency organsiation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner are also brought under net of the term "broadcasting". The activities as carried on by the appellants herein were not indispute. Such activities would strictly come within the definition of the term "broadcasting" as amended. They would also come within the definition of the term "broadcasting agency or organisation" in view of the nature of activities carried on by them. It obtaining sponsorships for broadcasting of any programme and were collecting broadcasting charges on behalf of ATL/EXPAND/STAR. Therefore, there was no merit in the contention of the appellant that the value of their services had to be limited to the payment made to it by ATL/EXPAND/STAR. The entire amount paid by the advertiser/sponsorer to ATL/EXPAND/STAR had to be treated as value of taxable service.

 w.e.f. 16-6-2005, amended Section 65(105)(zk) defines taxable service as under —

"taxable service" means any service provided or to be provided to a client, by a broadcasting agency or organisation in relation to broadcasting in any manner and, in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes service provided by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner, engaged in the activity of selling of time slots for broadcasting of any programme or obtaining sponsorships for programme or collecting the broadcasting charges or permitting the rights to receive form of communication like sign, signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multi-system operator or any other person on behalf of the said agency or organisation.

Thus, scope of taxable services had been enlarged by Finance Act, 2005 to include DTH and MSO services and permitting the rights to receive any form of communication by transmission.

In Siticable Network Pvt. Ltd. v. CCE, Mumbai [2007 -TMI - 811 - CESTAT, MUMBAI] it was held that activity of selling of space or time could never be considered as service by an advertising agency. Positive information about future programmes to be telecasted on the channel cannot be treated as to be acting as an advertising agency. It also held that preparation of an advertisement for electronic or print media broadcast is a very sophisticated and specialized job, involving expertise, huge costs and efforts. Dissemination of advertisements in target audience would fall under broadcasting service and not advertising service.

In BBC World (1) Pvt. Ltd. v CST, New Delhi, [2009 -TMI - 33230 - CESTAT NEW DELHI], it was held that even though engaged in only marketing of time slots, collection of bill amounts and remittance of the amount to BBC, assessee is covered under the scope of broadcasting agency or organization  providing broadcasting  services.

In CC,CE  & ST, Hyderabad- II v. Worldspace India Pvt. Ltd [2009 -TMI - 32366 - CESTAT, BANGALORE], where service was provided to subscribers/ listeners (not being clients)  by broadcasting audio channels, it was held that after amendment by Finance Act 2005, broadcasting agency collecting amount from multi system operators is liable to service tax. Subscriptions colleted were for service rendered and it can not be said that listeners are not clients and as such service rendered amounted to broadcasting service. The Tribunal observed that in case of radio or TV broadcasting service,  the service are subject to tax where the services are effectively used and enjoyed. The CBEC Circular dated 9.7.2009 has lost its relevance in the light of amendment of the provisions relating to broadcasting service.