Custom, Excise & Service Tax Tribunal
Pvs Multiplex India Pvt Ltd vs Ce & Cgst Meerut-I on 1 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70092 of 2019
(Arising out of Order-In-Appeal No.MRT-EXCUS-000-APPL-MRT-441-2018-19,
dated-02/01/2019 passed by Commissioner (Appeals) CGST, Meerut)
M/s PVS Multiplex India Pvt. Ltd. .....Appellant
(328, Kishanpura, Baghpat Road, Meerut (U.P.) 250002)
VERSUS
Commissioner, Customs, Central Excise & Service Tax,
Meerut ....Respondent
(2500004)
APPEARANCE:
Shri Vineet Dubey, Advocate for the Appellant
Shri A.K. Choudhary, Authorized Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.-70367/2024
DATE OF HEARING : 04.03.2024
DATE OF DECISION : 01.07.2024
SANJIV SRIVASTAVA:
This appeal is directed against order in appeal No
MRT/EXCUS/000/APPL-MRT/1441/2018-19 dated 02.01.2019. By
the impugned order following has been held:
"7. In view of above discussion and findings, both the
appeals bearing No. 29-ST/APPL-MRT/MRT/2018 dated
28.02.2018 filed by the department and No. 30-ST/APPL-
MRT/MRT/2018 dated 05.03.2018 filed M/s. PVS Multiplex
India Ltd., 328 Kishanpura, Baghpat Road, Meerut. (U.P)
against the Order-in-Original No. 12/AC/Div.-I/MRT/2018
dated 28.12.18 are dismissed."
2.1 Appellant is having Service Tax Registration No. AACCP8168
RST001 for providing "Renting of Immovable Property Service"
2 Service Tax Appeal No.70092 of 2019
falling under erstwhile Section 65(105) (zzzz) of the Finance
Act, 1994 ("the Act").
2.2 Appellant was also engaged in providing services of
screening of films etc., in his multiplex, on revenue sharing
basis, to the distributors of the films, He was, not paying Service
Tax on the services provided in connection with the screening of
the films.
2.3 The department had issued a show cause notice (SCN)
dated 12.09.2014 for the period 2009-10 to 2012-13,
demanding, inter-alia, Service Tax amounting to Rs.
72,92,717/- in respect of screening of films under the category
of Business Support Service, which was confirmed vide order in
original dated 15.03.2016, against which the appellant had
preferred an appeal before the CESTAT, which was decided vide
Final Order No. ST/A/71279/2017-CU(DB) dated 29.08.2017
holding as follows:
7. Having considered contentions and on perusal of the facts
on record, we are satisfied that there is no dispute of ST Appeal
No. 70563/16 fact that the appellant have been screening films in
their multiplex on Revenue Sharing basis, which is undisputed
finding recorded by the ld. Commissioner in the impugned order.
Accordingly, we hold that the appellant is not liable to pay Service
Tax for Screening of Films and payments to distributors in their
theatre We also take notice that the appellant have disclosed the
gross amount received from sale of tickets or exhibition of films in
their profit and loss account on the credit side and have shown
the amounts paid to the distributors on the debit side under the
head 'film software expenses. So far the other head of service is
concerned, we allow this appeal by way of remand to the ld.
Commissioner, So as to reconcile the payments made by the
tenants for the period prior to 30/09/2011. The appellant is also
directed to reconcile their accounts and if any amount is payable
by them for the period subsequent to 30/09/2011, calculate the
same and after depositing the tax, if any, intimate to the
Adjudicating Authority. As regards the other issue regarding
differential tax demanded Rs.56,114/- as different accounting
method in the financial accounts (accrual basis) and ST-3 return,
3 Service Tax Appeal No.70092 of 2019
which was on receipt basis, we remanded to the ld. Commissioner
to reconcile and direct the appellant to provide the calculation,
and to examine the same and be considered in accordance with
law.
Thus, the appeal is allowed in part and remanded in part as
indicated herein above. The appellant shall be entitled to
consequential benefits in accordance with law. We also take
notice of the fact that the amount of Rs 22,21,130/- was
deposited by the appellant under VCES Scheme, the
appropriation for the same have been granted by the ld.
Commissioner in the impugned Order in Original."
2.4 SCNs dated 21.04.15 & 22.03.16 for demand of Service
Tax of Rs. 26,99,899/- and Rs. 21,97,635/- respectively for the
subsequent periods of 2013-14 and 2014-15 on the same issue
were issued.
2.5 Both the show cause notices were adjudicated by common
order in original dated 29.12.2017 holding as follows:
"ORDER
(i) I demand and order to recover Service Tax amounting to
Rs. 26,99,899/- [Service Tax: Rs 2621252/-, Edu Cess:
Rs 52425/-, SHE Cess: Rs 26213/-] and Rs. 21,97,635/-
[Service Tax: Rs 2133625/-, Edu Cess: Rs 42673/-, SHE
Cess: Rs 21337/-] for the period 2013-14 & 2014-15,
respectively, from the party under Section 73 (1) of the
Finance Act, 1994 along with interest on above said
amount of Service Tax, at appropriate rate, from the
party in terms of Section 75 of the Finance Act, 1994.
(ii) I however drop the proceedings for imposing penalty."
