YASH RAJ FILMS P LTD vs COMMISSSIONER OF CENTRAL EXCISE & SERVICE TAX-MUMBAI WEST
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 85323 of 2023
(Arising out of Order-in-Original No. MUM/CGST/MW/COMMR/AK/47/2022-23 dated
14.12.2022 passed by Commissioner of Central Goods and Services Tax (CGST) & Central
Excise, Mumbai West)
Yashraj Films Private Limited …Appellants
5, Shah Industrial Estate, Veera Desai Road
Andheri (West),
Mumbai – 400 053.
VERSUS
Commissioner of CGST & Central Excise …Respondent
Mumbai West Commissionerate
6th Floor, ‘D’ Wing, BSNL Administrative Building,
Juhu Tara Road, Santacruz (West)
Mumbai – 400 054.
Appearance:
Shri Gopal Mundra along with Shri Gourav Sogani, Shri Yash Prakash, Advocates for the
Appellants
Shri S.K. Yadav, Authorized Representative for the Respondent
CORAM:
HON’BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON’BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/86345/2026
Date of Hearing: 24.06.2026
Date of Decision: 15.10.2026
PER : M.M. PARTHIBAN
This appeal has been filed by M/s Yash Raj Films Private Limited,
Mumbai (herein after referred to, for short, as “the appellants”) assailing the
Order-in-Original No. MUM/CGST/MW/COMMR/AK/47/2022-23 dated
14.12.2022 (hereinafter referred to, for short, as “the impugned order”)
passed by the Commissioner of Central Goods and Services Tax (CGST) &
Central Excise, Mumbai West, Mumbai.
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2.1 The brief facts of the case are that the appellants herein inter alia , is
engaged in the business of film production and distribution, primarily of
‘Hindi’ cinemas. In this business, their main activity consists of production of
films, either directly by them or through their line producers on ‘ work made
for hire ’ basis; such films are shot, either fully or partly, in India and/or in
foreign countries. Besides production of films, they also undertake certain
services viz., providing copyright right service, by temporary
transfer/temporarily permitting use or enjoyment; selling of space or time
slots for advertisement, advertising agency service; supply of tangible
goods; business auxiliary services etc. For the purpose of payment of service
tax on taxable services and for compliance with the service tax statute, the
appellants are registered with jurisdictional Service Tax authorities holding
Service Tax registration No. AAACY1176EST001. The appellants are also
currently registered with jurisdictional authorities under Goods and Services
Tax vide Registration No. 27AAACY1176E1ZF.
2.2 During the course of EA-2000 audit conducted by the department,
upon scrutiny of balance sheets along with ledger accounts maintained by
the appellants for the period 2013-2014 to June, 2017, the audit officers
have noticed that the appellants have incurred expenditure in foreign
currency for production, distribution, marketing and other expenditure for
various movies produced and released by them. Some of such movies
produced and released by the appellants during the relevant period, which
are partly or wholly shot in foreign countries are “ Dhoom3; Gunday; Befikre ”
etc. On further verification of ledgers and invoices, the audit officers had
observed that the appellants have made payments in foreign currency,
towards production of their films or part of their films, to many companies
for the services of ‘Line production’ and/or for various other technical
services. Through such analysis of accounting records, it was interpreted by
the department that although the appellants had received services from
various service providers located in foreign countries for the purpose of
producing, post production of films and for other technical services, but they
had not discharged appropriate service tax liability in terms of 66B, 68 (2) of
the Finance Act, 1994 read with Rule 2 (1)(d)(G) of Service Tax Rules, 1994
and Notification No. 30/2012-S.T. dated 20.06.2012.
2.3 Further enquiry was made on the above issue by the department, in
calling for agreements, contracts, purchase orders etc., entered by the
appellants with service providers for their detailed examination. Based on
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‘Production Assistance Agreement’ and other details submitted by the
appellants, the department had interpreted that the overseas Line Producers
or Local Area Representatives (LARs) are providing services of film
production to the appellants on principal-to-principal basis, and therefore the
appellants are liable to pay service tax on RCM basis. Further, the
department noted that such overseas entities had received certain incentives
from some of the foreign Governments like France, United Kingdom,
Switzerland etc., which are given to the producers of films for having
incurred expenses by foreign film makers in that country for production of
international films, and the same has been passed on to the appellants.
Therefore, the department had interpreted that such fact also supports that
the services have been rendered by the overseas entities to the appellants,
which are taxable under RCM basis. After providing opportunity for pre-
notice consultation, the department had issued Show Cause Notice (SCN)
dated 17.04.2019 for recovery of service tax payable on RCM basis under
Section 73(1) of the Finance Act, 1994 along with applicable interest and for
imposition of penalty under Sections 77 & 78 of the Act of 1994. The said
SCN dated 17.04.2019, was adjudicated upon by the original authority in
passing an Order-in-Original dated 14.12.2022, wherein he had confirmed
the service demand of Rs.46,40,92,070/- for the disputed period 2013-2014
to 2017-2018 (upto June, 2017) and ordered for its recovery along with
interest under Section 73(2) of the Finance Act, 1994. The original authority
also imposed penalty equivalent to the service tax under Section 78 of the
Act of 1994 and also imposed penalty of Rs.10,000/- under Section 77(2)
ibid. Feeling aggrieved with impugned order dated 14.12.2022, the
appellants have preferred this appeal before the Tribunal.
