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TMI Blog2021 (10) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... ds service tax under BSS under section 73(1A) of the Finance Act with interest and penalty. The said service is said to have been provided during the period 01.04.2012 to 30.06.2012. 3. The appellant is engaged in the business of exhibiting cinematographic films across India in theatres owned by the appellant or taken on rent. The appellant claims that it acquires the rights/license to exhibit the films at the designated theatres from various film distributors by entering into separate license agreements for each film. The consideration towards such license is paid by the appellant as per the agreed percentage of box office collection and such percentage varies from distributor to distributor, movie to movie and week to week, after the release date. 4. The Department issued two show cause notices dated 02.04.2014 and 22.05.2014 proposing to recover service tax of Rs. 2,67,79,932/- and Rs. 32,81,940/- with applicable interest and penalty for the period 09.05.2009 to 31.03.2012 and 01.04.2012 to 30.06.2012 respectively. 5. The show cause notices were adjudicated upon by a common order dated 30.03.2016 and the demands were confirmed for the following reasons: a. The appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 (6) TMI 87- CESTAT New Delhi]; (c) M/s. The Asian Art Printers (Sheila Theatre) vs. Principal Commissioner of Service Tax, Delhi-l [2020 (12) TMI 1012- CESTAT New Delhi]; (d) Shri Vinay Kumar, Proprietor of M/s. Regal Theatre vs. Principal Commissioner of Service Tax, Delhi-l [2020 (11) TMI 436- CESTAT New Delhi]; (e) M/s. Golcha Properties Pvt. Ltd. vs. Principal Commissoner of Service Tax, Delhi-l [2020 (11) TMI 137- CESTAT New Delhi]; and (f) Satyam Cineplexes Ltd. vs. Principal Commissioner of Service Tax, Delhi-l [2020 (8) TMI 1222- CESTAT New Delhi]; (ii) A revenue sharing arrangement in itself does not necessarily imply provision of service, unless service provider and service recipient relationship is established. In this connection reliance has been placed on the following decisions: (a) Mormugao Port Trust vs. Commissioner of Customs, Central Excise & Service Tax, Goa-(Vice-Versa) [2016 (11) TMI 520- CESTAT Mumbai]; (b) M/s. Old World Hospitality Limited vs. CST, New Delhi [2017 (2) TMI 1176- CESTAT New Delhi]; and (c) Delhi International Airport P. Ltd. vs. Union of India & Ors. [WP(C) 2516/2008 & CM No. 15832/2011 dated 14.02.2017]; (iii) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant and the producers of films. 5. The contentions advanced by the learned Counsel for the appellant and the learned Authorised Representative appearing for the Department have been considered. 6. 'Support services of business or commerce' has been defined in sub-section 104(c) of section 65 of the Finance Act to mean as follows: "(104c) "Support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.- For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx 2. Distribution Strategy / Showcasing 2.1.1. The Parties agree and understand that SPE Films shall License the Motion Pictures for exploitation of Theatrical Rights and the Exhibitor shall exhibit the Motion Pictures during the Term of this Agreement, on the terms and conditions set out in this Agreement. 1.1.2. This Agreement shall be the master agreement governing the Motion Pictures for which the Theatrical Rights will be granted by SPE Films to the Exhibitor during the Term. The specific details in respect of each Motion Picture, pertaining to the Designated Screens, the number of Prints provided to Exhibitor, the Refundable Advance, publicity materials and quantities thereof, shall be set out in the Annexure for each Motion Picture and executed in writing from time to time when the Theatrical Rights of such Motion Pictures are granted to the Exhibitor for the exhibition of the Motion Picture, in accordance with the procedure and timelines prescribed in clause 2.2 below. Such individual Annexures will form part of this Agreement only when duly signed by both the parties. It is clarified and understood that the amount of Refundable Advance shall be mutually agreed betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the Exhibitor from the exhibition of the Hindi Motion Pictures produced and/or distributed by SPE Films across all the Multiplexes, as the case may be: 5.1.1 1st Exhibition Week: 50% of the Net Collections 5.1.2 2nd Exhibition Week: 42.5% of the Net Collections 5.1.3 3rd Exhibition Week: 37.5% of the Net Collections 5.1.4 4th Exhibition Week onwards till the last Exhibition Week: 30% of the Net Collections. 5.2 This Revenue Share shall be applicable for all the Motion Pictures that are granted by SPE Films to the Exhibitor for exploitation during the Term. This Revenue Share shall be maintained throughout the Term of this Agreement and for all Motion Pictures and Multiplexes. xxxxxxxxx 5.10.2. Service Charge: The Exhibitor shall be entitled to deduct service charge wherever applicable, at actual, as prescribed by the statutory authority." (emphasis supplied) 9. The said Agreement would indicate that: (i) The distributor / supplier has granted a non-exclusive license to the appellant to exploit the theatrical rights of films in the designated screens; (ii) The ownership rights, copyrights and other intellectual property rights in the films continue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lms was examined by a Division Bench of the Tribunal in Moti Talkies. The Department alleged that the agreement was for 'renting of immovable property' as defined under section 65(90a) of the Finance Act. This contention was not accepted by the Tribunal and it was observed that the appellant did not provide any service to the distributors nor the distributors made any payments to the appellant as consideration for the alleged service. In fact, it was the appellant who had paid money to the distributors for the screening the rights conferred upon the appellant. The observations of the Bench are as follows: "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. xxxxxxxxxxx 16. It is very difficult to even visualise that the appellant is providing any service to the distributor by r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on perusal of the facts on record, we are satisfied that there is no dispute of fact that the appellant have been screening films in their multiplex on Revenue Sharing basis, which is undisputed finding recorded by the ld. Commissioner in the impugned order. Accordingly, we hold that the appellant is not liable to pay Service Tax for Screening of Films and payments to distributors in their theatre." (emphasis supplied) 16. This apart, a revenue sharing arrangement does not necessarily imply provision of services, unless the service provider and service recipient relationship is established. This is what was observed by the Tribunal in Mormugao Port Trust, Old World Hospitality and Delhi International Airport. 17. In Mormugao Port Trust, the Tribunal explained that public private partnerships between the Government/Public Enterprises and Private parties are in the nature of joint venture, where two or more parties come together to carry out a specific economic venture, and share the profits arising from such venture. Such public private partnerships are at times described as collaboration, joint venture, consortium or joint undertaking. Regardless of the name or the legal form i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the activity undertaken by a co- venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor-contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint ventu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In such case, the service provided by the theater owner would be categorized as 'Renting of immovable property for furtherance of business or commerce' and the theater owner would be liable to pay tax on the rent received from the distributor. The facts of each case and the terms of contract must be examined before a view is taken. 4. All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned." (emphasis supplied) 20. The subsequent Circular dated 13.12.2011 issued by the Central Board of Excise and Customs, apart from the fact that it would not be applicable for confirming a demand for any period prior to 13.12.2011, would also not come to the aid of the Department. The relevant portion of the Circular is reproduced below: 9. Thus, where the distributor or sub-distributor or area distributor enters into an arrangement with the exhibitor or theatre owner, with the understanding to share revenue/profits and not provide the service on principal-to-principal basis, a new entity emerges, distinct from its constituents. As the new entity acquires the character of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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