The Supreme Court upheld the order of CESTAT and held that ‘video tape production’ service does not cover mere editing, cutting under section 65(120) of Finance Act, 1994.
BACKGROUND
The assessee, M/s Prime Focus Ltd, is a pioneer in ‘visual effects’ and 3D technologies. It was the case of the assessee that it is engaged in activities such as conversion from ‘2D to 3D’, ‘imparting special effects’, ‘post production service’, ‘digital restoration service’, etc. which it claimed were ‘business support service/information technology software service’. Thus, it contended that the activity was entitled for exemption as ‘exports’ under Rule 3 of the Export of Service Rules, 2005.
Per contra, in the show cause notice issued to the assessee, the Revenue Department claimed that the activities conformed to Section 65(105)(zi) of Finance Act, 1994 owing to the provider/ assessee being a ‘video production agency’ under Section 65(119) in relation to ‘video-tape production’, as defined in Section 65(120) of Finance Act, 1994. The Department opined that the same would not be ‘exports’ unless the whole, or part, of the performance is undertaken outside India for the period prior to 1st July 2012. The show cause notice thus raised a demand for service tax for the relevant assessment years on the assessee.
RULING
The Supreme Court has upheld the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that the 3D conversion services provided by the assessee, including services such as ‘imparting special effects’, ‘post production service’, ‘digital asset management and content service’ and ‘digital restoration service’, will not fall under the ambit of ‘video-tape production’ under Section 65(120) of Finance Act, 1994. While adjudicating the service tax demand raised on the assessee, the CESTAT found that there was no evidence that the material received by the respondent/ assessee, M/s Prime Focus Ltd, from its clients was recorded in video or that the assessee had, at any time, handled video as media. The Tribunal had thus held that the assessee was entitled for exemption as exports as it had exported services in accordance with Export of Service Rules, 2005 and Rule 6A of Service Tax Rules, 1994.
Case Title: Commissioner Of Service Tax-Iv V/S Prime Focus Ltd
Citation: CIVIL APPEAL Diary No(s). 23042/2023