3.1 Learned Advocate for the appellants contends that the appellants as a
film producing company in India, had entered into agreements with Local
Area Representatives (LARs) situated abroad for undertaking certain
activities depending upon creative requirements of scripts, cinematographic
films. These included assistance to the appellants in hiring of junior artists,
camera crew, arranging transportation, obtaining permission from local
agencies, arranging lights, shooting related equipment, generator and
studios from third parties and arranging support team from various agencies
etc. He further submitted that LARs did not undertake film production on
principal-to-principal basis. All creative control, production decisions,
employment of lead actors, directors, technicians, post-production activities
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and exploitation of films vested exclusively with the appellants in India. He
further stated that the true nature of the transaction between the appellants
and LARs can be determined in light of the tenor of agreements and
intention of the parties. Therefore, by citing various clauses of the
agreement entered into between the appellants and LARs, he submitted that
(i) the appellants alone are the producer of the films and retained exclusive
control over all creative, budgetary, and business matters; (ii) the role of
LAR was strictly limited to rendering assistance in procuring various services
as required by the appellants; (iii) the engagement of LARs does not create
any obligation on the appellants to produce the films or utilize the
assistance. The LARs’ role was purely ancillary and subordinate, confined
solely to facilitating the procurement of services, and had no connection
whatsoever with the production of the film; (iv) the LARs acted purely as
intermediaries, merely facilitating procurement of services from third parties
on behalf of the appellants, without providing any independent service
themselves; and (v) accordingly, the very foundation of the SCN and the
Impugned Order, which presumes that the LARs provided production
services of films, is factually incorrect and untenable.
3.2 Learned Advocate further stated that upon perusal several clauses
agreement it would be evidential that LARs merely arranged and facilitated
provision of services by third parties to the appellants, and LARs by
themselves did not provide any service to the appellants. Therefore, he
claimed that LARs squarely fall within the definition of “intermediary” under
Rule 2(f) of the Place of Provision of Services Rules, 2012 (POPS Rules).
Thus, he claimed that once the services rendered by the LARs are held to be
intermediary services, the place of provision of such intermediary services in
terms of Rule 9(c) of the POPS Rules, shall be the location of the LARs.
Accordingly, the place of provision of the intermediary services, in terms of
Rule 9(c) of the POPS Rules, is the location of the LARs, which is admittedly
outside the taxable territory. Therefore, he submitted that the said services
do not qualify as services provided in the taxable territory as contemplated
under Section 66B of the Finance Act, 1994 in the impugned order.
Accordingly, he claimed that no Service Tax is leviable on the appellants
under the RCM.
3.3 He further stated that in terms of the agreements entered into by the
appellants with the LARs, they are liable to pay only on a limited, fixed and
pre-agreed facilitation fee as expressly provided; all other amounts paid to
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the LARs were strictly towards reimbursement of the costs, which were
advanced by the appellants solely towards payment of third-party vendors.
Therefore, in terms of Section 67 of the Finance Act, 1994, for the period
prior to 14.05.2015, he claimed that expenses incurred by a service provider
on behalf of the service recipient did not form part of the taxable value as
the payments were made by appellants for reimbursement of amounts paid
to the LARs. Further, he submitted that even after the amendment to
Section 67 ibid with effect from 14.05.2015, though reimbursable
expenditure is included within the scope of “consideration”, the expenses
incurred by a person acting as a pure agent of the service recipient are
specifically excluded from the taxable value in terms of Rule 5(2) of the
Service Tax (Determination of Value) Rules, 2006. Therefore, he claimed
that there is no legal requirement for payment of service tax by the
appellants in this case.
3.4 In support of their stand, the learned Advocate has relied upon the
following decisions of the Tribunal and the judgements of the Hon’ble
Supreme Court, in the respective cases mentioned below:
(i) Ramesh Sippy Vs. Shaan Ranjeet Uttam singh & Ors. - 2013 SCC
Online Bom 523
(ii) Amazon Development Centre India Pvt. Ltd., Vs. Additional
Commissioner of Central Tax & Another - 2025 (5) TMI 150 –
Karnataka High Court
(iii)
Columbia Sportswear India Sourcing Pvt. Ltd., Vs. Union of India
2025 (5) TMI 2139 - Karnataka High Court
(iv) Rolex Logistics Pvt. Ltd. Vs. Commissioner of Service Tax,
Bangalore - 2008 (9) TMI 123 - CESTAT Bangalore
(v) CCE. & C. Rajkot Vs. Reliance Industries Ltd . - 2009 (3) TMI 859 -
SC
(vi) Scott Wilson Kirkpatrick (I) Pvt. Ltd. Vs. C.S.T. - 2007 (5) S.T.R.
