The Tribunal determined that the marketing activities related to music rights do not constitute taxable services, as these activities primarily benefit the appellants rather than the assignors, negating liability for service tax.

PER : M.M. PARTHIBAN

This appeal has been filed by M/s Zee Entertainment Enterprises Limited, Mumbai (herein after referred to, for short, as “the appellants”) assailing the Order-in-Original No. 10/AKP/COMMR/A-III/2023-24 dated 18.07.2024 (hereinafter referred to, for short, as “the impugned order”) passed by the Commissioner of CGST & Central Excise, Audit-III, Mumbai.

2.1 Brief facts of the case are that the appellants herein are engaged inter alia, in the business of broadcasting and operating various Television Channels viz., Zee TV, Zee Movies, Zee Pictures, Zee Music and other channels in regional languages. The appellants are also providing taxable services under various categories such as Broadcasting services, Video production agency/video take production service, Advertising agency services, Copyright Service, Business Auxiliary Service, Renting of Immovable Service, Cable operator services, Sponsorship services etc. and for this purpose, they got themselves registered with the jurisdictional service tax authorities under Service Tax Registration No. AAACZ0243RST001.

2.2 The appellant’s primary business is related to broadcasting and operation of various TV Channels, for which they earn subscription income from consumers through cable operators/MSOs and such income is accounted under the head ‘advertisement and cable operation service’, on which they duly discharge the service tax liability. During the disputed period, the appellants had entered into agreements with the producers, registered copyright holders, individual artists, etc., (hereinafter referred as the "assignors") who are the owners / copyright holders of various songs in movies / albums, single songs. In terms of the agreement entered with such persons, the appellants receive the rights to distribute/ value monetize such songs to earn revenue and become the right holder. The copyright assigned to the appellants is exclusive for the entire term of the copyright. The rights granted are generally global rights. On sale of the rights to the appellants by the producers/assignors, the appellants pay for the rights charges along with service tax, as reflected in the invoice issued by them.

2.3 As per the agreements entered into between the appellants and the producers/assignors, aforesaid music rights are sold on the consideration of Minimum Guarantee (MG) plus a revenue share of the profit earned from the monetization / value accretion on such Music rights. The revenue share is termed as ‘overflow’ in the trade parlance. Further, as a part of such agreement, the appellants also incur certain expenditure for marketing and promotion of the songs/rights, at their discretion or as per their requirement, and the same is deducted from the gross revenue earned, for computing the Overflow income.

2.4 Letter dated 04.07.2019 was received from Mumbai Audit-III Commissionerate by the jurisdictional service tax authorities, informing that various Film Production Companies (FPCs), for assigning copyrights of such music for theatrical or non-theatrical distribution, have entered into commercial agreements with various persons, such as the appellants, known as ‘assignees’. Under such agreement, the FPCs/assignors grant certain rights to assignees for commercially exploiting the music of the movie for which assignees agree to pay specified amounts to FPC. Further, the audit also found that such agreement also stipulate that assignees shall spend a specified amount for the purpose of promotion, marketing, publicity, logistics and other operational expenses of the film and film music across all media. The department had interpreted that since the marketing and publicity cost is allowed to be retained by the appellants from the assignments rights/ royalty earned by them from selling the mus