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TMI Blog2024 (6) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in PVS Multiplex [ 2017 (11) TMI 156 - CESTAT ALLAHABAD] followed, but independent findings were also recorded to hold that service tax could not be levied upon the appellant under BSS. This order of the Tribunal was assailed by the Department before the Supreme Court and the Supreme Court while dismissing the appeal specifically observed that the Tribunal had taken an absolutely correct view, to which the Supreme Court agreed. PVS Multiplex and Inox Leisure, therefore, lay down the correct law. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal. - MR. DILIP GUPTA, PRESIDENT, MR. S.S. GARG, MEMBER (JUDICIAL) AND MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Shri Naveen Bindal, Advocate for the Applicant Shri B.L. Narasimhan, Ms. Krati Singh and Ms. Shreya Kuntela, Advocates for the Intervenors Shri Narinder Singh and Shri Aneesh Diwan, Authorized Representative for the Department ORDER The following three issues have been referred to a Larger Bench of the Tribunal by a Division Bench of the Tribunal: a) Whether the view expressed by the CESTAT in case of PVS Multiplex, and subsequently followed in the case of AB Motion Pictures, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination the picture by a draft payable at Jalandhar. That the exhibitor agrees to screen the picture simultaneously with its circuit release on 14th October, 2011. 4. A show cause notice dated 21.09.2014 was issued to the appellant alleging that the appellant provided support services of business or commerce [BSS], as defined under section 65 (104) (c) of the Finance Act, 1994 [the Finance Act] and made taxable under section 65 (105) (zzzq) of the Finance Act for the reason that the appellant provided the cinema hall and other infrastructure to the distributor for exhibition of the movie in the theatre. The show cause notice also alleges that appropriate service tax on the amount received by the appellant for providing the aforesaid taxable service was not paid by the appellant. The allegations made in the show cause notice are as follows: From the above statutory positions read with the Board's Circular discussed above and the statements supra of the authorized persons of the Noticee, the Noticee and its Distributor/sub-distributor always work together under different types of arrangements wherein the Noticee provided their cinema hall along with infrastructural support and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) 5. The appellant was, therefore, called upon to show cause why service tax on the amount of Rs. 2,31,76,539/- earned from 01.10.2008 to 31.03.2014 should not be recovered from the appellant for providing BSS. 6. The appellant filed a reply to the show cause notice and denied the allegations, but the Deputy Commissioner confirmed the demand of service tax with interest and penalty by order dated 07.04.2017. The appeal filed by the appellant before the Commissioner (Appeals) was also disposed by order dated 07.05.2018. The demand for the period prior to 01.05.2011 was dropped, but the demand for the period from 01.05.2011 to 31.03.2014 was confirmed. 7. It is this order dated 07.05.2018 passed by the Commissioner (Appeals) that has been assailed in this appeal. The Commissioner (Appeals) noticed that the issue was whether the service provided by the appellant to the distributors by way of providing cinema hall and other infrastructure for exhibition of the movie in the theatre would fall under the definition of BSS. The Commissioner (Appeals) examined the definition of BSS before 01.05.2011 and after 01.05.2011 and observed as follows : 8.2 Therefore, the issue before me for deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 65(104c) of the Finance Act defines BSS . The definition, as it stood prior to 01.05.2011, is reproduced below : 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 fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. 10. The aforesaid section 65(104c) of the Finance Act was amended on 01.05.2011 and the words operational or administrative assistance in any manner were added after the words processing of transactions and before the words formulation of customer service . 11. Service has been defined under section 65B of the Finance Act, which section was inserted on 01.07.2012. It is as follows : 65B(44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include (a) an activity which co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributor is liable to collect the service tax under copyright service deposit it with the government exchequer. Similarly when the sub-distributer or area distributor etc further transfers the rights to any person, he is also liable to collect the service tax under copyright service deposit it with the government exchequer. 5. In cases where no such copyrights are transferred by the distributor or sub-distributor or area distributor to the exhibitor or theatre owner, the same is not chargeable to service tax under Copyright Services. However the business transaction needs to be examined for leviability of service tax under other heads. Depending upon the arrangement whether the theatre owner has merely let out its premises to the distributor or is also involved in giving support services for the business of the distributer, there can be a case of leviability of service tax on the remuneration retained by such theatre owner under Business Support service or Renting of Immovable Property . The definition of Business Support service has been amended in Budget 2011 to include operational or administrative assistance in any manner in its definition. 