118 (T)
(vii) B.S. Refrigeration Ltd. Vs. C.S.T.- 2006 (4) S.T.R. 103 (T)
(viii) Dinesh M. Kotian Vs. Commissioner of Central Excise & S.T.-1,
Mumbai - 2016 (42) STR 772 (Tri.- Mumbai)
(ix) Sarovar Hotels Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai
- 2018 (10) G.S.T.L. 72 (Tri.- Mumbai)
(x) Anand Nishikawa Co. Ltd. Vs. CCE, - 2005 (188) ELT 149 (SC)
(xi) Jaiprakash Industries Ltd. Vs. CCE, Chandigarh - 2002 (146) ELT
481 (S.C.)
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. Learned Authorised Representative (AR) reiterated the findings made
by the Commissioner, in the impugned order dated 14.12.2022 and
submitted that the appeal filed by the appellants is liable to be dismissed as
the nature of services received by overseas entities have been examined by
him, and they do not fall under the category of intermediary services.
Hence, he submitted that the impugned order is sustainable.
5. We have heard both sides and perused the case records and the
written paper books submitted in this regard.
6.1. The issues for consideration before us are as follows:
(i) whether the services received by appellants from overseas entities
can be considered as ‘taxable service’ in terms of the definition provided
under 65(B)(51) of the Finance Act, 1994;
(ii) whether confirmation of service tax demand under proviso to
Section 73(1) of the Act of 1994 read with Section 66B and 68(2) ibid ,
by invoking extended period of limitation is sustainable in terms of the
Act of 1994; and
(iii) whether penalty under Section 77, 78 of the Finance Act, 1994 can
be imposed on the appellants in this case.
6.2. The transactions under present dispute are covered during the period
commencing from 2013-2014 to 30.06.2017. Thus, the relevant legal
provisions of the Finance Act, 1994, as applicable in the present case are of
post negative list regime i.e., after 01.07.2012, and the same are extracted
and given below:
“Finance Act, 1994
Chapter V
Service Tax
Section 65B. Interpretations. —
In this Chapter, unless the context otherwise requires,--
xxx xxx xxx xxx
(44) “service” means any activity carried out by a person for another for
consideration, and includes a declared service, but shall not include—
(a) an activity which constitutes merely,—
(i) a transfer of title in goods or immovable property, by way of sale,
gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to
be a sale within the meaning of clause (29A) of article 366 of the
Constitution; or
(iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the course
of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the
time being in force.
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xx xx xx xx xx
(51) “taxable service” means any service on which service tax is leviable
under section 66B;
(55) words and expressions used but not defined in this Chapter and
defined in the Central Excise Act, 1944 (1 of 1944) or the rules made
thereunder, shall apply, so far as may be, in relation to service tax as
they apply in relation to a duty of excise.
Section 66B. Charge of service tax on and after Finance Act, 2012.
There shall be levied a tax (hereinafter referred to as the service tax) at
the rate of fourteen percent. on the value of all services, other than those
services specified in the negative list, provided or agreed to be provided
in the taxable territory by one person to another and collected in such
manner as may be prescribed.
Section 66C. Determination of place of provision of service.—
(1) The Central Government may, having regard to the nature and
description of various services, by rules made in this regard, determine
the place where such services are provided or deemed to have been
provided or agreed to be provided or deemed to have been agreed to be
provided.
(2) Any rule made under sub-section (1) shall not be invalid merely on
the ground that either the service provider or the service receiver or both
are located at a place being outside the taxable territory.
Section 68. Payment of service tax.
(1) Every person providing taxable service to any person shall pay
service tax at the rate specified in section 66B in such manner and within
such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of
such taxable services as may be notified by the Central Government in
the Official Gazette, the service tax thereon shall be paid by such person
and in such manner as may be prescribed at the rate specified in section
66B and all the provisions of this Chapter shall apply to such person as if
he is the person liable for paying the service tax in relation to such
service:
Provided that the Central Government may notify the service and the
extent of service tax which shall be payable by such person and the
provisions of this Chapter shall apply to such person to the extent so
specified and the remaining part of the service tax shall be paid by the
service provider.”
