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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 ..... sions rendered by the Tribunal in case of PVS Multiplex and AB Motion Pictures are correct exposition of the law on the subject." 2. M/s Sikri Multiplex Cinema (P) Ltd. [the appellant] in Ludhiana runs a cinema hall called "Orient Cinema". According to the appellant, it is the practice in the film industry that a director/producer of a movie sells his rights to distributors, who contact the owners of cinema halls and thereafter different types of agreements are executed between the theatre owners and the distributors and one such agreement is an agreement where the parties share the revenue. Under this system, the revenue generated from the exhibition of the movie is distributed between the theatre owner and the distributor in a pre-determined ratio. 3. In the present case, reference has been made to an agreement dated 11.10.2011 between the distributor "Yash Raj & Puri Co. Pvt. Ltd." and the appellant for exhibition of the movie "Mujhse Friendship Karoge". The agreement provides that the movie would run for one week and the show timings would be from 10 AM, 12 PM and 9.30 PM. The share of distributor has been shown to be 50% in the agreement and the exhibitor has agreed to scree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the theatre. Thus, these two have always formed an unincorporated Joint Venture/entity, which is an entity as per Supreme Court findings in the matter as discussed above. The effective control of the theatre has never been handed over to the distributor or sub-distributor even in those cases where the agreements contain the words such as theatre hire or fixed hire or rent etc. This fact of these two entities working together to form a joint venture/entity gets further support from the statement dated 24.08.2014 of the authorized signatory of the Noticee, wherein he has categorically admitted that they and the distributor have worked together for the screening of the film wherein they provide the infrastructural support and the distributor provides the film to exhibit in the cinema hall and appoints a person to the theatre to keep a check on the working of the theatre. These two clearly form a partnership which is engaged in the joint undertaking of exhibition of movie for their mutual profit. Thus in this case, clearly a new entity emerges which acquires the character of a "person" and the transactions between it and the other independent entities namely the distributor/sub-dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of movies in the theatre falls under the definition of "Business Support Service". ***** ***** ***** 8.4 .........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. ***** ***** ***** 8.6 .........However, the definition of "support services of business or commerce" was amended w.e.f 01.05.2011 (Notification No. 29/2011-ST dated 25.04.2011) vide section 74 of the Finance Act, 2011 (8 of 2011) as the clause "operational assistance for marketing" was substituted by the clause: "operational or administrative assistance in any manner" and, thereafter, it reads as under: ***** ***** ***** ............On going through all the above pointed, it can be noted that with the amendment in the definition from Operational assistance for marketing to operational or administrative assistance in any manner, the appellant/cinema exhibitor came into the preview of the taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1 - xxxxxx xxxxxx xxxxxx Explanation 2 - xxxxxx xxxxxx xxxxxx Explanation 3 - For the purposes of this Chapter,- (a) An unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) An establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons." 12. "Support services" has been defined under section 65B(49) of the Finance Act in the following manner : "65B(49) 'support services' means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the theatre owner conduct business together and hence no service tax is leviable. Arrangement amongst two or more entities can either be on principal-to-principal basis or on partnership / joint / collaboration basis. In the former, the constituent members are independent of each other and do not share any risk / revenue / profit / loss / liability of the other while in latter the constituent members join hands for mutuality of interest and share common risk / profit together. 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 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal -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 unincorporated partnership/ joint/ collaboration basis Service provided by each of the person i.e. the 'new entity'/ Theater Owner or Exhibitor / Distributor or Sub-Distributor or Area Distributor or Producer etc, as the case may be, is liable to Service Tax under applicable service head 11. It is understood that the Circular dated 23.02.2009 has been misinterpreted to exclude all 'revenue sharing' arrangements from the levy of service tax. Remuneration or payment arrangements on basis of fixed or revenue sharing or profit sharing or hybrid versions of these may exist. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid decision of the Tribunal and had filed an appeal before the Supreme Court. The Division Bench further noticed that the agreement entered into between the appellant and the distributor was on a principal to principal basis whereby the appellant had provided the facilities for screening the movies by the copyright owners. The relevant portions of the referring order are reproduced below : "4.10 This order of CESTAT has not been accepted by the Revenue and appeal filed against the same before Supreme Court, as reported at [2021-TIOL-32-ST-SCLB]. Further in view of the decision of the Hon'ble Madras High Court referred to us by upholding the circular, we are not in position to agree with the decision in the case of AB Motion Pictures, supra. Not every revenue sharing agreement results in a joint venture whether incorporated or unincorporated. To the specific query made by the bench to the 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who are all producers or Distributors/sub-distributors /exhibitors of movie, challenge the Circular No. 148/17/2011-S.T., dated 13-12-2011 bearing F. No. 354/27/2011-TRU as illegal and unconstitutional and seek for issuance of directions to respondents 1 to 3 not to give effect to Circular No. 148/17/2011-S.T., dated 13-12-2011 issued by the Central Board of Excise and Customs, Tax Research Unit, New Delhi, which was issued for the purpose of collecting Service Tax from film distributors/sub-distributors/theatre owners and seek for a direction not to give effect to the said circular. ***** ***** ***** 25. In terms of Section 83 of the Finance Act certain provisions of the Central Excise Act including Section 37B are made applicable to the provisions of the Finance Act. It has not been disputed before us that the impugned circular has been issued in exercise of the power conferred under Section 37B of the Central Excise Act. The petitioners contend that the impugned circular is violative of the proviso to Section 37B of the Central Excise Act, which provides that no orders, instructions, and directions shall be issued so as to require any Central Excise Officer to make a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Madras High Court since the Circular provided that the facts of each case would have to be examined on merits and a decision would have to be taken on a case to case basis. 21. Such being the position, the decision of the Madras High Court in Mediaone Global could not have been made the basis for holding that the decisions of the Tribunal in PVS Multiplex and AB Motions would require reference to a Larger Bench of the Tribunal. 22. What needs to be also noticed is that in Inox Leisure Ltd. vs. Commissioner of Service Tax, Hyderabad [2022 (60) GSTL 326 (Tri.-Hyd.)], a similar agreement that was executed between the distributor and an exhibitor that 50% of the net collection would be that of the distributor, was also examined by a Division Bench of the Tribunal. The show cause notices that were issued to the appellant therein were adjudicated upon by a common order dated 30.03.2016 and the demands were confirmed for the following reasons: (a) The appellant was providing services to distributors/producers in the nature of infrastructure support services falling within the definition of taxable service category of BSS defined under Section 65(104c) of the Finance Act; and (b) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 resources either capital, or technical expertise necessary for commercial exploitation of the resource belonging to the Government. These PPP arrangements are described sometimes as collaboration, joint venture, consortium, joint undertaking, but regardless of their name or the legal form in which these are conducted. These are arrangements in the nature of partnership with each co-venturer contributing in some resource for the furtherance of the joint business activity. xxxxxxxxx xxxxxxxxx xxxxxxxxx 15. An analysis of this judgment shows that in order to constitute a joint venture, the arrangement amongst the parties should be a contractual one, the objective should be to undertake a common enterprise for profit. Joint control over strategic financial and operative decisions was held to be the key feature of a joint venture. The other obvious fea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 theater owner by the distributor irrespective of the fact whether the movie runs well or not. However, there is no rental arrangement between the theater owner and the distributor as in the arrangement at paragraph 2.1 above. A view has been expressed that in this arrangement, the theater owner provides 'Business Support Service' to 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 exhibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2016 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 No. 30489 of 2016 are allowed." (emphasis supplied) 24. This order of the Tribunal in Inox Leisure was challenged by the department before the Supreme Court. The Civil Appeal filed by the department was dismissed by the Supreme Court on 28.02.2022 and the decision is reported in Commissioner of Service Tax vs. Inox Leisure Ltd. [2022 (61) GSTL 342 (SC) ]. The judgment of the Supreme Court is reproduced below : "No case is made out to interfere with the impugned Order passed by the Customs, Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'). The CESTAT has taken an absolutely correct view, to which we agree. Hence, the Civil Appeal stands dismissed." (emphasis supplied) 25. A perusal of the aforesaid decision of the Tribunal in Inox Leisure would indicate that not only was the earlier decision of the Tribunal in PVS Multiplex 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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