2.6 This order was challenged by both appellant and revenue
before the Commissioner (Appeal). Both the appeals filed by
revenue and the appellant were disposed of by the impugned
order.
2.7 Aggrieved appellant has filed this appeal.
2.8 Appeal filed by the revenue has been dismissed vide Final
Order No 71696/2019 dated 04.09.2019 on the ground of
4 Service Tax Appeal No.70092 of 2019
monetary limit prescribed by F No 390/Misc/116/2017-JC dated
22.08.2019 for filing the appeal by revenue before the CESTAT
3.1 We have heard Shri Vineet Dubey, Advocate on the basis
of Authorization (dated 23.01.2024 filed in court on 04.03.2024)
given by Shri Harbir Singh, Advocate for the appellant and Shri
A. K. Choudhary, Authorized Representative for the revenue.
3.2 Arguing for the appellant learned counsel submits that:-
The appellant had not provided any support service to the
film distributor as such there was no relevance of pre-
negative service era.
In case of Inox Leisure Ltd. [Final Order No A/85216/2022
dated 14.03.2022] after taking note of the order of
Allahabad Bench in the case of appellant the issue has
been considered for the period July 2012 to 2014, and
matter has been decided again in favour of the assessee.
The ground taken by the Commissioner (Appeal) was
totally out of context.
Hon'ble Supreme Court has vide order dated 28.02.2022
dismissed the appeal filed by the revenue against the
order of CESTAT in case of Inox Leisure Ltd., wherein the
same issue was involved.
As matter is no longer res-integra the appeal should be
allowed.
3.3 Learned authorized representative reiterated the findings
recorded in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows:
"6. I have carefully gone through the facts and records of the
case as well as the submissions made by the appellant no. 2. I
find that the adjudicating authority has confirmed the demand
by observing that the activity of exhibition of film by the
appellant no. 2, on revenue sharing basis with the distributor, is
5 Service Tax Appeal No.70092 of 2019
taxable service as there is no exemption nor the same is under
negative list as declared in Section 66D of the of the Act. As per
the arrangement made between the appellant no. 2 and the
distributor, it is seen that there was an understanding to share
revenue/profits in a pre-set percentage of the entire box office
collection of the movies supplied by the distributor and screened
in appellant's theatre and in such cases, the two parties to the
said arrangement were not transacting on a principal-to-principal
basis but were conducting business together as constituent
members of a partnership having mutuality of interest and
sharing common risks and rewards in a pre-determined manner.
There is no dispute that the appellant no. 2 constructed
multiplex for screening of movies/films and the distributor of
films engaged appellant no.2 for screening of films purchased
by him from producers on a consideration agreed by him. The
contention of the appellant no. 2 that his appeal against the
earlier demand was allowed by the Tribunal vide Final Order
29.08.2017 and the same was not limited to the period prior to
Negative List Regime i.e. 1st July, 2012 but covered the period
up to March,2013 is countered by the counter objections dated
27.04.2018 filed by the appellant no.1 stating that the above
Final Order of the Tribunal largely pertained to the period of
2009-10 to 2012-13 i.e. pre negative list era while the present
demand covered the period 2013-14 to 2014-15 i.e. post
negative list era. According to appellant no.1, the exemption
granted under SI. No. 47 of Notification No. 25/2012-ST dated
20.06.2012, on the above issue was not applicable for the period
pertaining to 2013-14 to 2014-15 as the same was not available
post implementation of negative list-based tax regime, and was
made available only by inserting Sl. No. 47 in Notification
6/2015-ST dated 31.03.2015 effective from 01.04.2015.
6.1 I find that for the impugned period i.e. from 01.07.2012 to
31.03.2015, the Hon'ble High Court of Madras in the case of
Mediatone Global Entertainment Ltd., Vs Chief CCE, Chennai
reported as 2014 (34) STR (819) (Mad.) held that 'the variant
modes of transaction between the distributor/sub-distributors of
6 Service Tax Appeal No.70092 of 2019
films and exhibitors of movie and thus revenue sharing
arrangement between them are neither in the "Negative List
Șervices" nor exempted'. Hon'ble Tribunal has however not
taken cognizance of the above judgement of the Hon'ble High
Court which was passed much before the Final Order dated
29.08.2017 passed by the Hon'ble CESTAT
6.2 During the relevant period entry at serial no. (j) of the
Section 66D of the Act, reads as under:
66 D. Negative list of services-The negative list shall
comprise of the following services namely:-
(j) "admission to entertainment event or access to amusement
facilities'
Section 65B (24) of the Act (before being omitted w.e.f.
01.06.2015 defined "entertainment event" as under-
'entertainment event' means an event or a performance
which is intended to provide recreation, pastime, fun or
enjoyment, by way of exhibition of cinematographic film e i
circus, concerts, sporting event, pageants, award functions,
dance, musical or theatrical performances including drama,
ballets or any such event or programme."
