Section 65(99) read with section 65(105)(zj) of the Finance Act, 1994 – Sound recording studio or agency. The assessee operated a sound recording studio and had undertaken activities of conceptualisation, script preparation, identification of voice, actual recording, editing and ultimate development of a package ready for broadcast.
Whether since sound recording was part of activity, assessee would not be covered under category of ‘sound recording studio or agency’?
Every taxable service may be an end in itself to a consumer. There is, however, no bar on such a taxable service being an input for another service. That is the nature of a commercial supply chain. It is seen from the Circular No. B-II/1/2000-TRU, dated 9-7-2001 that the activity of sound recording itself forms the core of the service to be rendered to a client for bringing the activity within the fold of section 65(105) (zj). In the instant case, the assessee undertakes the conceptualisation, the script preparation, identification of voice, actual recording, editing and ultimate development of the entire as a package ready for broadcast and it is for this entire range of activities that the compensation is made by the client. Undoubtedly sound recording is part of activity, but it does not make for whole of the activity or the entirety of the activity. Nor can the consideration be dis aggregated to value the sound recording undertaken in pursuance of the contract. The activity of the assessee is clearly not that of sound recording per se. As the scope of contract, the consideration of which is sought to be taxed, extends well beyond sound recording in both the directions, the proposed classification would not be tenable for levy of the tax. Accordingly, the impugned order deserved to be set aside and the assessee is not liable to tax under sound recording agency service.
Circulars and Notifications: Circular No. B-II/1/2000-TRU, dated 9-7-2001
Citation: [2018] 96 taxmann.com 313 (Mumbai – CESTAT)