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TMI Blog2022 (3) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Deputy/Assistant Commissioner within 15 (fifteen) days of receipt of this order and the Jurisdictional Deputy/Assistant Commissioner shall calculate and convey the recalculated demand amount to the appellant (assessee) within 30 days therefrom. (ii) Cum-tax benefit is allowed to the appellant and the jurisdictional Deputy/ Assistant Commissioner is directed to requantify the demand after extending the benefit of cum-duty price if there is nothing to the contrary on record. The appellants shall place the relevant records before the original adjudicating authority within a period of fifteen days from receipt of this order and the original adjudicating authority shall pass necessary order within a period of thirty days of submission of relevant record by the appellant; (iii) I refrain from imposing any penalty. 2.1 Acting on an information that the Appellant were engaged in providing the Business Support Service" by way of providing cinema hall and other infrastructure for the exhibition of movies in their theatre but were not discharging the Service Tax liability on the amounts earned by them for providing the said services, investigations were undertaken. 2.2 On complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove. 2.5 Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Naveen Bindal, Advocate for the appellant and Ms Jaspreet Kaur Authorized Representative for the revenue. 3.2 Arguing for the Appellant learned counsel submits that * the issue involved in the matter is squarely covered by the decision of this bench in case of AB Motion Pictures [2019-TIOL-3781-CESTAT-CHD] * the decision in the case of AB Motion Pictures is relying on the earlier decisions in Wave Infratech Pvt Ltd vs. CCE & ST, Lucknow - Final Order No. ST/A/71252/2018-CU[DB] dt. 27.06.2018 and PVS Multiplex India Pvt Ltd vs. CCE & ST, Meerut-I - Final Order No. ST/A/71279/2017-CU[DB] dt. 29.08.2017 * Following the judicialprecedence appeal be allowed. 3.3 Arguing for the revenue learned Authorized Representative, while reiterating the findings recorded in the impugned order, submits that- * The order referred to by the counsel, have not been accepted by the revenue and appeal against the order in case of AB Motion Pictures is pending before the Hon'ble Supreme Court and in case of PVS Multiplex before the Hon'ble Allahabad High Court. * The circular relied upon by the Commissioner (Appeal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach them for the display of their films and other support systems at their theatre. Sh.Vinod Sharma, Accountant &Authorised Signatory of the noticee admitted in his statement that the distributor/sub-distributor appointed one person in their theatre to keep a watch on the working of the theatre and give suggestions for improvement in the services and sort out any complaint. Further, it is observed that these two entities i.e. the Theatre Owner and the distributor/ sub-distributors were apparently working together under a different arrangements/agreements to distribute among themselves amounts collected from exhibition of the movie and thus had together formed a new entity, an incorporated partnership/Joint venture having the character of a 'person'. The CBEC (TRU) vide its circular C.No. 148/17/2011-ST dated 13.12.2011 has further clarified the issue. The relevant text of the said circular is reproduced below: "Thus, where the distributor or sub-distributor or area distributor enters into an agreement 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 emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors of movie, C.B.E. & C. was justified in issuing the Circular clarifying the transactions between the distributor/ sub-distributor and owners of the theatres and levy of Service Tax and that the nature of transaction determines the leviability of Service Tax and decision to be taken on case-to-case basis. The impugned Circular No. 148/17/2011-S.T., dated 13-12-2011 cannot be said to be beyond the powers of Central Board of Excise and Customs. The Circular does not restrict the powers of the officials to decide a particular dispute in a particular manner and the impugned circular is not violative of Section 37B. All the writ petitions are liable to be dismissed. 52. In the result, all the writ petitions are dismissed Consequently, the connected miscellaneous petitions are closed. Interim stay grunted in the various writ petitions stands vacated. However, there is no order as to costs." It is observed that in the case of Mediaone Global Entertainment Ltd. the Hon'ble High Court has upheld the circular issued by CBEC, levying Service tax on the various arrangements being undertaken by the Theatre owner and distributor/sub distributor. On considering the statement of Sh. Vino ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Infrastructural support service and 11. Other transaction processing" On going through all the above points, it can be noted that before 01-05-2011 the appellant has not provided any such service to the distributor while he has taken the film for exhibition. The Appellant therefore, cannot be brought under the head "Business and Support Service" and raising of demand before 01-05-2011 on that count is therefore, liable to be set aside. 