I find that what was exempted vide Section 66D (j) of the Act
was admission to entertainment events only. The description of
the said entry cannot be interpreted to mean exemption to the
services provided by the appellant no. 2 to the film distributors
for which the consideration was received by him by way of an
arrangement of sharing of revenue generated from the sale of
the tickets. The Hon'ble High Court of Madras, vide the case law
cited supra, observed as under:
50. By a combined reading of Section 66D(j), Notification
Nos. 25/2012-S.T., dated 20-6-2012 and 3/2013-S.T.,
dated 1-3-2013, it is clear that what is exempted is only an
admission to entertainment events or access to amusement
facilities or exhibition of cinema in a theatre. The variant
modes of transaction between the distributor/sub-
7 Service Tax Appeal No.70092 of 2019
distributors of films and exhibitors of movie and the revenue
sharing arrangement between them are neither in the
"Negative List Services" nor exempted.
6.3 I find that the appellant no.2 was engaged by the distributor
for screening of the picture/film/movie (copyrights of which were
with the distributor) for which he was getting a consideration,
on revenue sharing basis, for the screening of the
picture/film/movie belonging to such distributor. It is therefore
evident that the appellant no. 2 was engaged by the distributor
for providing services in relation to exhibition of movie for which
he received consideration. I further find that Notification No.
6/2015-ST dated 01.03.2015 w.e.f 01.04.2015, reads as under:
In exercise of the powers conferred by sub-section (1) of
section 93 of the Finance Act, 1994 (32 of 1994), the Central
Government, being satisfied that it is necessary in the public
interest so to do, hereby makes the following further
amendments in the notification of the Government of India in
the Ministry of Finance (Department of Revenue) No.
25/2012-Service Tax, dated the 20th June, 2012, published in
the Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i) vide number G.S.R. 467 (E), dated the 20th June,
2012, namely
46. Service provided by way of exhibition of movie by an
exhibitor to the distributor or an association of persons
consisting of the exhibitor as one of its members;";
(xii) after entry 46 so inserted, the following entry shall be
inserted with effect from such date as the Central
Government may, by notification in the Official Gazette,
appoint, namely :-
47. Services by way of right to admission to,
exhibition of cinematographic film, circus, dance, or
theatrical performance including drama or ballet;
From the above, it is evident that only from 01.04.2015 onwards
the services provided by way of exhibition of movies by an
8 Service Tax Appeal No.70092 of 2019
exhibitor to the distributor or an association of persons
consisting of the exhibitor as one of its members were
exempted from payment of Service Tax. For the present demand
no such exemption was available.
6.4 As regards the appellant no. 2's contention of failure of the
adjudicating authority to classify the category of taxable service
and no mention of Negative List exemption in the SCN issued
after 1st July, 2012, I find as per Section 65B(44) of the Act
inserted by the Finance Act, 2012, w.e.f 01.07.2012 "Service"
means any activity carried out by a person for another for
consideration, and includes a declared service and shall not
include................... Therefore, classification of taxable service
was no more required. I find that the SCNs speak of, inter alia,
contravention of the provisions of section 66B of the Act which
states that 'there shall be levied a Service Tax other than those
specified in the negative list. From the above it is evident that
the demand of the Service Tax has been raised by appropriate
reference to the applicable provision of law. The contention of
the appellant no. 2, regarding this point is therefore not
tenable."
4.3 From the perusal of the show cause notices which were
issued to the appellant, it is quite evident that these show cause
notices have been issued on the basis of the provisions of the
Finance Act, 1994 as they existed before 01.07.2012, i.e. prior
to introduction of levy of service tax on the services other than
those specified in the negative list or exempted. The relevant
para of the show cause notice dated 29.03.2016 are reproduced
below:
"8. And whereas, the party is owner of three theaters and is
engaged in providing the Service of screening of film supplied
by a film distributor, which falls under any of the taxable
service category of "renting of immovable property" or
"Business Support Service" depending "Pon the arrangement
between the film distributor and theatre owner, as clarified
vide Board's Circutar No. 109/03/2009 dated 23d February,
9 Service Tax Appeal No.70092 of 2019
2009, This issue was further clarified vide Circular No.
148/17/2011-St dated 13-12-2011
9 As per above said clarifications and facts of the case, it
came to notice that in the balance sheets, the amount
received from screening of film has been shown as theatre
income and payment to the film distributor has been shown as
software expenses. It further appeared that the party had
been showing the films on revenue sharing basis without
transfer of copyright in their favour, which qualifies the
taxable condition and thus the party appear liable to pay
service tax on exhibition of film on the amount received under
revenue sharing basis as provider of Business support service.
10 Further, the party has shown "A.C. Receipts (Theatre)" and
"Maintenance Charges" in their Balance sheet, which they are
collecting as theatre collection and expensing it for repairing &
maintenance of "Air Condition" and "Theatre" respectively.
