The Madras High Court on Thursday, February 2, 2023 dismissed writ petitions filed by music composers A.R. Rahman, C.R. Santhosh Narayanan and G.V. Prakash Kumar challenging the proceedings initiated against them on the charge of not having remitted service tax in full by suppressing various receipts between 2013 and 2017.
Justice Anita Sumanth, however, granted liberty to Mr. Rahman and Mr. Narayanan to file statutory appeals within four weeks challenging the demand of tax with penalty. The appellate authorities under Central Goods and Services Tax (CGST) Act of 2017 were directed to entertain the appeals without reference to limitation period.
Pointing out that Mr. Kumar had approached the court prematurely challenging the show cause notice issued to him by a Joint Director in the Directorate General of GST Intelligence, the judge permitted him to file his reply to the notice before the officials concerned within four weeks and take the matter forward in accordance with law.
The judge said the issues raised by the writ petitioners on merits required a study of voluminous records including the agreements which the three music composers had signed with producers of various movies between 2013 and 2017. Such an exercise could not be undertaken in the writ proceedings, she added.
“It is best that such issues be decided by the authorities who can call for relevant information, including the agreements, from the petitioners for their appreciation. Interpretation of contractual clauses is not a matter that should concern this court,” Justice Sumanth wrote in the common judgment passed on all three writ petitions.
She also stated that the petitioners had not produced the agreements or other documents before the court for appreciation and therefore, it was best for the appellate authorities to take a decision with respect to the nature of the assignment of copyrights under those agreements with the film producers.
In his affidavit, Mr. Rahman had claimed that the Commissioner of GST and Central Excise had initiated the proceedings against him and demanded ₹13.58 crore on a wrong presumption that the producers of the movies should be considered as owners of copyright of his musical works created on the basis of contractual agreements.
He relied upon Section 13(1)(a) of the Copyright Act of 1957 and claimed that the composer would be the sole and absolute owner of copyright on songs as well as background score composed for the movies produced by others. He said that permanent transfer of copyright could not be termed as a service liable for tax.
He also stated to have been paying service tax only for sound recording services. In a counter affidavit filed through Central government senior standing counsel Rajnish Pathiyil, the Commissioner said, Mr. Rahman had created an artificial segregation of his work and paid service tax only for 10% to 15% of total consideration received by him.
The Commissioner claimed that the composer had not transferred absolute copyright of his work to the film producers. Instead, he had retained certain rights such as right for public performance of his work and also to receive publishing royalties from across the world except India and Pakistan.
“Any legally enforceable right retained by the petitioner disqualifies such assignment as absolute transfer... It is not an absolute transfer but a mere temporary transfer,” the Commissioner had contended.