8.5 Vide CBEC Circular No. 109/03/2009 dated 23-02-2009 it was clarified as under 2.5. The matter has been examined. By definition 'Business Support Service' is a generic service of providing support to the business or commerce of the service receiver'. In other words the principal activity is to be undertaken by the client while assistance or support is provided by the tarable service provider. In the Instant case the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under Business Support Service 3 In the light of above, it is clarified that screenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order and to some extent, rightly so, as the paras 10 and 11 of the above said circular summarizes the clarification, which reads thus: "10. To sum-up the above, the arrangements entered into by the distributor or sub-distributor or area distributor etc. and the exhibitor or theatre owner etc. in exhibiting the film produced by the producer, the original copyright holder, the arrangements and their respective service tax classification is tabulated as under: Type of Arrangement Movie Exhibited on whose account Service Tax Implication Principal to Principal Basis Movie being exhibited by theatre owner or exhibitor on his account - i.e. The copyrights are temporarily transferred Service tax under copyright service to be provided by distributor or sub-distributor or area distributor or producer etc., as the case may be Movie being exhibited on behalf of Distributor or Sub-Distributor or Area Distributor or Producer, etc. - i.e. no copyrights are temporarily transferred Service Tax under Business Support Service/Renting of Immovable Property Service, as the case may be, to be provided by Theatre Owner or Exhibitor Arrangement under unincorporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Appeal) has dropped the demands. 4.7 In case of Mediaone Global Entertainment Ltd [2014 (34) STR 819 (Mad)], Hon'ble Madras High Court held as under: "15. In 2009, a query had been raised by the field formation as to whether the activity of screening of film supplied by a film distributor would fall under any of the taxable services and accordingly, whether the theatre owners are required to pay service tax on amount received by them from distributors. In the light of the queries raised, Circular No.109/03/2009 dated 23.2.2009 was issued clarifying the levy of service tax, where theatre owner provides taxable service of renting of immovable property for furtherance of business of commerce and accordingly liable to pay service tax under Section 65(105)(zzzz). Insofar as revenue sharing arrangementbetween the distributor and the theatre owner, the Circular stated that in such type of arrangements two contracting parties act on principal to principal basis and one does not provide service to another. Hence, in such arrangement the activities are not covered under service tax. The said Circular No.109/03/2009 dated 23.2.2009 reads as under: "2. The matter has been ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the arrangement at paragraph 2.1 above. A view has been expressed that in this arrangement, the theater owner provides Business Support Serviceto the distributor and hence is liable to pay service tax on the fixed amount received by the theater owner. 2.5. The matter has been examined. By definition Business Support Service is a generic service of providing support to the business or commerce of the service receiver. In other words the principal activity is to be undertaken by the client while assistance or support is provided by the taxable service provider. In the instant case the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under 'Business Support Service'. 3. In the light of above , it is clarified that screening of a movie is not a taxable service except where the distributor leases out the theater and the theater owner get a fixed rent. In such case, the service provided by the theater owner would be categorized as "Renting of immovable property for furtherance of business or commerce" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. (*Substituted for "operational assistance for marketing" by the Finance Act, 2011 w.e.f. 1.5.2011) The word includes finds a place not only in the Section, but also in the Explanation, which we would elaborate later. 