This appear to have been done with the sole purpose of
bifurcating the amount of sale of movie tickets, i.e. Theatre
Receipt, A.C. Receipts (Theatre) and Maintenance Charges
receipts. It appeared that the "A.C Receipts (Theatre)" and
"Maintenance Charges" receipts is retained in full by the
exhibitor (Theatre Owner) while the remaining amount of
income on account of sale of movie tickets is being shared by
each of the persons, which appeared liable to Service Tax
under the category of Business Support Service" as per above
said Circulars issued by CBEC
11. In view of above facts, the amount of Tax Dues not
paid/short paid by the party, under various categories of
services is summed up as under:
[Figure in Rupees]
S Name of Service Service Tax not paid/short
No paid inclusive of Cess
1 Sale of space or time for advertisement 1,83,214.00
2 Renting of Immovable Property 15,98,338.00
3 Amount claimed as Pure Agent which was in fact 20,99,179.00
Renting of Immovable Property
4 Amount shown received as commission on sale 23,13,431.00
10 Service Tax Appeal No.70092 of 2019
which was in fact Renting of Immovable property
5 Screening of film supplied by a film distributor 72,44,110.00
falling under the category of Business Support
Service
TOTAL 134,38,272.00
12. And whereas, on the above said issues and for the
period 2008-09 to 2012-13, a SCN bearing C.No. V(15)
Off/ Adj-l/ ST/-230/ 2013 dated 12.09.2014, has been
issued to the party, by the Commissioner, Central
Excise, Meerut -1, Meerut and another SCN bearing C.No
V(15)Off/Adj./ST/97/2015/752 dtd 21.04.2015 for
demand of Service Tax amounting to Rs 26,99,890/- for
the period 2013-14 has been issued to the party, by the
Joint Commissioner Central Excise & Service Tax
Commissionerate Meerut (RUD-1).
13. And whereas, the jurisdictional Superintendent of Service
Tax vide letter C.No. V(30]SCN/ST/R-I/DMRT/PVS/303/2014
dated 25.02.2016 (RUD-2) requested the party to provide the
details relating to the amount received during the financial
year 2014-15 relating to Business Exhibition service, Sale of
space or time for advertisement, Renting of immovable
property amount claimed as pure agent, amount shown
received as commission on sale, Screening of film (Theatre
receipt) etc. The party vide letter dated 07.03.2016 (RUD-3)
provided the Balance Sheet of Financial Year 2014-
14. Whereas, during the course of scrutiny of ST-3 returns for
the period April,2014 to March,2015 (RUD-4) with the
balance sheet for the year 2014-15 along with above said
details provided by the party, it was observed that the party
has paid Service Tax on the taxable value of Rs 1,50,60,754/-
under the category of "Renting of immovable property".
However, they have not paid any Service Tax on amount
charged for screening of films, supplied by film distributor
falling under the category of Business Support Service.
15. ....
11 Service Tax Appeal No.70092 of 2019
16. And whereas, the party is the owner of three theaters and
they are engaged in providing the Service of screening of film
supplied by a film distributor. As per Board's Circular No
109/03/2009 dated 23' February, 2009, it has been clarified
that the activity of screening of film supplied by a film
distributor would fall under any of the taxable service category
of 'renting of immovable property" or 'Business Support
Service' depending upon the arrangement between the film
distributor and theatre owner
17 Based on the representations received wherein it has been
requested to clarify on the taxability of consideration earned
by the distributors/sub-distributors/area distributors of Indian
& Foreign films in the form of 'revenue share' from the
exhibitors of the movie, and on revenue retained as
percentage by the exhibitors of the movie from the sale of
tickets, the C.B.E.C. issued Circular No. 148/17/2011-ST
dated 13-12-2011 clarifying the issue, in following term:
Para 10 of the aforesaid Circular dated 13-12-2011, states as
under:
"the arrangements entered into by the distributor or sub-
distributor or area distributor etc. and the exhibitor or theatre
owner etc, in exhibiting the film produced by the oroducer, the
original copyright holder, the arrangements and their
respective service tax classification is tabulated as under:
Type of Movie exhibited on Service Tax Implication
Arrangement whose account
Principal-to- Movie being exhibited by Service tax under
Principal Basis theatre owner or copyright service to be
exhibitor on his account provided by distributor
-i.e. The copyrights are or sub-distributor or area
temporarily transferred distributor or producer
etc., as the case may be
Movie being exhibited on Service Tax under
behalf of Distributor or Business Support Service
Sub- Distributor or Area / Renting of Immovable
Distributor or Producer Property Service, as the
etc. - i.e. no copyrights case may be, to be
are temporarily provided by Theatre
transferred Owner or Exhibitor
Arrangement under Service provided by each of the person i.e. the 'new
unincorporated entity'/ Theater Owner or Exhibitor / Distributor or
12 Service Tax Appeal No.70092 of 2019
partnership/ joint/ Sub-Distributor or Area Distributor or Producer etc.,
collaboration basis as the case may be, is liable to Service Tax under
applicable service head
18. In the above said Circular, it is further clarified that: -
"It is understood that the Circular dated 23.02.2009 has
been misinterpreted to exclude all "revenue sharing'
arrangements from the levy of service tax: Remuneration
or .payment arrangements on basis of fixed or revenue
sharing or profit sharing or hybrid ◦ versions of these may
exist. However, the nature of transaction determines the
leviability of service tax.
