2023 (1) TMI 390 - AT - Service Tax

Levy of Service tax - sharing of Revenue - unique deployment of constituents, that make up channel entities involved in exhibition of cinematographic films, in an arrangement by which several distributors participate in sharing of revenue - distinct entities rendering service in de-mutualized capacity on principal-to-principal basis - HELD THAT - The issue in dispute stands resolved by the decision of the Tribunal in their own matter in M/S. RELIANCE MEDIAWORKS LIMITED VERSUS COMMISSIONER, SERVICE TAX-VI, MUMBAI 2022 (4) TMI 253 - CESTAT MUMBAI where it was held that This issue had come up for consideration before a Division Bench of the Tribunal in M/S PVS MULTIPLEX INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT-I 2017 (11) TMI 156 - CESTAT ALLAHABAD . 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. Appeal allowed.

Summary

Issues:
Tax liability on revenue sharing arrangement in the exhibition of cinematographic films.

Analysis:
The appeal involved a dispute regarding the tax liability arising from a unique revenue-sharing arrangement in the exhibition of cinematographic films. The tax authorities had imposed a tax liability of &8377; 15,66,91,993/- on a value of &8377; 1,89,59,12,990/- for the period from 2014-15 to September 2015 in 2015-16 under section 73 of the Finance Act, 1994. The appellant, M/s Reliance Mediaworks Ltd, contested this order-in-original dated 12th February 2021 before the Appellate Tribunal CESTAT Mumbai.

The crux of the issue was whether the entities involved in the revenue-sharing arrangement could be considered distinct entities rendering services on a 'principal-to-principal' basis or whether they acquired the status of partners. The appellant argued that a previous decision of the Tribunal in their own matter supported their position, referencing the case of Reliance Mediaworks Limited v. Commissioner of Service Tax - VI, Mumbai.

The Tribunal, in its analysis, referred to relevant circulars issued by the Central Board of Excise and Customs. The circulars clarified that in cases where entities share revenue without providing services on a principal-to-principal basis, a new entity emerges, distinct from its constituents, and the transactions become taxable services. However, if the transaction is on a principal-to-principal basis, the tax liability falls on the constituent members based on the nature of the transaction.

The Tribunal also considered the decisions of the Supreme Court and previous Tribunal judgments in similar cases. Notably, the Tribunal cited the decision in Faqir Chand Gulati and the case of Mormugao Port Trust to support its conclusion that no service tax could be levied on the appellant under Business Support Service (BSS).

Based on the precedents and legal interpretations discussed, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant, M/s Reliance Mediaworks Ltd. The decision was pronounced in the open court on 22/12/2022.