Madras High Court Directs Film Producer To Pay ₹1.22 Crore GST Dues To "Saakshyam" Dubbing Rights Buyer

The Madras High Court has directed film production company Shri Abishek Pictures and its partner Abhishek Venkat Nama to jointly and severally pay ₹1.22 crore to SPM Arts LLP towards GST dues arising from the assignment of dubbing rights for the Telugu film Saakshyam.

Justice P.B. Balaji held that the production firm, having received the entire consideration of ₹7.5 crore and agreed to bear the GST liability under the assignment deed, was responsible for paying the applicable tax.

The Court directed the defendants to pay interest at 24% per annum from the date of filing of the suit until the decree, and thereafter at 6% per annum until realisation.

They were also directed to bear the costs of the suit, including those incurred by the GST authorities impleaded in the proceedings.

SPM Arts LLP had entered into a deed of assignment dated February 5, 2018, with Shri Abishek Pictures for the exclusive dubbing rights of Saakshyam in Hindi and other Indian languages, except Tamil, Telugu, Kannada and Malayalam, for a consideration of ₹7.5 crore, inclusive of GST.

According to SPM Arts, it paid the entire consideration before the film's release on July 27, 2018. While the production firm paid GST of ₹37.5 lakh on one invoice, it allegedly failed to deposit a further GST amount of ₹42.85 lakh despite receiving the corresponding consideration.

SPM Arts subsequently received a GST show cause notice in September 2022 demanding the unpaid tax along with interest and penal interest. The total demand was ₹1.22 crore. The firm approached the GST appellate authority and deposited 10% of the demand as pre-deposit.

The plaintiff then filed the commercial suit seeking recovery of the amount from the production firm and its partner, contending that the assignment deed expressly placed the GST liability on them.

The Court examined the assignment deed, invoices, payment records and correspondence between the parties.

It found that the defendants had undertaken to pay GST and that SPM Arts had paid the entire agreed consideration. Their failure to deposit the tax had consequently led to recovery proceedings against the plaintiff.

"Unfortunately, the defendants 1 and 2 have committed default, which has resulted in proceedings being initiated against the plaintiff by the Department. The present suit, however, does not in any manner come in the way of the statutory authorities taking recourse under law and proceed against the plaintiff. The plaintiff, having paid the entire sale consideration, is entitled to seek a recovery of the suit claim which represents the GST arrears together with interest/penal interest", it said.

The Court observed that Shri Abishek Pictures and its partner were responsible for paying the GST dues under the assignment deed.

The Court clarified, however, that the decree would not prevent the GST authorities from proceeding against SPM Arts LLP to recover the unpaid tax, subject to the outcome of the pending appeal.

"..it is clear that the plaintiff has been able to establish that the liability to pay GST amount is clearly on the shoulders of the defendants 1 and 2. However, under Section 16 (2) of Central Goods and Services Tax Act, 2017, it is open to the authorities to proceed against the plaintiff as well, to recover any GST arrears that may be payable by the defendants 1 and 2", the Court observed.

The suit was accordingly decreed in part, with the recovery decree confined to Shri Abishek Pictures and its partner.

For Plaintiff: Advocate R. Sivaraman

For GST Authorities: Advocate I. Dinesh, Additional Government Pleader