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TMI Blog2024 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... the demand made. It is noted that issue for the period post 01.07.2012, was considered by the Mumbai Bench in case of M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI [ 2022 (3) TMI 1256 - CESTAT MUMBAI] has held that ' 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 rights conferred upon the appellant.' There are no merits in the impugned order and the same is set aside - appeal allowed. - MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri Vineet Dubey, Advocate for the Appellant Shri A.K. Choudhary, Authorized Representative for the Respondent ORDER This appeal is directed against order in appeal No MRT/EXCUS/000/APPL-MRT/1441/2018-19 dated 02.01.2019. By the impugned order following has been held: 7. In view of abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after depositing the tax, if any, intimate to the Adjudicating Authority. As regards the other issue regarding differential tax demanded Rs.56,114/- as different accounting method in the financial accounts (accrual basis) and ST-3 return, which was on receipt basis, we remanded to the ld. Commissioner to reconcile and direct the appellant to provide the calculation, and to examine the same and be considered in accordance with law. Thus, the appeal is allowed in part and remanded in part as indicated herein above. The appellant shall be entitled to consequential benefits in accordance with law. We also take notice of the fact that the amount of Rs 22,21,130/- was deposited by the appellant under VCES Scheme, the appropriation for the same have been granted by the ld. Commissioner in the impugned Order in Original. 2.4 SCNs dated 21.04.15 22.03.16 for demand of Service Tax of Rs. 26,99,899/- and Rs. 21,97,635/- respectively for the subsequent periods of 2013-14 and 2014-15 on the same issue were issued. 2.5 Both the show cause notices were adjudicated by common order in original dated 29.12.2017 holding as follows: ORDER (i) I demand and order to recover Service Tax amounting to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the adjudicating authority has confirmed the demand by observing that the activity of exhibition of film by the appellant no. 2, on revenue sharing basis with the distributor, is taxable service as there is no exemption nor the same is under negative list as declared in Section 66D of the of the Act. As per the arrangement made between the appellant no. 2 and the distributor, it is seen that there was an understanding to share revenue/profits in a pre-set percentage of the entire box office collection of the movies supplied by the distributor and screened in appellant's theatre and in such cases, the two parties to the said arrangement were not transacting on a principal-to-principal basis but were conducting business together as constituent members of a partnership having mutuality of interest and sharing common risks and rewards in a pre-determined manner. There is no dispute that the appellant no. 2 constructed multiplex for screening of movies/films and the distributor of films engaged appellant no.2 for screening of films purchased by him from producers on a consideration agreed by him. The contention of the appellant no. 2 that his appeal against the earlier demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e description of the said entry cannot be interpreted to mean exemption to the services provided by the appellant no. 2 to the film distributors for which the consideration was received by him by way of an arrangement of sharing of revenue generated from the sale of the tickets. The Hon'ble High Court of Madras, vide the case law cited supra, observed as under: 50 . By a combined reading of Section 66D(j), Notification Nos. 25/2012-S.T., dated 20-6-2012 and 3/2013-S.T., dated 1-3-2013, it is clear that what is exempted is only an admission to entertainment events or access to amusement facilities or exhibition of cinema in a theatre. The variant modes of transaction between the distributor/sub-distributors of films and exhibitors of movie and the revenue sharing arrangement between them are neither in the Negative List Services nor exempted. 6.3 I find that the appellant no.2 was engaged by the distributor for screening of the picture/film/movie (copyrights of which were with the distributor) for which he was getting a consideration, on revenue sharing basis, for the screening of the picture/film/movie belonging to such distributor. It is therefore evident that the appellant no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Service Tax has been raised by appropriate reference to the applicable provision of law. The contention of the appellant no. 2, regarding this point is therefore not tenable. 4.3 From the perusal of the show cause notices which were issued to the appellant, it is quite evident that these show cause notices have been issued on the basis of the provisions of the Finance Act, 1994 as they existed before 01.07.2012, i.e. prior to introduction of levy of service tax on the services other than those specified in the negative list or exempted. The relevant para of the show cause notice dated 29.03.2016 are reproduced below: 8. And whereas, the party is owner of three theaters and is engaged in providing the Service of screening of film supplied by a film distributor, which falls under any of the taxable service category of renting of immovable property or Business Support Service depending Pon the arrangement between the film distributor and theatre owner, as clarified vide Board's Circutar No. 109/03/2009 dated 23d February, 2009, This issue was further clarified vide Circular No. 148/17/2011-St dated 13-12-2011 9 As per above said clarifications and facts of the case, it came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty, by the Joint Commissioner Central Excise Service Tax Commissionerate Meerut (RUD-1). 