6.3 Notification No.30/2012-Service Tax dated 20.06.2012, issued under
Section 68 ibid is extracted and provided herein for reference purpose:
“Notification N.30/2012-Service Tax dated 20.06.2012)
In exercise of the powers conferred by sub-section (2) of section
68 of the Finance Act, 1994 (32 of 1994), and in supersession of (i)
notification of the Government of India in the Ministry of Finance
(Department of Revenue), No. 15/2012-Service Tax, dated the 17th
March, 2012, published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R 213(E), dated the 17th
March, 2012, and (ii) notification of the Government of India in the
Ministry of Finance (Department of Revenue), No. 36/2004-Service
Tax, dated the 31st December, 2004, published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-section (i), vide number
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G.S.R 849(E), dated the 31st December, 2004, except as respects things
done or omitted to be done before such supersession, the Central
Government hereby notifies the following taxable services and the extent
of service tax payable thereon by the person liable to pay service tax for
the purposes of the said sub-section, namely :—
I. The taxable services,—
(A)(i) provided or agreed to be provided by an insurance agent to any
person carrying on the insurance business;
xx xx xx xx xx
(B) provided or agreed to be provided by any person which is located in
a non-taxable territory and received by any person located in the taxable
territory;
(II) The extent of service tax payable thereon by the person who
provides the service and the person who receives the service for the
taxable services specified in (I) shall be as specified in the following
Table, namely :-
TABLE
Sl.
No.
Description of a service Percentage of
service tax payable
Percentage of
service tax payable
by the person
providing service
by the person
receiving the service
1. in respect of services provided
or agreed to be provided by
an insurance agent to any
person carrying on insurance
business
Nil 100%
xx xx xx xx
10. in respect of any taxable
services provided or agreed to
be provided by any person who
is located in a non-taxable
territory and received by any
person located in the taxable
territory
Nil 100%
Explanation-I. - The person who pays or is liable to pay freight for the
transportation of goods by road in goods carriage, located in the taxable
territory shall be treated as the person who receives the service for the
purpose of this notification.
Explanation-II. - In works contract services, where both service provider
and service recipient is the persons liable to pay tax, the service recipient
has the option of choosing the valuation method as per choice,
independent of valuation method adopted by the provider of service.
2. This notification shall come into force on the 1st day of July, 2012.”
6.4 The following are the legal provisions of the Rules framed under the
Finance Act, 1994, that are relevant to the present case and the specific
provisions of these Rules are extracted and given below:
“Place of Provision of Services Rules, 2012
(Notification No. 28/2012 - Service Tax dated 20.06.2012 as amended)
2. Definitions - In these rules, unless the context otherwise requires,-
(a) “Act” means the Finance Act, 1994 (32 of 1994);
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(f) “intermediary” means a broker, an agent or any other person, by
whatever name called, who arranges or facilitates a provision of a service
(hereinafter called the ‘main’ service) or a supply of goods, between two
or more persons, but does not include a person who provides the main
service on his account.;
3. Place of provision generally .- The place of provision of a service
shall be the location of the recipient of service: Provided that in case “of
services other than online information and database access or retrieval
services” (Inserted vide Notification 46/2012- Service Tax) where the
location of the service receiver is not available in the ordinary course of
business, the place of provision shall be the location of the provider of
service.
9. Place of provision of specified services .- The place of provision of
following services shall be the location of the service provider:-
(a) Services provided by a banking company, or a financial institution,
or a non-banking financial company, to account holders;
(b)“ ;” omitted vide Notification 46/2016-Service Tax
(c) Intermediary services;
(d) Service consisting of hiring of means of transport other than, - (i)
aircrafts, and
(ii) vessels except yachts
upto a period of one months.
14. Order of application of rules .- Notwithstanding anything stated in
any rule, where the provision of a service is, prima facie, determinable in
terms of more than one rule, it shall be determined in accordance with
the rule that occurs later among the rules that merit equal
consideration.”
7. From plain reading of the above legal provisions, it transpires that
during the disputed period i.e., post-negative list regime, the category of
services hitherto defined under the erstwhile regime by itemizing it under
Section 65(105) ibid were merged under a common phrase i.e., ‘service’ as
defined under Section 65B(44) ibid . Further, the levy of service tax was
provided under Section 66B ibid . On harmonious reading of these legal
provisions, it transpires that there shall be an activity which should be in the
nature of ‘service’, provided or agreed to be provided in the taxable
territory, carried out by one person i.e., service provider, for another person
viz., service receiver, involving a consideration in order to attract the levy of
service tax. Further, where there is a levy of service tax under Section 66B
ibid , and in specified situations as provided under Section 68(2) ibid and as
provided under Notification No.30/2012-Service Tax dated 20.06.2012,
service tax shall also be paid by the service receiver.
