Custom, Excise & Service Tax Tribunal
The Asian Art Printers Sheila Theatre vs Delhi East on 1 September, 2020
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
SERVICE TAX Appeal No. 51688 of 2016
(Arising out of Order-in-Original No. DLI-SVTAX-001-COM-019-15-16 dated
25.01.2016 passed by Principal Commissioner of Service Tax-New Delhi)
M/s. The Asian Art Printers (Sheila ...Appellant
Theatre),
70 Building, Deshbandhu Gupta Road,
Oaharganj, New Delhi- 110055
Versus
Principal Commissioner of Service Tax, ....Respondent
Delhi-I 17-B, IAEA House, IP Estate MG Marg, New Delhi-110002 APPEARANCE:
Mr. B.L.Narasimhan and Ms. Shagun Arora, Advocates for the Appellant Mr. Dr. Radhe Tallo, Authorised Representative for the Respondent CORAM : HON'BLE MR.JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Date of Hearing/ Decision: September 1, 2020 FINAL ORDER No.: 50878/ 2020 JUSTICE DILIP GUPTA The Appellant, an owner of a cinema hall called 'Sheila Theatre' and engaged in the business of exhibiting films in this theatre, has assailed the order dated January 25, 2016 passed by the Principal Commissioner of Service Tax, Delhi1 that confirms the demand of service tax under "renting of immovable property"
service with penalty and interest proposed in the two show cause notices dated April 21, 2014 and April 18, 2015 for the reason
1. the Principal Commissioner 2 ST/51688/2016 that the Appellant is providing service to the film Distributors by way of renting its theatre for screening the films.
2. The Appellant had entered into agreements with films Distributors under which the theatrical exhibition rights for exhibition of the films were transferred to the Appellant, either for a specified number of shows and period or in perpetuity. It is in exercise of such rights obtained from the Distributors that the Appellant exhibited movies in its theatre. In lieu of obtaining such rights, the Appellant agreed to share a specified percentage of Net Box Office Collection with the Distributors, subject to the conditions specified in the agreements. In one such agreement dated January 3, 2013 entered into between M/s. UTV Software Communication Ltd. and the Appellant, the Appellant agreed to share 50% of the Net Box Office Collection, subject to a maximum theatre share of Rs.5,00,000/-.
3. The Department, however believed that the Appellant was providing various elements of inter connected services to the Distributors, such as renting/ letting/ leasing of theatre for exhibition of films; manpower to manage the theatre operations, provision of projector and other related equipment to screen the films; arranging of power supply and providing arrangements to collect the box office collections. According to the Department, the essential character of the bundle of services provided by the Appellant was in the nature of "renting of immovable property"
service which would be taxable under section 65(105) (zzzz) of the Finance Act 19942 for the period up to June 30, 2012 and
2. the Finance Act 3 ST/51688/2016 under section 66E(a) of the Finance Act read with section 66F(3)(b) of the Finance Act for the period from July 1, 2012 to March 31, 2014. The view of the Department was that copy rights of movies/ films were not transferred/ sold by the film Distributors, either temporarily or otherwise, and so the Appellant was only letting out its premises for exhibition of films to the Distributors.
4. The Appellant filed replies to the two show cause notices but the Principal Commissioner, by the impugned order dated January 25, 2016, confirmed the demand for the period October 2008 to March 2014. The demand proposed for the period prior to October 2008 was dropped for the reason that it was beyond the period prescribed under the Finance Act.
5. The impugned order holds that service tax will be leviable under the head of 'renting of immovable property' and the relevant portion of the order is reproduced below:
"9.18 I therefore come to a conclusion that while allowing the use of theatre, they have also provided the facility of projection of film on the said screen in terms of contract for which they are receiving remuneration as a share in Net Box Office Collections (NBOC). Had it been purely Principal to Principal relationship, rightful owner of the NBOC would have been exhibitor. Had it been purely Principal to Agent relationship, rightful owner of the NBOC would have been distributor who is owning the copyright of the film.
9.19 However, this situation is a mix of both and hence instead of a fixed rent, interest in net box office collection by way of sharing it after certain extent as defined in the agreement is being paid instead of a fixed rent, so as to promote business and protect their respective interest. The noticee, therefore, appears performing dual activities simultaneously viz. rendering taxable services to the Distributors on one hand and entertainment to the clients on other hand. Whereas they were paying tax for entertainment; they failed to pay tax on the services provided where they provided services to the Distributors in screening their films and in return the noticee received charges termed by them as Box Office collection share. The terms of contract also substantiate my findings.
