The Madras High Court on Wednesday stayed the operation of an order passed by a Commissioner of Goods and Services Tax (GST) and Central Excise on October 17, accusing acclaimed music composer A.R. Rahman of having evaded payment of service tax, and directing him to pay arrears to the tune of ₹6.79 crore, excluding interest, from April 2013 to June 2017, along with a penalty of another ₹6.79 crore.
Justice Anita Sumanth granted the interim stay following a writ petition filed by the composer, challenging the tax demand along with penalty.
In his order, the Commissioner of GST and CE (Chennai South), K.M. Ravichandran, stated that intelligence gathered by the Directorate General of GST Intelligence (DGGSTI) indicated that the composer was not discharging service tax correctly on payments received by him.
Hence, an inquiry was initiated, and it was found that the composer was earning income by composing music for movies, receiving royalties for public performances of his music works, and by conducting live concerts both within the country as well as in foreign nations.
After excluding considerations received in foreign currency directly from the organisers abroad, the official held that all other services were taxable.
‘Wrong assumption’
However, in his affidavit, filed before the court, Mr. Rahman said that the Commissioner had proceeded on a wrong presumption that the producer of a movie should be considered as the owner of the copyright of a musical work. Relying upon Section 13(1)(a) of the Copyright Act of 1957, he 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.
Stating that he assigns all rights on the works created by him in favour of the producer through an agreement, the petitioner said only thereafter, the producer becomes the absolute owner of the copyright on the musical work.
Stating that he had been discharging service tax only for the sound recording services provided by him, the composer said that permanent transfer of copyright could not be termed as a service liable to be taxed.
Further, temporary transfer of copyright was exempt from service tax, in terms of a notification issued by the Centre on June 20, 2012, he contended.
Stating that it was the Additional Director General of GST Intelligence who had issued a showcause notice to him on October 21, 2018, the petitioner said that it was legally impermissible for one authority to issue the notice and direct another authority (Commissioner of GST) to adjudicate the matter thereafter.