8.1 In the present case, the disputed transactions have been undertaken
during April, 2013 to June, 2017. Therefore, there is no need to examine the
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specific nature of service, whether it is falling any specific entry itemized in
the earlier Section 65(105) ibid and has to only examine, whether the
activity amounts to taxable service. In order to understand the nature of
services provided by the foreign entities to the appellants, it would be
necessary to examine the agreements entered into between them, the
activities undertaken by them. The relevant extract of the representative
‘Production Assistance Agreement’ dated 18.08.2016 entered into between
the appellants and the ‘Local Area Representative’ (LAR) M/s Firstep, Paris,
representing the disputed activities are given below:
“PRODUCTION ASSISTANCE AGREEMENT
This Production Assistance Agreement (“Agreement”) made and entered into at
Mumbai on this 18th day of April 2016
By and Between
YASH RAJ FILMS PRIVATE LIMITED , a company incorporated under the provisions
of Companies Act, 1956, as amended, having its registered office at 5, Shaw Industrial
Estate, Veera Desai Road, Andheri (West), Mumbai-400 053 (herein after referred to
as “ YRFPL” / “Company”, which expression shall unless repugnant to the context or
meaning thereof be deemed mean and include its successors in title and permitted
assigns) of the ONE PART
And
FIRSTEP , having its office located at 26 Rue de Paris, 06000 Nice, France (herein
after referred to as the “Local Area Representative (LAR)” which expression shall
unless repugnant to the context or meaning thereof be deemed to mean and include
her representative heirs, executors and administrators) of the OTHER PART
YRFPL and Local Area Representative are hereinafter collectively referred to as
“ Parties” and individually as “ Party ”.
Whereas
A. YRFPL is producing a cinematographic film, titled “Befikre”, to be directed by
Mr. Aditya Chopra (“Film”).
B. The LAR has been approached by YRFPL for rendering the assistance and
obligations (the “Assistance”) as more particularly set forth in Annexure A.
C. The parties wish to record the terms and conditions upon which YRFPL has
agreed to engage the LAR and the LAR has accepted the same.
NOW THEREFORE it is hereby agreed by and between the Parties as follows:
1. Engagement and scope of assistance:
1.1 The Assistance shall include, but not be limited to, the requirements outlines in
Annexure “A” attached hereto and by reference made part hereof:
1.2 The LAR shall assists in procuring on behalf of YRFPL the following services:
(i) act as a location support services company;
(ii) assist the producer in finalizing final budget for all spend in France for the said
Film;
(iii) assist the producer in creating a detailed plan of action for production;
(iv) maintain all accounting charts during the production;
(v) Shall ensure all the Incentives are duly paid back;
(vi) comply with all directions and Instructions of the Producer;
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(vii) comply with all applicable laws, statutes, ordinance, rules, regulations and
requirement of all governmental Agencies and regulatory bodies in France and
undertake all responsibilities
xxx xxx xxx xxx
1.5 The LAR shall be responsible to YRFPL at all times for the purpose of the above-
mentioned Film
LAR shall engage all individuals necessary for production of the Film, all-of whom shall
execute a copy (in such form and substance as YRFPL shall pre-approve) of a long
form agreement, prior to rendering any assistance in connection with the Film. LAR
shall pay all costs in connection with such individuals' engagement from and in
accordance with the Budget.
YRFPL shall retain exclusive control over all creative matters related to the
production of the Film and final control over all budgetary and other business
matters related to the production of the Film.
2. Fee:
2.1 All approved costs of production of the Film which, for the avoidance of
doubt, shall be advanced by YRFPL to LAR in accordance with the Budget and
the cashflow and shall be applied by LAR solely to pay costs and expenses , in
connection with the production of the Film pursuant to and in accordance with the
Budget, the cashflow and the terms of this Agreement.
2.2 Subject to the full, complete and timely performance by the LAR of the Assistance,
YRFPL shall pay to the LAR 100,000 € (Hundred Thousand Euros) during the
Term ("Fee"), payable In mutually agreed installments. The LAR hereby acknowledges
and confirms adequacy of the Fee towards the performance of all Assistance by the
LAR.
2.3 LAR acknowledges and agrees that, other than as expressly set out in this
Agreement, no further sums shall be payable by YRFPL in respect of entering into this
Agreement, the performance of the production requirements and all of LAR's other
obligations under this Agreement, the assignment of the licenses and LAR's supply and
assignment of its own intangible rights and all other rights accruing from the Production
of the Film or the exploitation of the Film whether by way of profits, residuals, use fees,
repeat fees or otherwise and that the sums specified In this Agreement represent a
complete so-called "buy-out" of all such rights throughout the universe in perpetuity.
xxx xxx xxx xxx
6. Audit
6.1 LAR will keep full true and accurate books of account which shall constitute
all original vouchers, receipts and records of expenditure (Records") made in
connection with the Assistance and YRFPL reserves the right to conduct audit or
inspection of the Records prepared and maintained by the LAR (including its sub-
contractor, if any) at any time during the term of this Agreement and/or within 6 (Six)
months after the termination or expiry of this Agreement. Such audit may be conducted
either through personnel of YRFPL and/or YRFPL and or through an independent
auditor. For the purpose of such audit, the LAR shall be given at least 7 days" notice
along with clear scope of work defined in it and the LAR shall provide access to the
Records and extend all reasonable cooperation to the auditor and shall ensure the
same from its sub-contractor.
xxx xxx xxx xxx
9. No Obligation: The LAR expressly acknowledges and agrees that the engagement
of assistance under this Agreement shall not in any way constitute or be deemed
to constitute an obligation of an undertaking by YRFPL to produce the Film or
use the Assistance in the Film , or any other cinematographic film or use, adapt,
change, revise, delete, exhibit, advertise or promote or in any way exploit the same.