Each case may be looked into on its merits and decision be
taken on case to case basis"
19. And whereas, from the above clarification, it came to
notice that the activity of screening of film supplied by a film
distributor falls under any of the taxable service category of
"renting of immovable property" or Business Support Service'
depending upon the arrangement between the film
distributor, and theatre owner. To ascertain the leviability of
Service Tax on the amount received on account of screening
of film which has been shown in the Balance sheet as Theater
Income, Shri Kalyan Singh, authorized representative of the
party. was inquired in this regard during the course of his
statement dated 18.10.2013 (Reply to Query No. 7). He
stated that there was no written agreement between the party
and the film distributor namely Mukta Movie Distributor and
as per his knowledge, Mukta Movie Distributor purchases copy
right of the film from the film producer and pays the service
tax and exhibits the film in their theatre on revenue sharing
arrangement. From the above fact as tendered by Shri Kalyan
Singh, authorized signatory of the party the following two
facts emerge namely:
A. M/s Mukta Movie Distributor purchased the copyright of
film from producer. Copyright was not purchased by the
PVS Multiplex i.e. exhibitor of film.
13 Service Tax Appeal No.70092 of 2019
B. M/s PVS Multiplex exhibited the film in their theatre on
revenue sharing arrangement on behalf of distributor as
copyright was not transferred to them.
20. The above said facts further gain strength from the
balance sheet where the amount received from screening of
film has been shown as theatre income and payment to the
film distributor has been shown as software expenses
21. As per para 10 of Circular dated 13.12.2011, in the
arrangement "Principal to Principal basis" where the Movie
being exhibited on behalf of Distributor or Sub-Distributor or
Area Distributor or Producer etc.- i.e. no copyrights are
temporarily transferred, the Service Tax Implication is under
Business Support Service / Renting of Immovable Property
Service, as the case may be, to be provided by Theatre
Owner or Exhibitor. In the view of above said circular and
considering the statement of Sh. Kalyan Singh it appears that
M/s PVS Multiplex is showing the films on revenue sharing
basis without transfer of copyright in their favour, which
qualifies the taxable condition as mentioned above. Thus, it
appears that the party is, liable to pay service tax on
exhibition of film on the amount received under revenue
sharing basis as provider of "Business support service"
22. And whereas, in the Balance Sheet (as reflected in
ledger account of the party for the payment made to
Film/Movies Distributor for the period 2014-15), the amount of
share paid to ilm distributor has been shown as Software
Expenses. The details of amount paid to M/s Mukta Movie
Distributor/Movie distributors from the' theater income on
account of the exhibition of movies are tabulated as under:
[Figure in Rupees]
Year Total Amount Amount paid to Film Distributor
Collected as Theater (Shown as Software Expenses in
Receipt Balance Sheet)
2014-15 30600721 14902420
23. Hence, it appears that the party is liable to pay
Service Tax on Rs. 1,56,98,301.00 [Rs 3,06,00,721.00 - Rs.
14 Service Tax Appeal No.70092 of 2019
1,49,02,420.00] for the year 2014-15. The details of the
service tax liability outstanding on the party are elaborated as
under:
[Figure in Rupees]
Year Total Amount Amount Paid to Film Distributor Taxable Amount
Collected (Shown As Software Expenses in of Theatre
Balance Sheet) Receipt
1 2 3 4=(2-3)
2014-15 30600721 14902420 15698301
24. Further, the party has shown "A.C. Receipts (Theatre)"
and "Maintenance Charges" in their Balance sheet. On being
inquired about the same, the party submitted that they are
collecting the said amount in theatre collection and expensing
it towards repairing & maintenance of "Air Conditioner" and
"Theatre" respectively. This appears to have been done with
the sole purpose of bifurcating the amount of sale of movie
tickets i.e. Theatre Receipt A.C. Receipts (Theatre) and
Maintenance Charges receipts. It appears that the "A.C.
Receipts (Theatre)" and "Maintenance Charges" receipt in full
is retained by the exhibitor (Theatre Owner) and the
remaining amount of income on account of sale of movie
tickets is being shared by each of the persons, which appears
liable to Service Tax. From this, it appears that it is not merely
a renting of premises to the distributor but giving the support
service, which is leviable to service tax under the category of
'Business Support Service" as per the Board's above said
Circular.
[Figure in Rupees]
Year AC Receipts (Theatre) Maintenance Charges
2014-15 NIL 2081907
25. In view of the above, it appears that the party is
liable to pay Service tax for the period 2014-15 on amount
retained during the course of providing "Business Support
Service" to film distributor as per chart mentioned below:
[Figure in Rupees]
Taxable Amount of AC Maintenance Total Taxable
Theatre Receipt Receipts Charges Amount
15 Service Tax Appeal No.70092 of 2019
(Theatre)
15698301 NIL 2081907 17780208
Year Total Service Education H.S.Education Total
Taxable Tax Cess (@2%) Cess (@1%) Service
Amount (@12%) Tax
2014- 17780208 2133625 42673 21337 2197635
15
26. It further appears that the party had deliberately and
willfully refrained from showing the amount received on
account of screening of the movie in their ST-3 return with
intent to evade payment of service tax. It appears that the
party has not paid Service Tax to the tune of Rs. 21,97,635/-
[Service Tax: Rs, 21,33,625.00; Edu. Cess: Rs. 42,673.00;
SHE Cess: Rs 21,337.00] (Rupees twenty one lakh ninety
seven thousand six hundred and thirty five only) for the period
2014-15.
