In W.P.Nos.3354, 5098 of 2020 & 29286 of 2022-MAD HC- Assumption of jurisdiction by Officials of DGGI is valid, says Madras HC while dismissing petitions filed by music composers A.R.Rahman, G.V.Prakashkumar & Santhosh Narayanan against SCN issued by GST Dept proposing to levy service tax
Justice Anita Sumanth [02-02-2023]

Read Order: M/S.AMIRTA INTERNATIONAL INSTITUTE OF HOTEL MANAGEMENT AND ORS V. THE PRINCIPAL COMMISSIONER OF CGST & CENTRAL EXCISE AND ORS 

LE Correspondent

Chennai, February 7, 2023: Noting that the practice and procedure, both pre and post GST are consistent and involve participation of the officer of the DGGI in issuance of show cause notices, the Madras High Court has dismissed the petitions filed by renowned music composers A.R.Rahman, G.V.Prakashkumar & C.R.Santhosh Narayanan challenging the Notices which proposed levy of service tax on transfer of copyright in musical work for the period April, 2013 to June, 2017

Referring to the  Notifications/Circulars F.No349/75/2017 – GST Circular No. 31/05/2018 dated February 9, 2018 on the subject of designation of Proper Officer under Sections 73 and 74 of the CGST and IGST Acts 2017 wherein it has been mentioned that the Superintendents of Central Tax shall also be empowered to issue show cause notices and orders under section 74, the Single-Judge Bench of Justice Anita Sumanth said, “Thus, the duality in the adjudicatory process continues.”

The petitioner was engaged in conducting professional and Executive Diploma courses in Hotel Management. It was in receipt of a show cause notice dated August 30, 2018 issued by the Director General of GST Intelligence proposing to levy service tax for the period January 1, 2013 to June 30, 2017 upon the premise that the activity carried on by it amounts to service as defined under Section 65B(44) of Finance Act, 1994, as amended in 2012.

According to the petitioner, the courses that it offered  were a  part of a curriculum recognised by law including vocational courses covered in Group15 to Schedule-I of the List of Designated Trades under the Apprentice Act, 1961. The allegations in the show cause notice were to the effect that the petitioner was not certified to enjoy recognition from the AICTE/UGC or any applicable authority.

The petitioner contended that the proceedings were without jurisdiction as there was no provision under which the DGGI could have drawn power to have issued the show cause notice, legitimately. 

In another Writ petition , the petitioner,A.R.Rahman- a music composer, assailed an order-in-original dated October 17, 2019 .  Prior thereto, he was in receipt of show cause notice issued by the Additional Director General of GST (Intelligence).

The notice proposed imposition of service tax under Section 66E(c) dealing with temporary transfer, or permitting the use or enjoyment of any intellectual property right. The petitioner reiterated that he was the sole and absolute owner of the copyright that subsists in the musical works composed by him. Being the holder of such copyright, he assigned them to the film producer under agreements that he executed with them, in terms of which the producer could exploit that copyright.

The petitioner in the third petition, C.R.Santhosh Narayanan, whio is also a composer of music and background score for films, challenged an order-in-original dated August 30, 2022 . Prior thereto, he had received a show cause notice relating to the period 2013-14 to 2016-17 and calling for various particulars in respect of the aforesaid period.

After extracting various provisions of the Service Tax Act, Rules and Copyright Act, the authority held that the petitioner had imported taxable services from outside India remitting consideration and foreign exchange. He thus fastened liability on the receipts from such services under Section 68(2) of the Act read with relevant Service tax and Point of Taxation Rules as well as Notification 30/2012 ST dated June 20, 2012. 

The issue that fell for consideration before this Court was as to whether, the Notifications under which the DGGI/officials of the Intelligence Department had drawn sustenance to issue show cause notices for assessment under the Finance Act 1994, survive the transition from the erstwhile regime of taxation (Service tax) to the new regime of Goods and Service tax (GST), effective from July 1, 2017  and as a consequence, whether the assumption of jurisdiction by the DGGI for issuance of show cause notice under Finance Act 1994 read with Section 174(2) of the CGST Act, is proper in law.

In view of the same, the Court noted, under the erstwhile Service tax regime, the assumption of jurisdiction for the purposes of issuing show cause notices and passing orders, came to be dealt with by few Notifications. Under Notification No.22/2014, the Board had appointed officers of the Directorate General of Central Excise Intelligence and Directorate General of Service Tax, as Central Excise officers, investing them with all powers under Chapter V of Finance Act, 1994 and the rules made thereunder throughout the territory of India.

In terms of Notification No.2/2015-ST, the Board had specified that the Principal Director General of Central Excise Intelligence shall have jurisdiction over the Principal Commissioners of Service Tax or the Commissioners of Central Excise as the case may be for the purpose of assigning Show Cause Notices issued by the Directorate General of Central Excise Intelligence, for adjudication, by such Principal Commissioner of Service Tax or the Principal Commissioners of Central Excise or the Commissioners of Service Tax or Commissioners of Central Excise, the Court noted. 

Vide Notification 14 of 2017, the Central Government directed that the powers exercisable by the Central Board of Excise and Customs under Rule 3 of the Central Excise Rules, 2002 and Rule 3 of the Service Tax Rules, 1994 may be exercised by the Principal Chief Commissioner of Central Excise and Service Tax or the Chief Commissioner of Central Excise and Service Tax for the purpose of assignment of adjudication of notices to show cause issued under the provisions of the Central Excise Act, 1944 or Finance Act, 1994 to Central Excise Officer subordinate to them, the Court further noted. 

The case of the petitioners was  that the aforesaid Notifications under which the officials of the DGGI  assumed jurisdiction had not been expressly saved under Section 174(2) of the CGST Act and hence the impugned orders/notice were non-est in law. Section 173 of the CGST Act 2017 omitted the Chapter V of Finance Act 1994, and Section 174.

It was noted by the Court that Section 6 of the General Clauses Act, 1897 which is also made applicable to the saving of the erstwhile provisions, states that where this Act, or any Act of Parliament or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears. 

Reference was placed on the case of Brihan Maharashtra Sugar Syndicate Ltd. V. Janardan Ramchandra Kulkarni and others and State of Punjab V. Mohar Singh.

In answering the legal issue therefore, and interpreting the provisions of Section 174 of the CGST act, this Court was guided by the consistency in procedure adopted/followed by the authorities and for this reason, the Court examined the procedure followed in adjudication, including issuance of show cause notices, post the introduction of GST.

In pursuance of the same, the Court took into consideration Section 3 of the GST. It was further noted, the practice and procedure, both pre and post GST are consistent and involve participation of the officer of the DGGI in issuance of show cause notices.

At the outset, the Court thus concluded by observing that these writ petitions needed to be dismissed and the petitioners were granted liberty to approach the appellate authority by way of statutory appeal.