Actor Dhanush’s Wunderbar Films has filed a writ petition in the Madras High Court challenging a show cause notice issued to it by the Directorate General of GST Intelligence on August 11, 2017 demanding service tax to the tune of ₹2.59 crore under the head of ‘copyright services’ along with proposed penalty for the assessment years 2013-14 and 2014-15.
Justice M. Duraiswamy on Monday ordered notices returnable by three weeks to the Principal Additional Director General in the office of the Directorate General, Chennai zonal unit as well as the Principal Commissioner of CGST and Central Excise.
In an affidavit filed on behalf of Wunderbar Films, its director S. Vinod Kumar claimed that service tax could be demanded only if the copyright holder had transferred the rights temporarily for a fixed tenure and not perpetually.
He also contended individual rights such as satellite rights, dubbing rights and remaking rights could be transferred to different individuals.
Transfer of copyright
Further pointing out that permanent transfer of copyright had also been brought under the ambit of Goods and Services Tax (GST) only from July 1, 2017, the petitioner firm said the demand made from it pertained to the financial years 2013-14 and 2014-15 when only temporary transfer of copyright had been subjected to payment of service tax.
It was further claimed that the Principal Additional Director General had come to an erroneous conclusion that the petitioner firm had transferred the copyrights permanently only to evade payment of service tax. The reasoning given by the official for such a conclusion was that a maker of a film could claim copyright only for 60 years.
Though any copyright could be claimed only for 60 years, Section 19 (5) of the Copyright Act of 1957 stated that if the period of assignment of a right was not mentioned in the agreement, then the period would be deemed to be five years. Therefore, it was imperative for a copyright holder to mention the period for which he was transferring the right, the petitioner claimed.
On the official’s other reasoning that Wunderbar Films had transferred only select rights of movies produced by it and had retained ownership with respect to other rights related to the same movies, the petitioner firm said the law does not prohibit a copyright holder from transferring different rights pertaining to a movie to different individuals.
All that mattered was whether such rights were transferred permanently or temporarily, it added.
