Madras High Court Dismisses Plea By AR Rahman, GV Prakash and Santhosh Narayan Challenging GST Department’s Order Claiming Service Tax

The department had asserted that the music composers were not the owner of the musical work composed and hence no copyright as contemplated under Section 13(1)(a) under the Copyright Act vested in them. The petitioner composers on the other hand claimed exemption in respect of receipts from temporary transfer or permitting to the use or enjoyment of a copyright in terms of clause (15) of Notification No.25 of 2012. Relying on Section 65B(44) of the Finance Act 1994, the petitioners further contended that they were exempt as they came within the purview of services.

Justice Anita Sumanth noted that to adjudicate the issue, it was necessary to look into the factual nature of the agreements between the petitioners and the third parties, and the authority was better equipped to look into the matter. The court added that the writ court could not go into interpretation of contractual clauses.

It would not, in my opinion, appropriate to refer to the factual nature of the agreements qua these petitioners and third parties including film producers in writ proceedings…The nature of the Intellectual Property Right (IPR) vesting in the music composers, the terms inter se the composers and film producers/third parties, whether there has been an assignment of the IPR, the terms of the assignment, if at all, are all questions of fact that would have a bearing upon the intrinsic question, relating to the applicability of the Exemption Notification to these petitioners.

The court added that the authorities could better deal with the issue as they could call for the relevant information pertaining the issue which stretched for a lengthy period from 2013 to 2017.

Even though the petitioners submitted that the liability for service tax could be decided without going into the detailed facts relating to the agreements, the court noted that doing so would be “oversimplifying the matter”.

Though it is the persistent attempt of the petitioners to state that the liability to service tax can well be decided without reference to facts, agreements or contracts, in my considered view, that would be an utter oversimplification of the matter and even assuming so, such a determination would be purely academic.

The petitioners had also challenged the jurisdiction of the Director General of GST Intelligence for issuing the show cause notice under the Finance Act 1994 read with Section 174(2) of the CGST Act. The petitioners argued that the power through which the DGGI could issue show cause notices emanated from Notifications issued prior to the GST regime. According to the petitioner, these notifications were not explicitly saved with the enactment of GST and thus the source of power itself was invalid in law and falls foul of statutory mandate.

However, looking into the proviso to Section 174 (2) (c) which states that repeal shall not affect the rights, privileges, obligations or liability acquired, accrued or incurred under the old Act, the High Court held that the assumption of jurisdiction by the DGGI was valid.

Case Title: M/s. Amirta International Institute of Hotel Management v. The Principal Commissioner of CGST & Central Excise

Citation: 2023 LiveLaw (Mad) 41

Case No: W.P.Nos.12291 of 2019