9.20 In view of above, the noticee's plan that there is no provision of service and hence no service tax liability is found baseless and thus their activities are rendered liable to service tax under the major head 'Renting of Immovable Property', which is taxable under erstwhile 4 ST/51688/2016 Section 65 (105) (zzzz) of the Act ibid upto 30.06.2012. Further the service provided by the noticee to the Distributors remained taxable under clause (a) of Section 66E of the Act ibid as "Declared Services"
and is not covered in the negative list as provided under Section 66D of the Act after introduction of negative services regime w.e.f. 01.07.2012."
xxxx xxxx xxxx "11.1 As regards to license fee, the noticee has admitted in their written submissions filed on 20.10.2014 that they had given their snack bar on license fee basis to M/s. Storage & General Services Pvt. Ltd. for license fee of Rs.9,000/- per quarter or Rs. 36,000 per annum for running the snack bar. They have also argued that though the services are covered under the Renting of immovable service, even after taking alongwith miscellaneous receipts, were much below the threshold exemption of Rs.10 lacs as provided under Notification No. 8/2008 dated 01.03.2008 in each of the financial year and therefore not liable to service tax.
11.2 However, I have analysed the issue of their exhibition of films as Exhibitor vis-s-vis share from NBOC collections and held the same to be liable to service tax under renting of immovable service. Therefore, the threshold exemption is not available to them under Notification No.8/2008 dated 01.03.2008 and therefore I hold that they are liable to pay service tax for the period 2008-09 to 2012-13 on such services. Accordingly, the noticee is liable to pay service tax on amount of Rs.1,80,000/- received during 2008-09 to 2012-13 as demanded in SCN dated 21.04.2014. They are also liable to pay service tax on amount of Rs.36,000/- received during 2013-14 as demanded in SCN dated 16.04.2015."
6. Shri B.L.Narasimhan learned counsel appearing for the Appellant has made the following submissions:
(i) The Appellant is not providing 'renting of immovable property' services to the Distributors. For an activity to fall under 'renting of immovable property' services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce. In the instant case, the immovable property i.e. the theatre is used and occupied by the Appellant in its own right to screen the film and at no point of time, the theatre is used by the Distributor;5
ST/51688/2016
(ii) A bare perusal of the agreements between the Appellant and the Distributors would make it abundantly clear that it is the Appellant who is making payments to the Distributors for grant of theatrical rights, which indicates both, the flow of service and consideration. Hence, no service tax can be levied on the Appellant, in absence of either a consideration or a service. In support of this submission, reliance has been placed on a recent decision of the Tribunal in Moti Talkies vs. Commissioner of Service Tax, Delhi-I3;
(iii) The agreements between the Appellant and the Distributors is on a revenue sharing basis and hence, no service tax is leviable;
(iv) The Appellant is not providing any service to the Distributors;
(v) 'Miscellaneous Receipts' and 'License fee from the Snack Bar' shown in the balance sheet is not leviable to service tax; and
(vi) The extended period of limitation could not have been invoked in the present case. Hence, the demand till March 2012 is time barred.
7. Shri Dr. Radhe Tallo, learned Authorised Representative of the Department has however, supported the impugned order. It is his submission that the Principal Commissioner committed no illegality in confirming the demand.
3. 2020(6) TMI 87- CESTAT New Delhi 6 ST/51688/2016
8. The submissions advanced by learned counsel for the Appellant and the learned Authorised Representative of the Department have been considered.
9. It is not in dispute that the Appellant is the owner of a cinema hall. According to the Appellant, the theatrical exhibition rights were transferred to the Appellant under the agreements on the basis on which the Appellant exhibited the movies in the theatre. For obtaining such rights, the Appellant agreed to share a specified percentage of the Net Box Office Collection with the Distributors.
10. The agreements entered into between the Appellant and the film Distributors clearly indicate that the film Distributors had granted theatrical exhibition rights to the Appellant and in return of transfer of such rights, the Appellant had agreed to pay certain amount to the Distributors, fixed generally as a percentage of Net Box Office Collection. The Principal Commissioner found that the Appellant had provided 'renting of immovable property' services. For an activity to fall under 'renting of immovable property' services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce. In other words, where an immovable property is given for use by the service recipient or where there is a transfer of the right to enjoy property for a certain time for a consideration paid or promised or where there is granting of the right to use and occupy the immovable property by way of tenancy, lease, license, the transaction would be 7 ST/51688/2016 covered under the category of 'renting of immovable property' services. In the instant case, the immovable property i.e. the theatre is used and occupied by the Appellant in its own right to screen the films and at no point of time, the theatre is used by the Distributor.
