- (1.) In these writ petitions, the petitioners, who are all producers or Distributors/sub-distributors/ exhibitors of movie, challenge the Circular No.148/17/2011-ST dated 13.12.2011 bearing F.No.354/27/2011-TRU as illegal and unconstitutional and seek for issuance of directions to respondents 1 to 3 not to give effect to Circular No.148/17/2011-ST dated 13.12.2011 issued by the Central Board of Excise and Customs, Tax Research Unit, New Delhi, which was issued for the purpose of collecting service tax from film distributors/sub-distributors/theatre owners and seek for a direction not to give effect to the said circular.
(2.) When service tax was levied on "intellectual property services" with effect from 10.9.2004, copyright was specifically excluded from the definition of intellectual property rights . Normally, a producer of a movie sells the rights showing the movies in a region to a distributor. The distributor in turn enters into agreement with subscribers/theatre owners and this agreement can be of different types. By Circular No.109/03/2009 of Central Board of Excise and Customs bearing F.No.137/186/2007-CX.4 dated 23.2.2009, it was clarified that the screening of a movie is not a taxable service except that the distributor leases out the theatre and the theatre owner gets a fixed rent. In such case, the service provided by the theatre owner would be categorised as renting of immovable property for furtherance of business or commerce and the theatre owner would be liable to pay service tax on the rent received from the distributor. Insofar as revenue sharing arrangement , the Circular clarified that in such type of arrangement, the two contracting parties act on principal to principal basis and one does not provide service to another and in such arrangements, the activities are not covered under the service tax.
(3.) With effect from 1.7.2010, business of "licensing of copyrights" was brought within the service tax net by making amendments to the definition of taxable service under Clause (105) of Section 65 by introducing sub-clause (zzzzt). As per Section 65(105) sub-clause (zzzzt), service tax is leviable on any temporary transfer of copyright or permitting the use or enjoyment of the copyright excepting rights covered under sub-clause (a) of clause (1) of Section 13.;