xxx xxx xxx xxx
12. Remedies: The LAR hereby acknowledges and agrees that this Agreement is
a contract for personal assistance and production of the Film is of a unique unusual
and extraordinary character and any disruption in the performance of Assistance by the
LAR shall cause loss to the production of the Film, which loss cannot be adequately
compensated through damages at law. Therefore, YRFPL shall be entitled to seek
specific performance by the LAR of all the Assistance set forth in this Agreement and
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the Annexure A, without prejudice to any other remedies that may be available to
YRFPL In law or in equity.
xxx xxx xxx xxx
ANNEXURE A
ASSISTANCE
The LAR shali:
1. Handle all accounting process for the shoot schedule in France.
2, Ensure all the contracts are properly executed.
3.Collect incentive for the work on behalf of YRFPL and shall pass back the same to
YRFPL within 1 (one) week from receipt of the same in his bank account with the
details:
Account Holder's Name:
Account Holder's Bank Account No:”
8.2 On careful perusal of the Production Assistance Agreement dated
18.08.2016, it transpires that the appellants have exclusive control over all
the creative matters related to production of films and also has the final
control over all budgetary and other business matters related to the
production of film. The role of LAR is limited to rendering assistance in
procuring various services as required by the appellants, to enable
production of part or whole of the film in foreign territory. Further, the
engagement of the LARs does not create any obligation on the appellants to
produce the films or utilize the assistance of independent service providers
located at the foreign territory. The LARs’ role is purely ancillary and
subordinate, confined solely to facilitating the procurement of services, and
had no connection whatsoever with the production of the film. Therefore,
from the various clauses of the Agreement it is conclusively evident that the
LARs have acted purely as intermediaries, merely facilitating procurement of
services from third parties on behalf of the appellants, without providing any
independent service by themselves.
8.3 In the impugned order, learned Commissioner in his findings recorded
at para 49.3 & 50 of the impugned order, on the basis of above agreement
has treated the LAR as ‘Line Producer’ of film on the basis of definition given
in Wikipedia/online resource to categorize them as service provided on the
basis of erstwhile Rule 3(iii) of the Taxation of Services (Provided from
Outside India and Received in India) Rules, 2006 and under Rule 3 of the
Place of Provision of Services Rules, 2012. As the period of dispute in the
present case covers the period 01.04.2013 to 30.06.2017, the provisions of
Rules of 2006 which superseded the Rule of 2012 by Notification
No.28/2012-Service Tax dated 20.06.2012 brining into force the Place of
Provision of Services Rules, 2012 (POPS) with effect from 01.07.2012 alone
is relevant for determination of the place of provision of a service. In terms
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of the agreement dated 18.08.2016, it clearly brings out the fact that the
services provided by FIRSTEP, Paris to the appellants are governed by the
specific clauses of the agreement. On overall reading of the agreement, it
transpires that recognizing the requirements of production of film, and the
consequent activities that are needed to be undertaken viz., location of film
shooting i.e., indoor and outdoor places; facilities and materials required
viz., decorative items, costumes, plants & flower arrangement, sound
recording systems, lighting arrangements etc.; manpower and specialists
required viz., food stylists, decorators, technicians and specialists for filming
of the events, actions by artists etc., the appellants have engaged FIRSTEP
to provide the facility for engaging with the respective individuals concerned,
by entering into a long form agreement, prior to rendering any services to
the appellants. For all such activities, the Local Area Representative/ Line
Producer (LAR) FIRSTEP shall be required to pay all the costs in connection
with the activities performed by such individuals, in accordance with the
budgetary allocation made by the appellants to the LAR.
8.4 In further examining such aspect, the learned Advocate for the
appellants have produced the copy of the agreement entered into by the
appellants with M/s BAZAR Decon Rental, 31/33 Rue du Temple, 75004,
Paris & LAR FIRSTEP, as joint parties, along with English translation copy
dated 23.03.2026, for providing the premises at ground floor of the
‘Aboudabi Bazar Boutique’ located at 125, Rue Vieille du Temple, 75003,
Paris including storefront and display windows for the purpose of filming the
movie “Befikre” for a specified period and timings as provided therein. The
invoice dated 22.04.2016 indicate payment of Euro 3420 made by LAR on
behalf of the appellant through LAR. Such amount paid for the above facility
also included Value Added Tax (VAT)/ Taxe sur la Valeur Ajoutée (TVA) in
French, of Euro 570 (VAT @ 20% on Euro 2850). Similarly, there were a
number of agreements have been entered into by the appellant with various
persons viz., agreement dated 11.05.2016 with Father Annequin, in his
capacity as Parish Priest of Saint-Germain L’ Auxerrois Church situated as 2,
Place du Louvre, 75001, Paris for use of parish hall, WC facilities, parking
area for setting up canteen facility in the parking slot, installation of hair,
makeup, costume in the parish hall; services provided by Mr. Jose’ Correia,
2, Rue Azais, 75018, Paris for providing electrical lines supply power to the
Hair, Makeup, Costume at the premises along with generator position at the
venue, for a specified period. On perusal of the above documents placed on
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record, we find that a number of persons operating from Paris, France have
provided services or rendered certain activities as ‘service provider’ to the
appellants for film shooting of ‘Befikre’ on principal-to-principal basis by
specific agreements entered into between them and the LAR FIRSTEP had
acted as an ‘intermediary’ between such persons and the appellants.
