9911796707
TMI Blog2022 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... t the motion picture. The distributor/producer had granted the exhibitor the non exclusive license to exploit the theatrical rights of a motion picture and each party was entitled to conduct its business in its absolute and sole discretion. What also needs to be noticed is that if the appellant was providing such a service, it would be the producers/ distributors who would be making payments to the appellant, but what comes out from a perusal of the Agreement is that in consideration for the distributor agreeing to grant to the appellant the license to exploit the theatrical rights of a motion picture, the appellant would have to pay such revenue share to the distributor as provided for in the said clause. In fact, the distributor agreed to grant to the Appellant the non exclusive license to exploit the theatrical rights of a motion picture during the term. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same has to be treated on principal to principal basis. After placing reliance upon the judgment of the Supreme Court in Faqir Chand Gulati vs. Uppal Agencies Pvt Ltd [2008 (12) STR 401], the Commissioner observed that there was no doubt that the enterprise created by the Agreement between the appellant and the distributor was a joint venture. The Commissioner also relied upon the Circular dated 13.12.2011 issued by the Central Board of Excise and Customs regarding the levy of service tax on distributors of films and exhibitors of movies to reject the contention of the appellant that the transaction was on a principal to principal basis and accepted the contention of the Department that the transaction lead to the emergence of new entity having the character of Association of Persons. The relevant portion of the order is reproduced below: "36. xxxxxxxxxxxxx I have no doubt that the enterprise created by the agreement between the noticee and a distributor is a Joint Venture. There is no explicit contract or deed to this effect. However, as held in several judicial pronouncements, such an enterprise would fall under the category of an incorporated joint venture. 37. The notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Gopal Mundhra assisted by Ms. Ginita Bodani and Shri Akash Khandelwal, learned counsel for the appellant made the following submissions: (i) The issue involved in the appeal has been decided in favour of the appellant in the following decisions of the Tribunal: (a) Inox Leisure Ltd. vs. Commissioner of Service Tax, Hyderabad [2021 (10) TMI 893-CESTAT HYDERABAD] (b) M/s. PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-l [2017 (11) TMI-156- CESTAT Allahabad] (c) M/s. Moti Talkies vs. Commissioner of Service Tax, Delhi-l [2020 (6) TMI 87- CESTAT New Delhi ]; (d) M/s. The Asian Art Printers (Sheila Theatre) vs. Principal Commissioner of Service Tax, Delhi-l [2020 (12) TMI 1012- CESTAT New Delhi]; (e) Shri Vinay Kumar, Proprietor of M/s. Regal Theatre vs. Principal Commissioner of Service Tax, Delhi-l [2020 (11) TMI 436- CESTAT New Delhi]; (f) M/s. Golcha Properties Pvt. Ltd. vs. Principal Commissoner of Service Tax, Delhi-l [2020 (11) TMI 137- CESTAT New Delhi]; and (g) 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 neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... theatre to screen the films and the appellant provides assistance and support for screening the films. Thus, the appellant extends support to the producers/suppliers of films by providing the infrastructure and this activity would fall under the definition of BSS; and (iii) In view of the Circulars dated 23.02.2009 and 13.12.2011 issued by the Central Board of Excise and Customs in connection with service tax on movie theaters, the appellant is not justified in contending that service tax would not be leviable if revenue is shared between the appellant and the producers of films. 8. The contentions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the Department have been considered. 9. '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: "65(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any additional lootage are specially excluded from the licensed rights. Net Collection: Gross Box-office collections less Applicable Entertainment Tax less Municipal Show Tex, if any, less Exact hire of Indian News Reel from the Grass collection. No other deductions shall be allowed. Payment: (a) The Payment of the Distributor's share shall be in accordance with the arrangement specified above and in the name of "PVR Pictures Ltd" (b) The invoices raised against this contract shall be cleared by the Exhibitor within 7 days of the last play date the week for which the invoice has been raised (c) in case of default to making the payment to the Distributor the Exhibitor hereby agrees to pay the interest 18% (Eighteen per cent) per annum to be calculated on the due amount after completion of each week it whether agreed that the provision of interest shall not mean or entitle the exhibitor