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TMI Blog2024 (8) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... x office manifests the joint venture between the exhibitor and distributor and, though not liable to tax of itself, had incurred costs of procuring service from the two collaborators of which provision of support service of business or commerce , enabling the venture to screen films, was sought to be fastened on the exhibitor - Once again, and with the additional benefit of subsequent developments in the above dispute, the Tribunal had cause to look at another controversy, and with substitution of the distributor by association of persons as recipient, identical to the one now here in M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI [ 2022 (3) TMI 1256 - CESTAT MUMBAI] . It was noted therein that the earlier decision was applicable even in the changed circumstances of negative list and any contrary stand on taxability was doubtlessly unacceptable. Thus, the demand and penalty in the impugned order have no basis in law and must be set aside - appeal allowed. - HON BLE MR JUSTICE DILIP GUPTA , PRESIDENT And HON BLE MR C J MATHEW , MEMBER ( TECHNICAL ) None for the appellant Shri S B P Sinha , Superintendent ( AR ) for the respondent ORDER PER : C J MATHEW Back in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with distributor for screening of films. It is not about a fresh tax under Finance Act, 1994 on the same transaction taxed under the relevant statute of a state government which has been packaged as constitutionally justifiable. It is not about taxing a service provided by the exhibitor to the distributor which may well be within ambit of Finance Act, 1994. Before we find ourselves stepping into that which it is and that which it is not, we would do well to advert to the claims and counter-claims. But first to the facts as set out in order [order-in-original No. 05 to 07/ST-VII/RK/2016 dated 31st May 2016] of Commissioner of Service Tax, Mumbai-VII which is impugned before us even as we are cognizant that, nonrepresentation for the appellant notwithstanding but the circumstances permitting, the appeal can be disposed off with the assistance of Learned Authorised Representative. 3. The appellant, M/s Meghraj Cinema, is a theatre owner and, in keeping with industry practice, screened films for which copyright was temporarily transferred by distributors in accordance with agreements, setting out the period and the declining share of net from the box office collections for each week as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter 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. and, in a sense, is foundation of the proceedings initiated against the appellant inasmuch as the provocation appears to have stemmed from some portion of their taxable income so designated in the impugned order instead of value of taxable service as it should have been not having been subjected to service tax and, owing to the proposition in the circular, merely awaiting avulsion of a transactional entity distinct from either, and both, of the parties to the agreement. 5. The specifics therein, in stark contrast with circular [circular no. 109/03/2009 dated 23rd February 2009] issued two years earlier, were held to authorise charging of tax upon identification of joint venture entity which, by its very nature, was premised as the recipient of service provided by the constituents. Impliedly, in rendering of service not to each other or jointly to patrons but independently b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Agencies P Ltd [2008 (12) STR 401 (SC)] . According to him, the costs incurred in exhibiting any film in the collaboration between owner of the theatre and owner of the right to screen the film and met from the box office collection represents the consideration for service rendered to the collaborative venture by each with the box office as the corporeal manifestation of association of persons birthed in the arrangement. 8. Parallel is an expression deployed in context of the film industry but here we find two parallel lines - of constitutional restriction disbarring levy on screening of films and fictional conception of an entity excoriating the flesh and blood of the charging provision - sought to be converged for bringing the box office , or part thereof, within the tax net of Finance Act, 1994. The implication is that the box office manifests the joint venture between the exhibitor and distributor and, though not liable to tax of itself, had incurred costs of procuring service from the two collaborators of which provision of support service of business or commerce , enabling the venture to screen films, was sought to be fastened on the exhibitor. That such collaboration can e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor of films was examined by a Division Bench of the Tribunal in Moti Talkies. 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 the rights conferred upon the appellant. The observations of the Bench are as follows : 11. It is more than apparent from a bare perusal of the aforesaid agreements that they have been entered into between the appellant as an exhibitor and the distributors for screening of the films on the terms and conditions mentioned therein. The payments contemplated under the terms and conditions either require the exhibitor to pay a fixed amount or a certain percentage, subject to minimum exhibitor share or theatre share of effective shows in a week. xxxxxxxxxxx 16. It is very difficult to even visualise that the appellant is providing any service to the dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ( emphasis supplied ) 11. On the issue of tax leviability on revenue-sharing arrangements, it was held that 16. This apart, a revenue sharing arrangement does not necessarily imply provision of services, unless the service provider and service recipient relationship is established. This is what was observed by the Tribunal in Mormugao Port Trust, Old World Hospitality and Delhi International Airport. 17. In Mormugao Port Trust, the Tribunal explained that public private partnerships between the Government/ Public Enterprises and Private parties are in the nature of joint venture, where two or more parties come together 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices. 17 The question that arises for consideration is whether the activity undertaken by a co- venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor-contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/coventurers or between the co-venturers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied 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' and the theater owner would be liable to pay tax on the rent received from the distributor. The facts of each case and the terms of contract must be examined before a view is taken. 4. All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned. ( emphasis supplied ) 20. The subsequent Circular dated 13.12.2011 issued by the Central Board of Excise and Customs, apart from the fact that it would not be applicable for confirming a demand for any period prior to 13.12.2011, would also not come to the aid of the Department. The relevant portion of the Circular is reproduced below: 9. Thus, where the distributor or sub-distributor or area distributor enters into an arrangement with the exhibitor or theatre owner, with the understanding to share revenue/profits and not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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