11. A perusal of the agreements between the Appellant and the Distributors would also make it abundantly clear that it is the Appellant who makes payment to the Distributors for grant of theatrical rights. This clearly indicates the flow of service and the consideration. Thus, as it is the Appellant who pays a fixed consideration to the Distributor, no service tax can be levied on the Appellant.
12. This issue also came up for consideration before a Division Bench of the Tribunal in Moti Talkies. It was held that the demand of service tax under 'renting of immovable property' service was not justified for the reason that the Appellant had not provided any service to the Distributor, nor the Distributor had made any payment to the Appellant as a consideration for the alleged service. The relevant portion of the decision is reproduced below:
" Agreements entered into between distributors and the Appellant, who is an exhibitor for screening pictures, have been considered to be agreements for "renting of immovable property" as defined under section 65(90a) of the Finance Act 1994, the Finance Act by the Department and accordingly, show cause notices have been issued to the Appellant demanding service tax. The demands made in the show cause notices have been confirmed by the Additional Commissioner (Adjudication) and the appeal filed by the Appellant to assail the said order has been dismissed by the Commissioner (Appeals). It is the dismissal of the appeal by the Commissioner (Appeals) by order dated 12 July that has led to the filing of this appeal.
2. The appellant is the owner of a cinema hall situated at Chandni Chowk, New Delhi and is engaged in the business of exhibiting films in its theatre. The copy right over the films is owned by the distributors. The appellant enters into agreements with the film distributors to 8 ST/51688/2016 obtain such copy rights under which the right to exhibit the films is transferred to the appellant, either temporarily or in perpetuity, depending upon the nature of the agreements between the parties.
xxxx xxxx xxxx
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.
xxxx xxxx xxxx
16. It is very difficult to even visualize 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.
xxxx xxxx xxxx
18. It is not possible to accept the reasonings given by the Commissioner (Appeals) for confirming the demand 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.
xxxx xxxx xxxx
23. The position in law does not change with effect from 1 July, 2012 because even under section 66B of the Finance Act, service tax is levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another. Though, ―renting of immovable property‖ is a declared service under section 66E of the Finance Act, then too under section 67(1) of the Finance Act, the value shall, in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him. The appellant is not receiving any payment from the distributor and, therefore, no service can be said to have been provided by the appellant."
13. It is, therefore, not possible to sustain the finding recorded by the Principal Commissioner that 'renting of immovable property' service had been rendered by the Appellant to the film distributors.
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14. The next issue that arises for consideration is about the confirmation of demand on the amount received by the Appellant under 'miscellaneous receipts' and 'license fee' from Snack Bar. This demand has also been confirmed under the category of 'renting of immovable property' services. The Department had levied service tax on an amount of Rs.4,29,759/- under the head 'license fee from snack bars and miscellaneous receipts' in the balance sheet. This demand has been confirmed under the category of "renting of immovable property" service. A further demand of service tax on the license fee of Rs.36,000/- received from M/s. Storage and General Services Pvt. Ltd., which was running a snack bar in the premises of the Appellant, has also been confirmed.
15. The confirmation of demand of Rs.36,000/- covered under "renting of immovable property" service is much below the threshold exemption of Rs.10,00,000/- provided in the notification dated June 20, 2012 and hence not liable to service tax.
16. The income received by the Appellant under "Shots and Slides Hire" income is on account of exhibition of advertisement films and slides of vendors, during the showcasing of movies. This income is not taxable w.e.f July 1, 2012 as it covered under the negative list provided under section 66 D(g) of the Finance Act, which relates to "selling of space or time slots for advertisement, other than advertisement broadcast by radio or television. Even for the period prior to July 1, 2012, this service 10 ST/51688/2016 is in the nature of exhibiting shots/graphic films, still slides and cannot be classified as 'renting of immovable property' service.
17. The interest amount income shown by the Appellant in its books of account represents the income earned by the Appellant from the deposits held in bank account and is not towards the 'renting of immovable property' service.
18. Thus, for all the reasons stated above, the confirmation of the demands in the impugned order cannot be sustained and are set aside.
19. The impugned order dated January 25, 2016 is, accordingly, set aside and the appeal is allowed.
(JUSTICE DILIP GUPTA) PRESIDENT (C.L. MAHAR) MEMBER (TECHNICAL) ARCHANA