to detain the due amount of the distributers share. (d) The exhibitor shall hold Distributor's share in Trust for the Distributor till all payments are made name of the Distributors (as mentioned in the contract) either by cash or cheque as directed by the Distributer in writing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by renting of immovable property or even any other service in relation to such renting. The agreements that have been executed between the appellant and the distributors confer rights upon the appellant to screen the film for which the appellant is making payment to the distributors. The distributors are not making any payment to the appellant. Thus, no consideration flows from the distributors to the appellant for the alleged service. xxxxxxxxxxxx 18. It is not possible to accept the reasonings given by the Commissioner (Appeals) for confirming the demand of service tax under "renting of immovable property" for the simple reason that the appellant has not provided any service to the distributors nor the distributors have made any payment to the appellant as consideration for the alleged service. In fact, the appellant who has paid money to the distributors for the screening rights conferred upon the appellant. The Commissioner (Appeals) completely misread the agreements entered into between the appellant as an exhibitor of the films and the distributors to arrive at a conclusion that the appellant was providing the service of "renting of immovable property." (emphasis suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially in the nature of partnership with each co-venturer contributing some of the resources for the furtherance of the joint business activity. The Tribunal held that such public private partnerships meet the test laid down by the Supreme Court in Faqir Chand Gulati vs. Uppal Agencies Pvt Ltd [2008 (12) STR 401 ], for ascertaining whether or not the arrangement is one of joint venture. The relevant observations of the Tribunal in Mormugao Port Trust are reproduced below: "12 …………………….. In our view this arrangement in the nature of the joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing model. Such PPP arrangement are common nowadays not only in the port sector but also in various other sectors such as road construction, airport construction, oil and gas exploration where the Government has exclusive privilege of conducting businesses. In all such models, the public entity brings in the resource over which it has the exclusive right, whether land, water front or the right to exploit the said land and water front, and the private entities brings in the required resour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent." 20. The Civil Appeal filed by the Department (Commissioner vs. Mormugao Port Trust) against the aforesaid decision of the Tribunal was dismissed by the Supreme Court both on the ground of delay as well as on merits and the judgment is reported in 2018 (19) GSTL J 118 (SC). 21. The Circular dated 23.02.2009 issued by the Central Board of Excise and Customs, infact supports the case of the appellant. The relevant portion of the Circular, which is in connection with service tax on movie theatres, is reproduced below: "2.4. The arrangement most commonly entered into between a theater owner and a distributor is that the theater owner screens the movie for fixed number of days under a contract. The proceeds earned through sale of tickets go to the distributor but the theatre owner receives a fixed sum depending upon the number of days of screening. In this arrangement, the advertisement and display of posters etc. is done by the distributor. Under this arrangement, the fixed amount contracted is given to the theate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquires the character of a "person", the transactions between it and the other independent entities namely the distributor/sub-distributor / area distributor and the exhibitor etc will be a taxable service. Whereas, in cases the character of a "person" is not acquired in the business transaction and the transaction is as on principal-to-principal basis, the tax is leviable on either of the constituent members based on the nature of the transaction and as per rules of classification of service as embodied under Sec 65A of Finance Act, 1994." (emphasis supplied) 23. In view of the decision of the Supreme Court in Faqir Chand Gulati and the decision of the Tribunal in Mormugao Port Trust, no service tax can be levied on the appellant under BSS. 24. All the aforesaid issues were also examined at length by a Division Bench of the Tribunal in Inox Leisure Ltd. and the order passed by the Commissioner was set aside. 25. The Department filed Civil Appeal No. 1335 of 2020 (The Commissioner of Service Tax vs. Inox Leisure Ltd) before the Supreme Court and by order dated February 28, 2022, the Supreme Court dismissed the Civil Appeal holding that the Tribunal had taken an absolutely corr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