19. In the light of the amendments bringing in temporary transfer of copyright within the service tax net, the National Association of Motion Pictures Exhibitors, New Delhi submitted a letter to the CBEC seeking clarification, stating that the revenue sharing transaction between the distributor and the exhibitor is not transfer or permitting to use copyright in favour of cinema owner, however, many distributors have been writing to cinema theatre owners that they will collect service tax on the share received by the distributors from the ticket sales, which according to them, was wrong. Therefore, the association requested a clarification so that the service tax is collected by the right assesses. 20. In reply to the request made by the association, the Tax Research Unit (TRU) by clarification dated 28.04.2011 informed the association by referring to the circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foreign films in the form of 'revenue share' from the exhibitors of the movie, and on revenue retained as percentage by the exhibitors of the movie from the sale of tickets have been received from certain sections of service providers. 24. The Circular No.148/17/2011-ST dated 13.12.2011 clarifies levy of service tax on distributors/sub- distributors of films and exhibitors of movie. The Circular reads as under: 2. These representations have been examined. Subsequent to issuance of CBEC Circular No. 109/03/2009 dated 23.02.2009 significant changes in the law have taken place. Temporary transfer or permitting the use or enjoyment of, any copyright defined in the Copyright Act, 1957 (14 of 1957), except the rights covered under sub-clause (a) of clause (1) of section 13 of the said Act were made taxable w.e.f. 01.07.2010 under the sub-clause (zzzzt) of Sec 65(105) by the Finance Act of 2010. Also, for the words operational assistance for marketing, the words operational or administrative assistance in any mannerwere substituted in the clause (104c) of Sec 64 of the Act by the Finance Act, 2011, w.e.f. 01.05.2011. 3. The normal business practice in the industry is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as a new entity, the Circular refers to New Horizons case ((1995) 1 SCC 478). In the Circular, recognition of unincorporated joint venture as a new entityand reference to New Horizons case, (1995) 1 SCC 478, reads as under: "7. Unincorporated joint venture, not operating on principal-to-principal basis, will exist only if the arrangement entered into between the two independent persons is also recognized as a person. It may be noted that the word person has not been defined in the Finance Act, 1994. As per Sec 3(42) of General Clauses Act, 1897 person shall include any company or association or body of individuals, whether incorporated or not. In this regard attention is invited to explanation to Sec 65 of the Finance Act, 1994 wherein the taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof. 8. Such a joint venture is also recognized as a legal & juristic entity in the nature of a partnership of the constituent companies by the honble Supreme Court of India in the case of New Horizons [1995 SCC (1) 478; 1994 -TMI 83686] wherein it was held that the expression joint ventureconnotes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a primary activity and not a support service. 33. Furthermore, it was contended that the circular has based its conclusion by relying upon the decision of the Hon'ble Supreme Court in case of New Horizons Ltd. vs. UOI, [(1995) 1 SCC 478] which has been considered in a subsequent judgment in Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd., 2008 (12) S.T.R. 401 (SC), in which it has been held that in case of a true joint venture, the co-adventurer in the joint venture is not a service provider. Therefore, it is submitted that the impugned circular is wholly untenable. 34. The case in Faqir Chand Gulati, arose out of an order passed by the National Consumer Disputes Redress Commission and it related to the question whether a land owner who enters into an agreement with the builder for construction of an apartment building and for sharing of the constructed area is a consumer entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act, 1996. The Hon'ble Supreme Court while considering the facts of that case and the agreement termed as a joint venture entered into by the parties therein found that it is not a true joint ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has to be seen as to whether such service rendered by the new entity would fall within any of the entries for levy of service tax. The revenue rests their case on clause (104c) of Section 65 as amended by Finance Act, 2011, w.e.f., 01.05.2011. The said clause defines support services of business or commerce. The petitioners would state that the said clause commences with expression means and also uses the word includes. 