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2024 (8) TMI 1053 - AT - Service TaxTaxability - revenue-sharing arrangements between theatre owners and distributors - principal contention of the appellant is that the agreements have been misconstrued for contriving a new entity birthed therefrom and that the circular of 2011 has been inappropriately relied upon by disregard of the clear instructions in that of 2009 inasmuch as the former has not disowned the exhortation that each arrangement must be scrutinized for ascertaining the elements of service, as set out in Finance Act, 1994, as prelude to tax. HELD THAT - Parallel is an expression deployed in context of the film industry but here we find two parallel lines - of constitutional restriction disbarring levy on screening of films and fictional conception of an entity excoriating the flesh and blood of the charging provision - sought to be converged for bringing the box office , or part thereof, within the tax net of Finance Act, 1994. The implication is that the box office manifests the joint venture between the exhibitor and distributor and, though not liable to tax of itself, had incurred costs of procuring service from the two collaborators of which provision of support service of business or commerce , enabling the venture to screen films, was sought to be fastened on the exhibitor - Once again, and with the additional benefit of subsequent developments in the above dispute, the Tribunal had cause to look at another controversy, and with substitution of the distributor by association of persons as recipient, identical to the one now here in M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI 2022 (3) TMI 1256 - CESTAT MUMBAI . It was noted therein that the earlier decision was applicable even in the changed circumstances of negative list and any contrary stand on taxability was doubtlessly unacceptable. Thus, the demand and penalty in the impugned order have no basis in law and must be set aside - appeal allowed.
Issues Involved:
1. Taxability of revenue-sharing arrangements between theatre owners and distributors. 2. Interpretation and application of circulars issued by the Central Board of Excise & Customs (CBEC). 3. Determination of whether a joint venture exists between the theatre owner and distributor. 4. Legitimacy of the demand and penalties imposed under the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Taxability of Revenue-Sharing Arrangements: The core dispute revolves around whether the revenue-sharing arrangement between the theatre owner (appellant) and the distributors constitutes a taxable service under the Finance Act, 1994. The appellant argued that the agreements with distributors were misconstrued to create a new taxable entity, and the circular of 2011 was inappropriately relied upon, disregarding the clear instructions of the 2009 circular. The appellant contended that no service was rendered to the distributor, but rather to the cinema patrons, and thus, the transaction did not fall under the scope of taxable services as defined in the Finance Act, 1994. 2. Interpretation and Application of CBEC Circulars: The impugned order relied heavily on Circular No. 148/17/2011-ST dated 13th December 2011, which suggested that a new taxable entity emerges in revenue-sharing arrangements. However, the appellant argued that the earlier Circular No. 109/03/2009 dated 23rd February 2009, which clarified that screening a movie is not a taxable service unless the theatre is leased out, was not superseded and should have been considered binding. The appellant emphasized that the agreements should be scrutinized to ascertain the elements of service as per the Finance Act, 1994. 3. Determination of Joint Venture: The adjudicating authority concluded that the revenue-sharing arrangement constituted a joint venture, thereby making the theatre owner liable for service tax. However, the Tribunal referred to several precedents, such as the Inox Leisure Ltd v. Commissioner of Service Tax, Hyderabad case, which held that revenue-sharing arrangements do not necessarily imply the provision of services unless a service provider-recipient relationship is established. The Tribunal reiterated that the appellant did not provide any service to the distributors, nor did the distributors make any payments to the appellant as consideration for the alleged service. The Tribunal emphasized that the agreements conferred rights upon the appellant to screen films, for which the appellant paid the distributors. 4. Legitimacy of Demand and Penalties: The Tribunal found that the demand and penalties imposed under the Finance Act, 1994, had no basis in law. The Tribunal drew upon earlier decisions, such as Moti Talkies and PVS Multiplex India Pvt. Ltd., which concluded that screening films on a revenue-sharing basis does not constitute a taxable service. The Tribunal also noted that the Supreme Court had dismissed the Civil Appeal filed by the Department in the Inox Leisure Ltd case, affirming that the Tribunal had taken the correct view. Consequently, the Tribunal set aside the demand and penalties imposed in the impugned order. Conclusion: The Tribunal concluded that the demand and penalty in the impugned order lacked a legal basis and must be set aside. The appeal was allowed, and the order was pronounced in the open court on 19/08/2024.
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