Temporary transfer or permitting the use or enjoyment of any copyright - except the rights covered under sub-clause (a) of sub-section (1) of Section 13 of the Indian Copyright Act for the period from 1.7.2010 to 31.06.2012 and the period from 01.4.2013 onwards since the levy of service tax on Copyright Services (Section 65(105)(zzzzt) is revived from 1.4.2013 with the exception of Section 13(1)(a) or Cinematograph films for exhibition in a cinema hall or a cinema theatre - assessee contested that Copyright is considered as transfer of right to use the goods, which is a sale in terms of Article 366(29A) read with Entry 54 and not a service - Assessee's contention that Temporary transfer or use or enjoyment of the copyright is a sale of goods falling under Entry 54 of List II -
Held that:- Section 65(105)(zzzzt) seeks to tax viz., "temporary transfer or permitting the use or enjoyment" of copyright which is a service provided by the producer/distributor/exhibitor. Service Tax is a levy not on the "transfer of right to use the goods" as described under Article 366(29A) sub-clause (d); but on the temporary transfer" or "permitting the use or enjoyment" of the copyright as defined under the Copyright Act, 1957. In the case of Sales Tax Act, there would be "transfer of right to use the goods". Whereas under the Service Tax Act what is levied is temporary transfer/enjoyment of the goods. The pith and substance of both enactments are totally different. "Temporary transfer" or "permitting the use or enjoyment of the copyright" is not within the State's exclusive power under Entry 54 of List II. Therefore, there is no merit in the contention that the taxable event provided under Section 65(105)(zzzzt) is covered by Article 366(29A).
The impugned levy is a tax on service and in terms of the definition of taxable service under section 65 (105)(zzzzt), it means any service provided or to be provided to any person by any other person and two types of such services are contemplated one being transferring temporarily and the other being permitting the use or enjoyment of copyright. Therefore, the impugned levy is not a levy of tax on the "transfer of the right to use the goods", but, on the service provided or to be provided for transferring temporarily or permitting the use or enjoyment of any copyright, except the rights covered under section 13(1)(a) of the Copyright Act. It is a levy which is distinct from the levy under Entry 54 of List II or Entry 92A of List I. Therefore, there is nothing wrong for Parliament to claim taxing power under Entry 97 of List I and all that is required to be shown is that that tax is not mentioned in List II or List III. Resorting to Entry 97 of List I. The Parliament brought out the amendment Section 65(105)(zzzzt) bringing the activity of temporary transfer or permission to use or enjoy the copyright for consideration under the ambit of service tax net on the service provided by resorting to Entry 97 of List I and the same cannot be said to be ultra vires the Constitution.
Transfer of right to use the goods or permission to use the copyright or enjoyment of copyright operate in different fields. There may be overlapping. The impugned legislation cannot be held to be vitiated merely because there is overlapping and that both sales tax and service tax becomes leviable.
Legislative competence of the Parliament - As decided in MAFFTALAL INDUSTRIES LTD.,v UNION OF INDIA [1996 (12) TMI 50 - SUPREME COURT OF INDIA]in the matter of taxation laws the Court permits a great latitude to the discretion of the legislature and the State is allowed to pick and choose objects, persons, methods, and even rates for taxation, thereby having wide discretion.
Permission to use and transferring temporarily or enjoy the intangible goods such as designs, patents and trademarks were subject matter of levy to service tax from 2004. Though copyright is also once such intangible item, it was excluded from the scope vide section 65 (55a). Now copyright service has been brought under the category of taxable service, by virtue of section 65 (105)(zzzzt). Therefore, the respondents may be justified in stating that when temporary transfer of other categories of intellectual property such as designs, patents and trademarks are liable to service tax, there is no justifiable reason to exclude copyright services from such category. Writ petitions dismissed.