38. Prior to the amendment to Section 65(104c), since it was 'operational assistance for marketing' it was felt that 'exhibition of a cinema' is not a 'support or assistance activity for marketing', but an activity on its own accord. The amendment to clause (104c) of Section 65 by Finance Act 2011, may be very crucial for this case, as by the said amendment, the words operational assistance for marketing was substituted with the words operational or administrative assistance in any manner. Thus, the substitution brought about by Finance Act 2011, in clause (104c) appears to have expanded the scope of support services to bring under its net all administrative assistance. Even prior to the amendment infrastructural support services was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 550; Indian Drugs & Pharmaceuticals Ltd. v. ESI Corpn. (1997) 9 SCC 71 and T.N. Kalyana Mandapam Assn. v. Union of India, (2004) 5 SCC 632.) It is also well settled that in order to determine whether the word includeshas that enlarging effect, regard must be had to the context in which the said word appears. [See South Gujarat Roofing Tiles Manufacturers Assn. v. State of Gujarat, (1976) 4 SCC 601; R.D. Goyal v. Reliance Industries Ltd., (2003) 1 SCC 81 and Philips Medical Systems (Cleveland) Inc. v. Indian MRI Diagnostic and Research Ltd. (2008) 10 SCC 227). 16. Thus, as already stated above, having regard to the language of Rule 2(g) of the 2002 Rules, and the analysis of the aforenoted decisions, it appears that by employing the phrase and includes, legislature did not intend to impart a restricted meaning to the definition of inputsand therefore, the interpretation of the said term in Maruti Suzuki Ltd (2009) 9 SCC 193 may require reconsideration by a larger Bench." 41. As held by the Hon'ble Supreme Court when the word includes is used, it enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 65(105)(zzzzt) and the substitution in clause (104c) of Section 65. Since all revenue sharing arrangements irrespective of the nature of arrangement were interpreted to fall outside the service tax net. Therefore, the CBEC clarified, there may be various types of arrangements and there may be hybrid versions of arrangements that may exist and therefore a clarification was necessary. Even in the impugned circular, the department has unequivocally accepted that the nature of transaction determines the leviability of service tax. Therefore, each case has to be looked into on its merits and decision be taken on case to case basis. As observed earlier, the arrangements referred to in the impugned circular can at best be taken as an illustration and it cannot be termed as an exhaustive or a comprehensive list of arrangements. The nature of transaction is a question of fact, which the exhibitor/distributor/ producer has to place before the department and such arrangement to be examined on its merits. The apprehension of the petitioners that the assessing authority shall mechanically proceed to levy service tax is without any basis. The answer lies in the impugned circular, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to entertainment events or access to amusement facilities", the reason, being, "tax on admission or entry of such events is covered in the State List, which is subjected to Entertainment Tax. 48. The Central Government has issued Mega exemption Notification No.25/2012-S.T dated 20.06.2012. As pointed out earlier, from 2012, the basis of levying service tax was changed from "service specific levy" to "levying tax on all services except services specified in Negative List and the Exemption Notification." The exemption Notification No.25/2102-S.T dated 20.6.2012 becomes operative with effect from 1.7.2012. As per Entry 15 in Notification No.25/2012 - S.T dated 20.06.2012, levy of service tax on "temporary transfer or permitting the use or enjoyment of a copyright" was exempted. Entry No.15 reads as under: "Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films." 49. Under Notification No.3/2013-S.T dated 1.3.2013, Entry No.15 in the earlier Notification No.25/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of A B Motion Pictures [2019-TIOL-3781-CESTAT-CHD] wherein following has been held: "It has been the contention of the learned advocate that as per the agreement as mentioned above, both the parties have mutually agreed to work together wherein the appellant being the owner of the theatre is exhibiting the movies and the distributor being the right holder for the particular movies is providing and facilitating the screening of the movies. Under the agreement, it can be seen that both the parties are working for mutual benefit to each other and they are not providing the service to any one whereas they are providing the service to self. The income is earned in the form of gross box office collection earned from screening of the movies. The revenue shared after deduction of various expenses as per the revenue sharing percentage decided by the appellant and the distributor as per the agreement. Thus, the learned advocate has tried to impress upon that the activity of screening of the film by the appellant is not a service to anybody and it is a service to self and therefore, this activity cannot be put service tax under the category of Business Support Service. It is further being i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgments of this Tribunal in the cases of Wave Infratech Pvt Ltd vs. CCE & ST, Lucknow - Final Order No. ST/A/71252/2018-CU[DB] dt. 27.06.2018 and PVS Multiplex India Pvt Ltd vs. CCE & ST, Meerut-I - Final Order No. ST/A/71279/2017-CU[DB] dt. 29.08.2017. 