6. It is being represented that in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 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. 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 Implicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would not be providing any service to the other party. The Division Bench also found that the revenue generated was shared between the appellant and the distributor, in which case any element of service would not arise. In such circumstances, the Tribunal held that the activity undertaken by the appellant would not be leviable to service tax. 16. When this appeal came up for hearing before the Division Bench of the Tribunal, it was contended by learned counsel for the appellant that the issue involved in the appeal stood covered in favour of the appellant in view of the aforesaid decision of the Tribunal in AB Motions, which decision relied upon the earlier decision of the Tribunal in PVS Multiplex. 17. The contention of the appellant that the issue stood decided by the Tribunal in AB Motions was, however, not accepted by the Division Bench. What primarily weighed with the Division Bench in not following the decision of the Tribunal in AB Motions was that the Madras High Court in Mediaone Global Entertainment Ltd. vs. Chief CCE, Chennai [2014 (34) STR 819 (Mad.)] had upheld the Circular dated 13.11.2011 and secondly the department had also not accepted the aforesaid decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Finance Act for levy of service tax on revenue sharing arrangement and would, therefore, be in contravention of the provisions of article 265 of the Constitution. It was further contended that under the guise of clarifying the scope of levy of service tax on distributors and exhibitors, the Circular introduced a deemed fiction of a new entity , which supposedly emerged in the case of revenue sharing arrangement. The Madras High Court upheld the constitutional validity of the Circular dated 13.12.2011. The contention of the writ petitioners that though in paragraph 11 of the Circular it was stated that each case may be looked into on its merit and a decision be taken on case to case basis, but the assessing authority would be bound by what was contained in the remaining part of the Circular, was not accepted by the Madras High Court and it was specifically held that the Circular does not restrict the power of the officials to decide a particular dispute in a particular manner. The relevant paragraphs of the judgment of the Madras High Court dealing with this aspect are reproduced below : 1 . In these writ petitions, the petitioners, who are all producers or Distributors/sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall. The source of concept of Service Tax lies in economics. Huge money is involved in film industry, coupled with host of commercial activities right from the Box Office to theatrical exhibition. Having regard to the variant modes of arrangements between the distributors/sub-distributors of films and exhibitors 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. (emphasis supplied) 20. It is seen that the contention of the writ petitioners that the assessing authority would be left with no discretion was not accepted by the Madras High Court since the Circular provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 in which the same are conducted, they are essentially 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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. 18. 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). 19. The Circular dated 23.02.2009 issued by the Central Board of Excise and Customs, in fact 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 up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding 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 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. 21. This apart, 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. 22. Thus, for all the reasons stated above, it is not possible to sustain the confirmation of the two demands under the order dated 30.03.2016 passed by the Commissioner. The said order dated 30.03.2016 is, accordingly, set aside and Service Tax Appeal No. 30488 of 2016 and Service Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down the correct law and the Circular dated 13.12.2011 or the decision of the Madras High Court in Mediaone Global do not change the legal position expressed by the aforesaid three Division Benches of the Tribunal. 29. The reference is, accordingly, answered in the following manner : (a) The decisions of the Tribunal in PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-I, AB Motions Pvt. Ltd. vs. Commissioner of CE ST, Ludhiana and Inox Leisure Ltd. vs. Commissioner of Service Tax, Hyderabad lay down the correct law and the judgment of the Madras High Court in Mediaone Global Entertainment Ltd. vs. Chief CCE, Chennai does not change the legal position expressed by the Tribunal; (b) The Madras High Court in Mediaone Global Entertainment Ltd. vs. Chief CCE, Chennai has observed that the facts of each case have to be examined on merits and a decision has to be taken on a case to case basis. The Circular dated 13.12.2011, therefore, does not curtail the power of the adjudicating authority in deciding a particular dispute in a particular manner and it is the law laid by the Tribunal in PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-I; AB ..... X X X X Extracts X X X X X X X X Extracts X X X X
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