8.5 Therefore, the service provider in all such activities are the persons
located abroad/in Paris and the service receiver is the appellants in India
and such activity was for an agreed consideration paid through the LAR
acting on behalf of the appellants. Thus, the services provided such persons
placed in abroad in this case is covered under the scope of definition under
Section 65(44) ibid as ‘service’ and is also covered under the definition of
‘taxable service’ in terms of Section 65(51) ibid , as the service in the present
case is not covered under any specific exclusion in terms of negative list
under 66D ibid . However, as the services are rendered from abroad i.e.,
Paris office of the service provider, we need to further examine the exigibility
to service tax in terms of Section 66C ibid and the rules made thereunder.
Thus, we need to look into the Rules framed in exercise of the powers vested
with the Government in terms of Section 94(2)(hhh) ibid , i.e., Place of
Provision of Services Rules, 2011 (POPS).
8.6 In terms of POPS, under Rule 3, generally the place of provision of
service shall be taken as the location of the recipient of service. However,
specific rules prescribe the place of provision of service in various
circumstances such as performance-based services, services relating to
immovable property, services relating to events, services provided from
more than one location, service provider and service recipient located in
taxable territory, provision of specified services, goods transport services,
passenger transport services, services provided on board a conveyance etc.
It is claimed by the appellants that the nature of services received from
LARs situated at Paris is an intermediary service, for which the applicable
rule under POPS is Rule 9; whereas the Department has claimed that the
applicable rule under POPS is Rule 3. In order to determine the correct
application of the Rule, we have also examined the definition of the phrase
‘intermediary services’ provided in Rule 2 ibid . Inasmuch as, the Paris office
of FIRSTEP i.e., the service provider, had arranged for various activities
related to shooting of film at Paris, France to the appellants, in order to
completing the film production activity abroad, it is clearly proved that these
services are covered under the definition ‘intermediary services’.
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8.7 At the time of introduction of negative list regime of service tax, the
Ministry of Finance had issued an Education Guide on ‘Taxation of Services”.
The relevant paragraph dealing with ‘intermediary services’ the clarification
providing on the scope of levy is extracted as follows:
“5.9.6 What are “Intermediary Services” ?
Generally, an “intermediary” is a person who arranges or facilitates a supply
of goods, or a provision of service, or both, between two persons, without
material alteration or further processing. Thus, an intermediary is involved
with two supplies at any one time:
(i)the supply between the principal and the third party; and
(ii)the supply of his own service (agency service) to his principal, for which a fee
or commission is usually charged.
For the purpose of this rule, an intermediary in respect of goods (such as a
commission agent i.e. a buying or selling agent, or a stockbroker) is
excluded by definition.
Also excluded from this sub-rule is a person who arranges or facilitates a
provision of a service (referred to in the rules as “the main service”), but
provides the main service on his own account.
In order to determine whether a person is acting as an intermediary or not,
the following factors need to be considered:-
Nature and value : An intermediary cannot alter the nature or value of the
service, the supply of which he facilitates on behalf of his principal, although
the principal may authorize the intermediary to negotiate a different price.
Also, the principal must know the exact value at which the service is
supplied (or obtained) on his behalf, and any discounts that the
intermediary obtains must be passed back to the principal.
Separation of value : The value of an intermediary’s service is invariably
identifiable from the main supply of service that he is arranging. It can be
based on an agreed percentage of the sale or purchase price. Generally, the
amount charged by an agent from his principal is referred to as
“commission”.
Identity and title : The service provided by the intermediary on behalf of
the principal is clearly identifiable.”
8.8 Accordingly, by applying the aforesaid three criteria in the present
case, we find that firstly, LAR FIRSTEP cannot alter the nature of service for
which they are engaging the persons abroad to enable provide film shooting
requirements/services; secondly, the consideration is received in terms of
the contractual arrangements which cannot be altered by LAR FIRSTEP.
