The Customs, Excise & Service Tax Appellate Tribunal has held that the perpetual transfer of copyright in television programmes constitutes a sale of goods, not a taxable service. This decision clarifies the boundary between service tax and value added tax in cases involving intellectual property rights in media content.
The Verdict
The appellant won. The Tribunal held that the perpetual assignment of copyright in recorded television programmes to broadcasters amounts to a sale of goods, not a taxable service under the Finance Act, 1994. Consequently, service tax demand, interest, and penalty for the period 2005-2010 were set aside. The Tribunal ruled that where VAT has been paid on such transfers, the transaction falls outside the scope of service tax, as the two taxes are mutually exclusive.
Background & Facts
The appellant, Ananda Vikatan Productions Pvt. Ltd., is the copyright owner of the Tamil serial 'Kolangal'. It produced the serial independently and later licensed the rights to broadcast the dubbed versions in Telugu and Malayalam to Sun TV Network and its subsidiaries. The revenue authorities assessed service tax on these transactions under the category of 'TV or Radio Programme Producer Service', arguing that the appellant was providing a service by producing and assigning programmes.
The original adjudicating authority confirmed a demand for service tax for the financial years 2005-06 to 2009-10, along with interest and a penalty equal to the tax amount under Section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this demand. The appellant appealed to the Customs, Excise & Service Tax Appellate Tribunal, contending that the transaction was not a service but a sale of intangible property - copyright - which was already subject to VAT under the Tamil Nadu Value Added Tax Act, 2005.
The appellant submitted that it produced the programmes on its own initiative, without being commissioned by the broadcasters. The assignment of copyright was perpetual, and VAT had been paid on such transfers, as evidenced by VAT returns for July and August 2009. The authorities failed to verify these payments or consider the legal distinction between sale of goods and provision of services.
The Legal Issue
The central legal question was whether the perpetual transfer of copyright in independently produced television programmes to broadcasters constitutes a taxable service under Section 65(105)(zzu) of the Finance Act, 1994, or whether it amounts to a sale of goods exempt from service tax and subject instead to VAT.
Arguments Presented
For the Appellant
The appellant argued that copyright, as an intangible property, qualifies as 'goods' under the definition in the Tamil Nadu Value Added Tax Act, 2005, and by extension under the Supreme Court’s interpretation in Tata Consultancy Services v. State of Andhra Pradesh. The transfer of copyright on a perpetual basis is a sale, not a service. The definition of 'Programme Producer' under Section 65(86b) requires production 'on behalf of another person', which was not the case here. The appellant produced the programme independently and later assigned rights. The Tribunal in Radaan Media Works and BBC World Services had previously held that such transactions do not attract service tax. Payment of VAT further confirms the transaction’s nature as a sale.
For the Respondent
The respondent relied on the adjudicating authority’s finding that the receipt of consideration for programme assignment constituted a service under the category of 'TV or Radio Programme Producer Service'. It did not dispute that the appellant produced the programmes independently but argued that the act of assigning rights for broadcast constituted a service rendered to the broadcasters. No independent legal argument was advanced to counter the appellant’s reliance on the Supreme Court’s definition of goods or the precedents from coordinate benches.
The Court's Analysis
The Tribunal began by examining the nature of the transaction. It emphasized that service tax applies only when a service is rendered by one party to another. As held by the Gauhati High Court in Magus Construction Pvt. Ltd. v. Union of India, an activity carried out by a person for its own benefit cannot be termed a service. Since the appellant produced 'Kolangal' independently, without any contractual obligation to produce for the broadcasters, the initial act of production was not a service.
The Tribunal then turned to the transfer of copyright. Citing the Supreme Court’s landmark judgment in Tata Consultancy Services v. State of Andhra Pradesh, it affirmed that intangible property such as software, when capable of being bought, sold, stored, and transmitted, qualifies as 'goods'. The Court noted:
"If a software whether customized or non-customized satisfies these attributes, the same would be goods. Unlike the American Courts, Supreme Court of India have also not gone into the question of severability."
The same logic applies to television programmes. The copyright in the serial, once fixed on a medium and transferred for consideration, becomes a commodity susceptible to sales tax. The Tribunal further noted that the assignment was perpetual, as confirmed by the original authority’s own order (para 7.5 of OIO No. STC/13/2012-ADC(LTU)), which concluded that the appellant had no further rights over the dubbed versions. This is the hallmark of a sale, not a licence.
The Tribunal also highlighted the mutual exclusivity of service tax and VAT. Where VAT has been paid on the transfer of goods, service tax cannot be levied on the same transaction. The authorities had ignored the appellant’s evidence of VAT payment and failed to reconcile their assessment with the legal classification of the transaction.
The Tribunal then relied on its own coordinate bench’s decision in Radaan Media Works, which interpreted Section 65(86b) strictly: a 'Programme Producer' must produce 'on behalf of another person'. The appellant did not. The Tribunal quoted the Radaan order:
"In the present case, the appellants did not produce programmes for another person. There is no second person at the time of appellant producing the programme which is apparently for self."
This interpretation was consistent with the Delhi CESTAT’s ruling in BBC World Services. The Tribunal concluded that the demand under 'TV or Radio Programme Producer Service' was legally unsustainable.
What This Means For Similar Cases
This judgment provides a clear doctrinal framework for distinguishing between service tax and VAT in media and entertainment transactions. Practitioners dealing with copyright assignments in television, film, or digital content must now assess whether the transfer is perpetual (sale of goods) or temporary (service). If the copyright is transferred outright, with no retained rights, VAT applies and service tax is excluded. This applies even if the content is produced independently and later licensed.
The ruling reinforces the principle that statutory definitions must be interpreted literally. The term 'programme producer' under Section 65(86b) is not a catch-all for any entity involved in programme distribution - it requires a principal-agent relationship in production. This limits the scope of service tax to commissioned productions only.
Future assessments must verify VAT compliance before imposing service tax. Tax authorities can no longer assume that receipt of consideration for programme assignment automatically triggers service tax liability. Practitioners should advise clients to maintain clear documentation of copyright assignment agreements and VAT payment records to preempt disputes.
The judgment also signals a broader judicial trend of recognizing intellectual property as goods under Indian tax law, aligning with global commercial realities and reducing regulatory overlap.