3. On the other hand, the learned A.R. reiterates the findings in the impugned order-in-order. 4. We have heard rival submissions made by both the sides and perused the records of the appeal. 5. After careful consideration of the submissions made by both the sides and on perusal of the records of the appeal, we find that the appellant has been screening various films in their multiplex on behalf of the film distributors such as Mukta Arts Limited, PVR Pictures Ltd, UTV Software Communications Ltd, Reliance Big Entertainment Pvt Ltd etc. As per the agreement entered into by the appellant and the various distributors/ sub distributors, the revenue generated from the selling of the tickets of movies was shared between the appellant and the various distributors in percentage terms as under: Distributor's share @ 50% for 1st week Distributor's share @ 42.5% for 2nd week Distributor's share @ 37.5% for 3rd week Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing received by the person, who screening the movie, is from the customers and not from the distributors/ sub distributors. The distributor has also not passed on the copy right to the appellant, therefore, we feel that there is no relevance of the above circular in the present case and we find that in such an arrangement there is no service element from the appellant to the distributor or sub-distributor. We also feel that the issue is no longer res integra as it has been already decided by this Tribunal in the case of PVS Multiplex India Pvt Ltd vs. CCE & ST, Meerut-I (supra). Relevant extract of the said judgment is as under: "6. Having considered contentions and 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. We also take notice that the appellant have disclosed the gross amount received from sale of tickets or exhibition of fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e counsel, for the appellant as to how the revenue sharing agreement resulted in the joint venture, by virtue of which the appellant claim that they cannot be providing the services to them, counsel was not able to justify the claim for providing the services to the joint venture in which he is a constituent. 4.11 Further the agreement entered into between appellant and the distributor is on principal to principal basis whereby the appellant have provided the facilities for screening the movies by the copyright owner. Adjudicating authority in his order has clearly recorded as follows: "It is observed that noticee entered into a proper agreement with the distributors/sub distributors who approach them for the display of their films and other support systems at their theatre. Sh. Vinod Sharma, Accountant &Authorised Signatory of the noticee admitted in his statement that the distributor/sub-distributor appointed one person in their theatre to keep a watch on the working of the theatre and give suggestions for improvement in the services and sort out any complaint. Further, it is observed that these two entities i.e. the Theatre Owner and the distributor/ sub-distributors were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; did not pay the service tax due on the services provided; did not submit ST-3 returns with the Central Excise Department. Therefore, the Noticee have rendered themselves liable to penal action under Section 77 of the Act. As regards to penalty under Section 78 of the Act, this section is used to levy penalty when service tax has been not levied; or not paid; or short levied; or short paid; or erroneously refunded with an intention of evading payment of service tax due to fraud; or collusion; or willful mis-statement; or suppression of facts; or contravention of any provisions or rules and contravention of provisions of rules and notifications issued under these rules. In the present case, I find that the noticee neither have got themselves registered with the department, nor filed any ST-3 returns nor paid the applicable service tax. It can be said that they have shown evasive tendencies by not paying the applicable service tax in the first instance. This clearly shows the intention of the noticee to commit fraud with the exchequer/ Government. Also they had not paid any tax till date. If the department would not have got the information about the noticee, the evasion would ..... 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