2024 (4) TMI 679 - AT - Service Tax

Classification of service - Business Support Service or Renting of immovable property - appellant is an operator of individual or multiple cinemas screen at multiple complexes as owner/lessee having ownership/lease hold rights - HELD THAT - There is no service as such which has been provided by the appellant to the distributors. The appellant has agreed for exhibiting the distributor s film without any interference of the said distributors. The distributors had actually granted licence to exhibit the theatrical exihibition rights of the film in the lincesed theatre. As far as the time and number of shows are concerned, the distributor has agreed for getting share in the Revenue collected from the sale of the tickets that to within 10 days of completion of every week to which it pertains. The agreement clarifies that it is the transfer of copyright by the distributor in favour of the appellant to the exclusion of all including the owner of the said copyright. The issue is otherwise no more res-integra. Various decisions have clarified that Revenue sharing arrangement in itself does not necessarily imply provision of service, unless service provider and service recipient relationship is established - reliance can be placed in DELHI INTERNATIONAL AIRPORT P. LTD. MUMBAI INTERNATIONAL AIRPORT P. LTD. VERSUS UNION OF INDIA ORS. 2017 (2) TMI 775 - DELHI HIGH COURT - there is otherwise nothing on record to establish the said relationship. There are no reason to differ with the findings arrived at in the Order-in-Appeal, the same is accordingly upheld - appeal of Revenue dismissed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on revenue sharing arrangements.
3. Validity of the Show Cause Notice and Order-in-Original.
4. Relevance of Board Circulars and previous judgments.

Summary:

1. Classification of Services Provided by the Appellant:
The appellant was registered for services such as "Selling of Space or time slots for Advertisements" and "Security/Detective Agency Services." The Department, based on Board Circular No. 109/03/2009 and subsequent Circular No. 148/17/2011, argued that the appellant's activity of screening films should be classified under "Renting of Immovable Property" or "Business Support Services," depending on the arrangement with the film distributor.

2. Applicability of Service Tax on Revenue Sharing Arrangements:
The Department issued a Show Cause Notice proposing to recover Service Tax amounting to Rs. 1,57,55,155/- along with interest and penalties, asserting that the revenue sharing arrangement falls under taxable services. The appellant contended that their revenue from the exhibition of films is recorded under "Sale of Cinema Tickets (Audi Receipts)" and the payments to distributors are shown as "Film Purchases Account," arguing that their activity is an entertainment event exempt under Section 66D.

3. Validity of the Show Cause Notice and Order-in-Original:
The appellant argued that the Show Cause Notice and the Order-in-Original lacked a clear discussion on the nature of the impugned activity and its taxability under "Business Support Service." The Commissioner (Appeals) set aside the Order-in-Original, leading to the Department's appeal to the Tribunal.

4. Relevance of Board Circulars and Previous Judgments:
The Department relied on the decision of Hon'ble Madras High Court in Ages Entertainment Pvt. Ltd. vs. Union of India, arguing that the activity should be taxable. However, the Tribunal referenced multiple judgments, including Mormugao Port Trust v. Commissioner of Customs, Central Excise & Service Tax, Goa, and Inox Leisure Ltd. vs. Commissioner of Service Tax, Hyderabad, which clarified that revenue sharing arrangements do not necessarily imply a service provider-recipient relationship. The Tribunal concluded that there was no service provided by the appellant to the distributors, and the arrangement was essentially a transfer of copyright.

Conclusion:
The Tribunal upheld the Order-in-Appeal, dismissing the Department's appeal and confirming that the appellant's activity did not fall under taxable services as per the given facts and circumstances. The decision emphasized the absence of a service provider-recipient relationship in revenue sharing arrangements for film exhibition.