Thus, the nature and value of the services provided are known to both
parties i.e., the service provider and a service receiver, and further to the
LAR FIRSTEP. We also find that the consideration charged by LAR FIRSTEP in
the form of fixed fees at 100,000 Euro is independent of the consideration
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involved in obtaining the services from various persons abroad by the
appellants for shooting the film abroad. Thus, the principle of separation of
value, is also fulfilled in the present case. The main transaction between the
appellants and the persons situated abroad, is the services involved in
obtaining various facilities viz., renting of location of film shooting i.e.,
indoor and outdoor places; facilities and materials required for decorative
items, costumes, plants & flower arrangement, sound recording systems,
lighting arrangements etc.; manpower and specialists required such as food
stylists, decorators, technicians and specialists; for filming of the events,
actions to be performed by artists for shooting the film. These services are
distinct and is completely different from the services provided by LAR
FIRSTEP. Thus, we find that all the three criteria laid down by the CBIC’s
clarification is fulfilled in the present case to categorize the disputed services
provided by the LAR, as ‘intermediary service’.
8.9 Thus, in terms of specific Rule of the POPS which would more
appropriately applicable in this case, we find that Rule 9 of POPS is
applicable to the ‘intermediary service’ as it is the more appropriate rule for
determination of place of provision of the service. Further, in terms of Rule
14 of POPS in determining the order in which these rules shall be applied,
even for argument sake, if we consider that both Rule 3 as claimed by the
department and Rule 9 as claimed by the appellants are contending Rules in
the present case, then notwithstanding the above various Rules, the place of
provision of services shall be determined in terms of ‘later Rule’ among
those merit equal consideration. Thus, even in such a situation, Rule 9 of
POPS would be the appropriate rule to be applied in this case. Accordingly,
the place of provision of service in the present case would be the location of
the service provider i.e., Paris, France. Hence, in respect of ‘intermediary
services’ provided by the LAR FIRSTEP from PARIS to the appellants who are
located in India, would not be exigible to service tax under Section 66B ibid .
Further, we are also of the view that for the above reasons, the levy of
service tax on Reverse Charge Mechanism (RCM) basis under Section 68 ibid
read with Notification No.30/2012-Service Tax dated 20.06.2012 is also not
applicable in the present case.
9.1 In the impugned order, learned Commissioner has also considered the
fact that the LAR FIRSTEP having received the refund of taxes provided by
the Government of France, and thus have come to the conclusion that they
should be treated as exporter of film to India, for charging service tax on the
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appellants as a recipient of service. On perusal of the extract of ledger
accounts of foreign remittances for the period 01.04.2016 to 31.03.2017
maintained by the appellants, it transpires that an amount of 2,50,000 Euro
had been received from LAR FIRSTSTEP. Similar incentives were also
received by the appellants from other LARs viz., 15,361.41 GBP from
Bollywood Limited. On further examination of this aspect with the details
submitted by the learned Advocate of the appellants on the scheme of ‘Tax
Rebate for International Production’ (TRIP) it transpires that it is a
selectively granted tax rebate/incentive by the Centre National du Cinema et
de I’image animee/French National Centre of Cinema (CNC). This is granted
by the CNC to the French production services company who is in charge in
compliance with a contract entered into with a non-French production
company, for both supplying the artistic and technical means for making the
feature film and of managing the material operations for its making and
monitoring its proper execution at France. Further, such tax rebate is
provided only to certain eligible project which fulfill the conditions of
minimum project amount to be incurred viz., 250,000 Euro and having at
least 5 days of shooting in France; the approved works should include
elements related to the French culture, heritage, and territory, accordingly
to a cultural test specific to each genre (live action or animation). On
examining the nature of tax rebate/incentive, it transpires that this is being
given to certain specific film projects fulfilling certain conditions specified
therein and to the film production company as well as to the intermediary
persons like the LAR who manages the material, operations, personnel
required for shooting the film abroad, by a non-French production company.
Hence, such grant of rebate/incentive to the LAR FIRSTEP as intermediary
for the appellants being non-French film production company, does not
provide any sufficient ground to conclude that the LARs are the service
providers as film production company to the appellants. Therefore, we do
not find any merits in the conclusion arrived by the learned Commissioner in
the impugned order on this aspect to treat LARs as service providers for
charging service tax in respect of services provided by them as film
producers.
9.2 Since, we have examined the disputed issues on merits and have
come to the conclusion that the disputed activities are not liable to payment
of service tax on RCM basis, we do not find it necessary to go into the
aspects of limitation of time and other grounds raised by the appellants
against the adjudged demands confirmed in the impugned order.
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10. Based on the foregoing discussions and analysis, we find that there are
no strong grounds to hold that the services received by the appellants from
LARs having their base in Paris, France or other foreign entities based in
abroad, are liable for payment of service tax in terms of the provisions of
Finance Act, 1994. Consequently, the adjudged demand of service tax and
imposition of penalties confirmed in the impugned order is not legally
sustainable.
11. In view of the above, we are of the considered view that the adjudged
demands confirmed on the appellants in the impugned order dated
14.12.2022 is liable to be set aside. Therefore, by setting aside the
impugned order, the appeal is allowed in favour of the appellants.
(Order pronounced in open court on 15.10.2026)
(S.K. Mohanty)
Member (Judicial)
(M.M. Parthiban)
Member (Technical)
SM