27. From above said facts, it appears that the party has
contravened the provisions of Rule 6 of the Service Tax Rules,
1994 read with provisions of Section 66/66B, Section 67 and
Section 68 of the Finance Act, 1994, in as much as they failed
to pay the service tax on the above said taxable services
rendered by them to their clients. Thus, it appears that
Service Tax amounting to Rs. 21,97,635/- [Service Tax: Rs.
21,33,625.00; Edu. Cess: Rs. 42,673.00; SHE Cess: Rs.
21,337.00] (Rupees twenty one lakh ninety seven thousand
six hundred and thirty five only), as detailed in Annexure - A
to this notice, for the period 2014-15, is demandable and
recoverable from them in terms of Section 73(1) of the
Finance Act, 1994 along with due interest there on in terms of
Section 75 ibid.
28. Further, the party has willfully suppressed the value of the
taxable services rendered by them from the department, with
intent to evade the payment of Service Tax and short/not
paid the Service Tax amounting to Rs. 21,97,635/- [inclusive
Edu. Cess and S&H Edu. Cess] as applicable there for, to the
Government exchequer along with interest due thereon, in
contravention of provisions of Rule 6 of the Service Tax Rules,
1994 read with Section 66/66B 67 and 68 of the Finance Act,
16 Service Tax Appeal No.70092 of 2019
1994. Accordingly, it appears that the party is liable for
penalty in terms of Section 76 of the Finance Act,1994, for
contravention of above said provisions."
4.4 From the above it is quite evident the show cause
notice has not made any averment in respect of the definition
of Service as per Section 65 B (44) as introduced by the
Finance Act, 2012 or about the negative list. Thus we have no
hesitation in holding that the impugned order has travelled
beyond the show cause notice while upholding the demand
made. We also do not find any relevance of the decision of
Hon'ble Madras High Court in case of M/s Mediatone Global
Entertainmenmt Ltd [2014 (34) STR 819 (Mad)] relied in the
impugned as the said decisions has considered the provisions
as introduced after introduction of negative list. The show
cause notice defines the strict boundaries for adjudication and
subsequent proceedings. Thus any order which travels beyond
the boundaries laid down by the show cause notice is bad in
law and needs to be set aside for the same reason.
4.5 We also find that the show cause notices have been
issued completely on the basis of the earlier show cause notice
dated 12.09.2014 for the period for the period 2008-09 to
2012-13. Order in original adjudicating the said show cause
notice has been set aside by the Allahabad Bench vide its Final
Order No. ST/A/71279/2017-CU(DB) dated 29.08.2017,
referred in para 2.3 above and the matter remanded back to
original authority for reconsideration of certain demands which
are other than the demands in respect of screening of films
and payments to the distributors in their theatre" . However
the demand in the present two show cause notices is only in
respect of the demands which have been set aside by this
bench vide order dated 29.08.2017
4.6 We also note that issue for the period post
01.07.2012, was considered by the Mumbai Bench in case of
INOX Leisure and bench has vide Final Order No
A/85216/2022 dated 14.03.2022 has held as follows:
17 Service Tax Appeal No.70092 of 2019
"3. The Department issued two show cause notices
dated 14.10.2014 and 13.10.2015 proposing to recover
service tax demand of Rs.65,46,68,211/- along with
the applicable interest and penalty for the period July
2012 to December 2014. It was alleged that the
agreement between the appellant and the distributors
created an Association of Persons so as to undertake
jointly the activities of screening of the films. The
appellant, it was further stated, had provided services
to the Association of Persons which appeared to be
classifiable under "support services of business or
commerce".
8. 'Support services of business or commerce' has been
defined in sub-section 104(c) of section 65 of the Finance
Act to mean as follows:
"65(104c) "Support services of business or
commerce" means services provided in relation to
business or commerce and includes evaluation of
prospective customers, telemarketing, processing of
purchase orders and fulfillment services, information
and tracking of delivery schedules, managing
distribution and logistics, customer relationship
management services, accounting and processing of
transactions, operational or administrative assistance in
any manner, formulation of customer service and
pricing policies, infrastructural support services and
other transaction processing.
Explanation.-- For the purposes of this clause, the
expression "infrastructural support services" includes
providing office along with office utilities, lounge,
reception with competent personnel to handle
messages, secretarial services, internet and telecom
facilities, pantry and security."
(emphasis supplied)
9. It is made taxable under section 65(105)(zzzq) of the
Finance Act which is reproduced below: "65(105)(zzzq)
'taxable service' means any service provided or to be
provided to any person, by any other person, in relation to
support services of business or commerce, in any manner;
10. The issue that arises for consideration is whether the
activity carried out by the appellant would be exigible to
service tax under BSS. To appreciate this, it would be
pertinent to refer to the agreement. The agreement in the
present appeal is almost the same as the agreement in other
appeals that have been decided including that in Inox
Leisure Ltd. It would be seen from the agreement that the
producer/distributor is engaged in the business of production
and distribution of films, while the appellant is an exhibitor
engaged in the business of exhibition of films and
18 Service Tax Appeal No.70092 of 2019
owns/operates a chain of multiplex theatres. The exhibitor
decides which screens would play the motion picture, the
numbers of shows, the show timings and the ticket pricing
including the right to decide on a week to week basis,
whether or not to continue to exhibit the motion picture. The
distributor/producer had granted the exhibitor the non
exclusive license to exploit the theatrical rights of a motion
picture and each party was entitled to conduct its business in
its absolute and sole discretion.
