2023 (12) TMI 81 - AT - Service Tax

Levy of service tax - supply of food and beverages at their counters provided in the cinema halls - whether the supply of food and beverage in the cinema complex falls within the definition of service and declared service in terms of Section 65B(44) and Section 66 E of the Act? - HELD THAT - The provisions of section 65B (44) and 66E of the Finance Act, defining service and declared services having been clarified by the Circulars and interpreted in the various decisions, the material issue is no longer res-integra. As noted in various decisions, in case of take away food, packaged items etc. over the counter, the same amounts to sale of goods and there is no element of service involved therein. The same principle would apply here in the case of PVR Cinemas where fixed menu which is ready to eat is sold by merely reheating, if required. The viewers who have come to watch the movie go to the counters during the interval period, stand in queue and buy the food items which are either already packed or are reheated and sold to people as and when their turn comes. After buying they bring those items to their respective seats and enjoy it while watching the movie. The duration of the interval is so short that it is not possible for the viewers to rush outside the cinema complex to buy food stuff and eat there. Just for making it convenient, the cinema complex provides some packaged or ready to eat food items and drinks. The choice of food stuff or soft drink is limited and the viewers have to accept from what is available. There is another aspect of the matter which is peculiar to the cinema complex, that these counters providing food items are not open to the public at large like any snack bar or restaurant but only those who have bought a ticket for viewing the movie can access them. Thus, the supply of food items and drinks to viewers through the counters in the cinema halls is equivalent to the transaction involved in sale of take away/packaged food. The Revenue has taken the plea that appellant has admitted their service tax liability for this activity and the same activity could not be vivisected as taxable for one category and non-taxable for other. Considering the said argument, we would like to distinguish the Gold Class category which is available in the PVR multiplex where apart from special comfortable seats, the viewers are provided with further facilities where a staff member of the multiplex / waiter comes to their seats and take the order and accordingly provide the food and drink to them on a small table like attachment to the seat. After the food is consumed by the viewers, the waiters come and collect the crockery back - the service tax is not leviable on the sale of food items in packed form or by process of reheating in the cinema halls as there is no element of service involved therein. Thus, no service tax can be charged on the sale of food stuff in the PVR complex to the viewers of the movie, the provisions of Service Tax (Determination of Value) Rules, 2006 will not be applicable - the impugned order deserves to be set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the supply of food and beverages in the cinema complex falls within the definition of 'service' and 'declared service' under Section 65B(44) and Section 66E of the Finance Act, 1994.
2. Whether service tax is leviable on the sale of food items in packed form or by reheating in cinema halls.

Summary:

Issue 1: Definition of 'Service' and 'Declared Service'
The appellant argued that the supply of food and beverages in the cinema hall is a pure transaction of sale without any service element, distinguishing it from scenarios involving dining facilities, washing areas, and table clearing. The Revenue contended that the activity involves an element of service, making it taxable under Section 66E(i) of the Finance Act, 1994. The Tribunal examined definitions under Section 65B(44) and 66E, noting that 'service' excludes mere transfer of title in goods. Circulars clarified that transactions amounting to the sale of goods are not subject to service tax unless an element of service is involved.

Issue 2: Levy of Service Tax on Sale of Food Items in Cinema Halls
The Tribunal referenced several decisions and circulars, including those clarifying that takeaway food and packaged items sold over the counter amount to the sale of goods without service elements. The Tribunal observed that in the case of PVR Cinemas, the sale of ready-to-eat food items during movie intervals, where customers purchase and consume food at their seats, does not involve service elements. The Tribunal distinguished this from scenarios where additional services, such as waiters serving food at seats, are provided, which are taxable. The Tribunal concluded that the sale of food items in cinema halls is equivalent to takeaway food transactions and thus not subject to service tax.

Conclusion:
The Tribunal set aside the impugned order, ruling that service tax is not leviable on the sale of food items in packed form or by reheating in cinema halls, as there is no element of service involved. Consequently, the provisions of the Service Tax (Determination of Value) Rules, 2006, and issues of interest and penalty do not apply. The appeals were allowed.

Order Pronounced on 30th November, 2023.