The Madras High Court has recently rejected the pleas of three well-known music composers, AR Rahman, G V Prakash Kumar, and Santhosh Narayan, who challenged the proceedings initiated by the Commissioner of the GST Department, holding that, Show Cause Notice issued by Director General of GST Intelligence for service tax on permanent transfer of copyright in musical works is valid.
The department, seeking to impose a service tax on the transfer of copyright in musical works for the period between 2013 and 2017 . The composers argued that they were exempt from this tax due to their receipt from temporary transfer or use of copyright, as stated in clause (15) of Notification No. 25 of 2012. Additionally, they claimed that they were exempt as a service under Section 65B(44) of the Finance Act 1994.
The case was heard by Judge Anita Sumanth, who recognized that a thorough review of the agreements between the composers and third parties was required to resolve the dispute. The judge concluded that this examination was better suited to the authority rather than the writ court, which could not interpret the contractual clauses.
The petitioners also questioned the authority of the Director General of GST Intelligence to issue a show cause notice under the Finance Act 1994 and the CGST Act’s Section 174(2). They argued that the power of the DGGI to issue the notice was legally invalid as the notifications granting this power were not explicitly saved with the implementation of the GST.
Section 174 (2) of the Central Goods and Services Tax (CGST) Act deals with the powers of the Director General of Goods and Services Tax (GST) Intelligence. According to this section, the Director General has the authority to conduct investigations and issue show cause notices in cases of suspected tax evasion and other similar offenses under the GST regime.
However, after examining the proviso to Section 174 (2) (c), which states that repeal will not affect rights, privileges, obligations, or liabilities acquired, accrued, or incurred under the old act, the High Court ruled that the assumption of jurisdiction by the DGGI was valid.
In conclusion, the Madras High Court dismissed the petitions filed by composers AR Rahman, G V Prakash Kumar, and Santhosh Narayan and ruled that the proceedings initiated by the Goods and Services Tax Department were valid. The composers were given the opportunity to follow the appeals process, but the interpretation of contractual clauses was left to the authority.
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