11. In the present case the Department has alleged that the
appellant is providing infrastructure support services to the
producers/distributors of films under BSS.
12. Such an arrangement between a distributor/producer
and an exhibitor of films was examined by a Division Bench
of the Tribunal in Moti Talkies. The Department alleged that
the agreement was for 'renting of immovable property' as
defined under section 65(90a) of the Finance Act. This
contention was not accepted by the Tribunal and it was
observed that the appellant did not provide any service to
the distributors nor the distributors made any payments to
the appellant as consideration for the alleged service. In
fact, it was the appellant who had paid money to the
distributors for the screening rights conferred upon the
appellant. The observations of the Bench are as follows:
"11. It is more than apparent from a bare perusal of
the aforesaid agreements that they have been entered
into between the appellant as an exhibitor and the
distributors for screening of the films on the terms and
conditions mentioned therein. The payments
contemplated under the terms and conditions either
require the exhibitor to pay a fixed amount or a certain
percentage, subject to minimum exhibitor share or
theatre share of effective shows in a week.
xxxxxxxxxxx
16. It is very difficult to even visualise that the
appellant is providing any service to the distributor by
renting of immovable property or even any other
service in relation to such renting. The agreements that
have been executed between the appellant and the
distributors confer rights upon the appellant to screen
the film for which the appellant is making payment to
the distributors. The distributors are not making any
payment to the appellant. Thus, no consideration flows
from the distributors to the appellant for the alleged
service.
xxxxxxxxxxxx
18. It is not possible to accept the reasonings given by
the Commissioner (Appeals) for confirming the demand
19 Service Tax Appeal No.70092 of 2019
of service tax under "renting of immovable property"
for the simple reason that the appellant has not
provided any service to the distributors nor the
distributors have made any payment to the appellant as
consideration for the alleged service. In fact, the
appellant who has paid money to the distributors for
the screening rights conferred upon the appellant. The
Commissioner (Appeals) completely misread the
agreements entered into between the appellant as an
exhibitor of the films and the distributors to arrive at a
conclusion that the appellant was providing the service
of "renting of immovable property." (emphasis
supplied)
13. Similar views were expressed by Division Benches of the
Tribunal in The Asian Art Printers, Shri Vinay Kumar, M/s.
Golcha Properties and Satyam Cineplexes Ltd.
14. What also needs to be noticed is that if the appellant
was providing such a service, it would be the producers/
distributors who would be making payments to the
appellant, but what comes out from a perusal of the
Agreement is that in consideration for the distributor
agreeing to grant to the appellant the license to exploit the
theatrical rights of a motion picture, the appellant would
have to pay such revenue share to the distributor as
provided for in the said clause. In fact, the distributor agreed
to grant to the Appellant the non exclusive license to exploit
the theatrical rights of a motion picture during the term.
15. This issue had come up for consideration before a
Division Bench of the Tribunal in PVS Multiplex India. The
Bench observed that as the appellant was screening films on
revenue sharing basis, the appellant was not liable to pay
service tax on the payments made to the distributors for
screening the films.
"7. Having considered contentions and on perusal of the
facts on record, we are satisfied that there is no dispute
of fact that the appellant have been screening films in
their multiplex on Revenue Sharing basis, which is
undisputed finding recorded by the ld. Commissioner in
the impugned order. Accordingly, we hold that the
appellant is not liable to pay Service Tax for Screening
of Films and payments to distributors in their theatre."
(emphasis supplied)
16. This apart, a revenue sharing arrangement does not
necessarily imply provision of services, unless the service
provider and service recipient relationship is established.
This is what was observed by the Tribunal in Mormugao Port
Trust, Old World Hospitality and Delhi International Airport.
17. In Mormugao Port Trust, the Tribunal explained that
public private partnerships between the Government/Public
20 Service Tax Appeal No.70092 of 2019
Enterprises and Private parties are in the nature of joint
venture, where two or more parties come together to carry
out a specific economic venture, and share the profits arising
from such venture. Such public private partnerships are at
times described as collaboration, joint venture, consortium
or joint undertaking. Regardless of the name or the legal
form in which the same are conducted, they are essentially
in the nature of partnership with each co-venturer
contributing some of the resources for the furtherance of the
joint business activity. The Tribunal held that such public
private partnerships meet the test laid down by the Supreme
Court in Faqir Chand Gulati vs. Uppal Agencies Pvt Ltd [2008
(12) STR 401], for ascertaining whether or not the
arrangement is one of joint venture. The relevant
observations of the Tribunal in Mormugao Port Trust are
reproduced below:
"12 .......................... In our view this arrangement in the
nature of the joint venture where two parties have got
together to carry out a specific economic venture on a
revenue sharing model. Such PPP arrangement are common
nowadays not only in the port sector but also in various
other sectors such as road construction, airport construction,
oil and gas exploration where the Government has exclusive
privilege of conducting businesses. In all such models, the
public entity brings in the resource over which it has the
exclusive right, whether land, water front or the right to
exploit the said land and water front, and the private entities
brings in the required resources either capital, or technical
expertise necessary for commercial exploitation of the
resource belonging to the Government. These PPP
arrangements are described sometimes as collaboration,
joint venture, consortium, joint undertaking, but regardless
of their name or the legal form in which these are
conducted. These are arrangements in the nature of
partnership with each co-venturer contributing in some
resource for the furtherance of the joint business activity.