13. And whereas, the jurisdictional Superintendent of Service Tax vide letter C.No. V(30]SCN/ST/R-I/DMRT/PVS/303/2014 dated 25.02.2016 (RUD-2) requested the party to provide the details relating to the amount received during the financial year 2014-15 relating to Business Exhibition service, Sale of space or time for advertisement, Renting of immovable property amount claimed as pure agent, amount shown received as commission on sale, Screening of film (Theatre receipt) etc. The party vide letter dated 07.03.2016 (RUD-3) provided the Balance Sheet of Financial Year 2014- 14. Whereas, during the course of scrutiny of ST-3 returns for the period April,2014 to March,2015 (RUD-4) with the balance sheet for the year 2014-15 along with above said details provided by the party, it was observed that the party has paid Service Tax on the taxable value of Rs 1,50,60,754/- under the category of Renting of immovable property . However, they have not paid any Service Tax on amount charged for screening of films, supplied by film distributor falling under the category of Business Support Service. 15. . 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified that: - 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. However, the nature of transaction determines the leviability of service tax. Each case may be looked into on its merits and decision be taken on case to case basis 19. And whereas, from the above clarification, it came to notice that the activity of screening of film supplied by a film distributor falls under any of the taxable service category of renting of immovable property or Business Support Service' depending upon the arrangement between the film distributor, and theatre owner. To ascertain the leviability of Service Tax on the amount received on account of screening of film which has been shown in the Balance sheet as Theater Income, Shri Kalyan Singh, authorized representative of the party. was inquired in this regard during the course of his statement dated 18.10.2013 (Reply to Query No. 7). He stated that there was no written agreement between the party and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pay Service Tax on Rs. 1,56,98,301.00 [Rs 3,06,00,721.00 Rs. 1,49,02,420.00] for the year 2014-15. The details of the service tax liability outstanding on the party are elaborated as under: [Figure in Rupees] Year Total Amount Collected Amount Paid to Film Distributor (Shown As Software Expenses in Balance Sheet) Taxable Amount of Theatre Receipt 1 2 3 4=(2-3) 2014-15 30600721 14902420 15698301 24. Further, the party has shown A.C. Receipts (Theatre) and Maintenance Charges in their Balance sheet. On being inquired about the same, the party submitted that they are collecting the said amount in theatre collection and expensing it towards repairing maintenance of Air Conditioner and Theatre respectively. This appears to have been done with the sole purpose of bifurcating the amount of sale of movie tickets i.e. Theatre Receipt A.C. Receipts (Theatre) and Maintenance Charges receipts. It appears that the A.C. Receipts (Theatre) and Maintenance Charges receipt in full is retained by the exhibitor (Theatre Owner) and the remaining amount of income on account of sale of movie tickets is being shared by each of the persons, which appears liable to Service Tax. From this, it appears t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the Government exchequer along with interest due thereon, in contravention of provisions of Rule 6 of the Service Tax Rules, 1994 read with Section 66/66B 67 and 68 of the Finance Act, 1994. Accordingly, it appears that the party is liable for penalty in terms of Section 76 of the Finance Act, 1994, for contravention of above said provisions. 4.4 From the above it is quite evident the show cause notice has not made any averment in respect of the definition of Service as per Section 65 B (44) as introduced by the Finance Act, 2012 or about the negative list. Thus we have no hesitation in holding that the impugned order has travelled beyond the show cause notice while upholding the demand made. We also do not find any relevance of the decision of Hon ble Madras High Court in case of M/s Mediatone Global Entertainmenmt Ltd [2014 (34) STR 819 (Mad)] relied in the impugned as the said decisions has considered the provisions as introduced after introduction of negative list. The show cause notice defines the strict boundaries for adjudication and subsequent proceedings. Thus any order which travels beyond the boundaries laid down by the show cause notice is bad in law and needs to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. (emphasis supplied) 9. It is made taxable under section 65(105)(zzzq) of the Finance Act which is reproduced below: 65(105)(zzzq) taxable service means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner; 10. The issue that arises for consideration is whether the activity carried out by the appellant would be exigible to service tax under BSS. To appreciate this, it would be pertinent to refer to the agreement. The agreement in the present appeal is almost the same as the agreement in other appeals that have been decided including that in Inox Leisure Ltd. It would be seen from the agreement that the producer/distributor is engaged in the business of production and distribution of films, while the appellant is an exhibitor engaged in the business of exhibition of films and owns/operates a chain of multiplex theatres. The exhibitor decides which screens would play the motion picture, the numbers of shows, the show timings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 supplied) 13. Similar views were expressed by Division Benches of the Tribunal in The Asian Art Printers, Shri Vinay Kumar, M/s. Golcha Properties and Satyam Cineplexes Ltd. 14. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 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. . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined at length by a Division Bench of the Tribunal in Inox Leisure Ltd. and the order passed by the Commissioner was set aside. 23. 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 28.02.2022, the Supreme Court dismissed the Civil Appeal holding that the Tribunal had taken an absolutely correct view, to which the Supreme Court agreed. The order passed by 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. 24. Thus, for all the reasons stated above, it is not possible to sustain the confirmation of the demand by the order dated 16.06.2016 passed by the Commissioner. It is, accordingly, set aside and the appeal is allowed. 4.6 Respectfully following the decision of Allahabad Bench in appellants own case and the decision of Mumbai Bench in case of M/s INOX Leisure we do not find any merits in the impugned order and set aside the same. 5.1 Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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