In a high-profile case which was meticulously argued by the ministry of finance departmental representative against a battery of lawyers, Star TV and Zee Telefilms have finally lost the battle at the Central Excise and Service Tax Appellate Tribunal, Delhi.

The tribunal has held that the two channels are liable to pay service tax as activities of selling time slots or obtaining sponsorships for broadcasting of any programme, and collecting broadcasting charges will strictly come within the definition of the term 'broadcasting' as amended and, they will also come within the definition of the term 'broadcasting agency or organisation' in view of the nature of activities carried on by them.

The tribunal held that the entire amount paid by the advertiser/sponsor to ATL/Expand/Star has to be treated as value of taxable service.

Interestingly, the amendment which was introduced to plug the loopholes in the Act had not worked for the government in the case of transporters but did work well in the present case.

Had the amendment not expanded the definition and activities of broadcasting, it would not have been possible to win this case.

It was contended by Star TV and Zee Telefilms that their programmes are telecast from satellites situated outside India. The signals are encrypted and beamed from outside India. These signals are received by the multi-system operators (MSOs) and cable TV operators through decoders. These decoders enable MSOs and cable TV operators to re-transmit the signals to the viewers subscribing them.

The signals that are broadcast may be of advertisements, serials, programmes or live events. The advertisements recorded in videotapes by the advertising agencies and program/serials recorded in the videotapes by or on behalf of the sponsor are procured from advertisement agencies in India and sponsors and sent to ATL/Expand, Mauritius and to Star Ltd, Hong Kong.

Zee Telefilms submitted that they are engaged in collecting money due to ATL/Expand from its clients in India and the same is remitted to ATL/Expand after deducting its commission. So also Star India Pvt Ltd collects amounts due to Star from clients in India and remit the same to Star and get a commission paid for its activity of broadcasting and that broadcasting done by ATL/Expand and Star are from outside India and therefore no service tax can be demanded from the appellants as agents of broadcasting agency or organisation.

Both media companies were held liable to pay service tax vide the orders passed by the Commissioner of Central Excise (Appeals) Mumbai, dated November 18, 2002 who rejected their appeals against the orders of adjudication. Both contended that their activities cannot be termed as 'taxable service' as defined under section 65(72), as it stood during the relevant period. According to them they were not providing any service to a client as a broadcasting agency or organization in relation to broadcasting in India.

The tribunal refused to give a restricted meaning to the word 'broadcasting' or 'dissemination of any form of communication' even as they stood prior to amendment by the Finance Bill 2002. It held that unless the information or knowledge reaches the receiving end dissemination will not be complete. Meaning given to the word 'dissemination' in the Indian edition 2001 the New Oxford Dictionary is 'spread or disperse (something especially information) widely.'

Therefore, when the television programme and advertisements in the form of signals are encrypted and beamed from outside India and telecast outside India but are 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 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. 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 programme or collecting the broadcasting charges 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 are also brought under net of the term 'broadcasting.'

Zee Telefilms Ltd., are representatives of Asia Today Ltd. (ATL) and. Expand Fast Holdings Ltd. (Expand), Mauritius, in India for selling time slot for advertisement and for obtaining sponsors for serials, programmes, events, etc. which would be played out by ATL/Expand in the various channels like Zee TV, Zee Cinema, Music Asia.

Star India Pvt Ltd. are representative of Satellite Television Region Limited (Star) Hong Kong in India for selling time slot for advertisement and for obtaining sponsors in India for selling time slot for advertisement and for obtaining sponsor for serials, programmes and events which would be telecast by Star in various channels like Star Plus, Star News, Star World, etc.

Both the channels argued that they are not engaged in dissemination of any form of communication by transmission of electro-magnetic waves through space or through cables. They collect amounts due to their principals and remit the same to them and get the commission paid for their activity.

They are only providing service of selling time slot for advertisement and for obtaining sponsors for serials etc. for their principal for which they are paid an agreed commission. Therefore it cannot be held that they are providing broadcasting service to their clients.

It is further contended that the activity of ATL/Expand and Star is carried out outside India and hence is not taxable. The appellants submitted that the amendment which was brought under the Finance Act, 2002 with retrospective effect could at the most make the appellants liable to pay service tax on the amount received by them from ATL/Expand/Star as the case may be.

See full text of Judgement in 2004-Taxindiaonline-159-CESTAT-DEL in Legal Corner

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