...................
15. An analysis of this judgment shows that in order to constitute a joint venture, the arrangement amongst the parties should be a contractual one, the objective should be to undertake a common enterprise for profit. Joint control over strategic financial and operative decisions was held to be the key feature of a joint venture. The other obvious feature of a joint venture would be that the parties participate in such a venture not as independent contractors but as entrepreneurs desirous to earn profits, the extent whereof may be contingent upon the success of the venture, rather than any fixed fees or consideration for any specific services.
21 Service Tax Appeal No.70092 of 2019 17 The question that arises for consideration is whether the activity undertaken by a co- venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent.
18. The Civil Appeal filed by the Department (Commissioner vs. Mormugao Port Trust) against the aforesaid decision of the Tribunal was dismissed by the Supreme Court both on the ground of delay as well as on merits and the judgment is reported in 2018 (19) GSTL J 118 (SC).
19. The Circular dated 23.02.2009 issued by the Central Board of Excise and Customs, infact supports the case of the appellant. The relevant portion of the Circular, which is in connection with service tax on movie theatres, is reproduced below:
2.4. The arrangement most commonly entered into between a theater owner and a distributor is that the theater owner screens the movie for fixed number of days under a contract. The proceeds earned through sale of tickets go to the distributor but the theatre owner receives a fixed sum depending upon the number of days of screening. In this arrangement, the advertisement and display of posters etc. is done by the distributor. Under this arrangement, the fixed amount contracted is given to the theater owner by the distributor irrespective of the fact whether the movie runs well or not. However, there is no rental arrangement between the theater owner and the distributor as in the arrangement at paragraph 2.1 above. A view has been expressed that in this arrangement, the theater owner provides 'Business 22 Service Tax Appeal No.70092 of 2019 Support Service' to the distributor and hence is liable to pay service tax on the fixed amount received by the theater owner.
2.5. The matter has been examined. By definition 'Business Support Service' is a generic service of providing 'support to the business or commerce of the service receiver'. In other words the principal activity is to be undertaken by the client while assistance or support is provided by the taxable service provider. In the instant case the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under 'Business Support Service'.
3. In the light of above, it is clarified that screening of a movie is not a taxable service except where the distributor leases out the theater and the theater owner get a fixed rent. In such case, the service provided by the theater owner would be categorized as 'Renting of immovable property for furtherance of business or commerce' and the theater owner would be liable to pay tax on the rent received from the distributor. The facts of each case and the terms of contract must be examined before a view is taken. 4. All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned."
(emphasis supplied)
20. The subsequent Circular dated 13.12.2011 issued by the Central Board of Excise and Customs, apart from the fact that it would not be applicable for confirming a demand for any period prior to 13.12.2011, would also not come to the aid of the Department. The relevant portion of the Circular is reproduced below:
9. Thus, where the distributor or sub-distributor or area distributor enters into an arrangement with the exhibitor or theatre owner, with the understanding to share revenue/profits and not provide the service on principal-to-principal basis, a new entity emerges, distinct from its constituents. As the new entity acquires the character of a "person", the transactions between it and the other independent entities namely the distributor/sub-distributor / area distributor and the exhibitor etc will be a taxable service. Whereas, in cases the character of a "person" is not acquired in the business transaction and the transaction is as on principal-to-principal basis, the tax is leviable on either of the constituent members based on the nature of the 23 Service Tax Appeal No.70092 of 2019 transaction and as per rules of classification of service as embodied under Sec 65A of Finance Act, 1994.
(emphasis supplied)
21. In view of the decision of the Supreme Court in Faqir Chand Gulati and the decision of the Tribunal in Mormugao Port Trust, no service tax can be levied on the appellant under BSS.
22. All the aforesaid issues were also examined at length by a Division Bench of the Tribunal in Inox Leisure Ltd. and the order passed by the Commissioner was set aside.
23. The Department filed Civil Appeal No. 1335 of 2020 (The Commissioner of Service Tax vs. Inox Leisure Ltd) before the Supreme Court and by order dated 28.02.2022, the Supreme Court dismissed the Civil Appeal holding that the Tribunal had taken an absolutely correct view, to which the Supreme Court agreed. The order passed by the Supreme Court is reproduced below:
"No case is made out to interfere with the impugned order passed by the Customs, Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'). The CESTAT has taken an absolutely correct view, to which we agree. Hence, the Civil Appeal stands dismissed."
24. Thus, for all the reasons stated above, it is not possible to sustain the confirmation of the demand by the order dated 16.06.2016 passed by the Commissioner. It is, accordingly, set aside and the appeal is allowed.
4.6 Respectfully following the decision of Allahabad Bench in appellants own case and the decision of Mumbai Bench in case of M/s INOX Leisure we do not find any merits in the impugned order and set aside the same.
5.1 Appeal is allowed.
(Pronounced in open court on 01.07.2024) (P. K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal