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TMI Blog2021 (7) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act and taxable under section 65 (105)(zh) of the Finance Act. 3. The appellant is engaged in the business of exhibition of movies through various cinema halls located all over India. The appellant sells tickets for movies from the cinema ticket windows and also through its website www.pvrcinemas.com which is accessible through computer and mobiles phones. The website gives information on movies that are currently being exhibited in its cinemas, upcoming movies, trailers of movies and similar information. According to the appellant, no price is charged for accessing this website and any individual can access this website and gain information on movies that are being exhibited or would be exhibited in PVR cinemas. The customers who book tickets online through the website or through mobile phones electronically are required to pay an amount of INR 5/- to INR 25/- per ticket over and above the value of tickets. When the tickets are booked electronically, the hard copies of the same can either be collected over the counter or be retrieved by way of print out from a machine kept outside the counter of the movie hall. 4. The appellant received a show cause notice dated 14.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - On the website of M/s PVR Ltd., information/data viz. names and addresses of cinema hall, name of the movies being shown there or to be shown in future, number of shows, timings of shows of each movie being shown there or will be shown in future, rates of the tickets, total number of seat in that particular cinema hall, number of vacant seats available at that particular point of time etc. are continuously updated by M/s PVR Ltd. In addition to the same, customer can also see the trailers of the movies on the said website. A customer desirous of booking tickets, first of all chooses the suitable cinema hall/desired movie name from the list generated therein, thereafter he selects his options from the various options generated/shown onscreen in an interactive manner in respect of the movie he wants to see, show-timing, rates of tickets, etc. In the website, number of seats available for a particular show is also updated time to time. If a customer enters for a number of tickets/seats for a particular show and in case the desired numbers of seats are not vacant/available for that particular show, the website also shows the number of seats available at that point of time in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/ notifications/ circulars etc. I also find that the assessee has not been able to substantiate his claim of the amount being cum tax, and therefore I am inclined to consider the amount not inclusive of tax." (emphasis supplied) 8. The demand under the extended period of limitation was upheld on the ground that the Department was never made aware about the collection of convenience fee while providing OIDAR services and the evasion of service tax was detected by the Department only later. The Commissioner also observed that mere suppression of facts was enough for invoking the extended period of limitation and it was not necessary that there should be an intent to evade payment of service tax. The relevant portion of the order is reproduced below: 5.3 I find that the extended time period of five years is invokable under the provision contained in proviso to Section 73(1) of the Finance Act, 1994 as amended in specified cases, I find that the assessee had not disclosed to the Department about 'convenience fee' received while providing 'Online information and Database Access or Retrieval Service', which were taxable. ******** 5.3.4 I am of the view that it is possible to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -commerce transaction. In this connection reliance has been placed on the decision of the Tribunal in Commissioner of Service Tax, Mumbai vs. Click For Steel Services Limited [2017 (7) G.S.T.L. 215 (Tri. - Mumbai)]; (iv) Convenience fees in question is charged only for 'booking of tickets' and mere access to the website for information is free of cost; (v) The extended period of limitation in the first show cause notice for the period from 01.04.2007 to 31.03.2011 could not have been invoked. In this connection reliance has been placed upon the decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd. vs. C.S.T., New Delhi [2017 (47) S.T.R. 200 (Tri.- Del.)]; (vi) The activity of the appellant is not covered under any taxable service prior to 01.07.2012; (vii) The subsequent Circular dated 09.11.2016 issued by the Board clarifies that booking services or tickets to entertainment events do not fall under the category of OIDAR services; (viii) The manner of computation of tax adopted by the Department is incorrect. Service tax, if at all, is required to be computed on a cum-tax basis. In this regard, the Commissioner made only a one line observation that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... website for the aforesaid information. However, customers who actually book tickets online through the website or through mobile phones electronically are required to pay a certain amount per ticket over and above the value of ticket towards 'convenience fees'. In such a situation, when the tickets are booked online, the hard copy of the tickets can either be collected over the counter of the cinema hall or can be retrieved by way of the print out from a machine kept outside the counter in the cinema hall. 15. The issue that arises for consideration in these two appeals is regarding the taxability of 'convenience fee' charged by the appellant on its customers for online booking of movie tickets under OIDAR category under section 65(105)(zh) of the Finance Act. 16. Learned counsel for the appellant has broadly raised two submissions. According to the learned counsel for the appellant, the Commissioner was not justified in confirming the demand of service tax on convenience fee and even otherwise, the confirmation of demand for the period from 01.04.2007 to 31.03.2011 in the first show cause notice dated 14.06.2012 is bad in law since it is beyond the stipulated period of limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, namely wilful suppression of facts with an intent to evade payment of service tax do not exist and, therefore, the extended period of limitation could not have been invoked. 21. In order to appreciate this contention it would appropriate to reproduce section 73 of the Finance Act as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows; "73.(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contrave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oked in the facts and circumstances. For this purpose, learned counsel for the appellant placed the following factual position. 26. Pursuant to the audit conducted by the Audit Team of Service Tax Commissionerate, Delhi from 25.11.2008 to 28.11.08 for the period 2004-2005 to 2007-08, a communication dated 27.02.2009 was sent to the appellant by the Superintendent Service Tax (Audit) raising only two specific objections about service tax on the amount charged from advertising agencies and utilization of CENVAT Credit in excess of 20%. The appellant submitted a letter dated 18.05.2009 in response to both the audit objections. The appellant also submitted various documents, including financial records, agreements, details of revenue earned, credit availed etc., before the authorities. Subsequently summons dated 08.07.2009 was issued to the appellant by the office of Commissioner of Service Tax asking for certain documents and records mentioned in the Schedule to the summons, which among others, included convenience fees. The Schedule is reproduced below: SCHEDULE "1. All bills/invoices received against Advertisement and Publicity expenditure made during 2006-07 & 2007-08: 2. Det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department for the year 2007-08 in the show cause notice dated 14.06.2012. 33. A CERA Audit was also conducted and a Local Audit report dated 27.06.2011 was issued for the period 2007-10 raising for the first time an issue about non-payment of service tax on convenience fees. The Department believed that service tax was required to be paid on the amount collected as convenience fees under "business auxiliary service" [BAS]. The appellant submitted a reply dated on 27.07.2011 stating therein that service tax would not be payable on convenience fees under BAS. 34. The Commissioner, while confirming the demand under the extended period of limitation, observed that the Department was never made aware about the convenience fees received by the appellant and, therefore, the appellant had suppressed facts. The Commissioner also observed that mere suppression of facts is enough for invoking the period of limitation and there is no requirement of any intent to evade payment of service tax. 35. The conclusion drawn by the Commissioner that the appellant had suppressed having received any amount towards convenience fee is not correct. The first show cause notice is dated 14.06.2012 and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of facts; or (e) contravention of any of the provisions of this Act of the rules made thereunder with intent to evade payment of duty by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice." 39. In Pushpam Pharmaceuticals Company, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act." (emphasis supplied) 41. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur [2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief." (emphasis supplied) 44. It would also be useful to refer to a decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd., wherein the Tribunal after making reference to the decision of the Supreme Court in Cosmic Dye Chemical vs. CCE, Bombay [1995 (75) E.L.T. 721 (SC)], observed that there should be an intent to evade payment of service tax if the extended period of limitation has to be invoked. The observations are as follows: "8. Regarding the demand for extended period, we find the reason given by the Original Authority is not legally sustainable. In fact he recorded that in terms of proviso to Section 73 of Finance Act, 1994, the intention to evade payment of duty is not required to invoke extended period or to impose penalty. We find that for invoking extended period as well as for imposing penalty under Section 78, the legal provisions are identical. The words used like fraud, collusion, willful mis-statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the payment of service tax. 47. For all these reasons, the confirmation of demand of service tax of Rs. 1.27 crores on convenience fees for the period commencing 01.04.2007 to 31.03.2011 is beyond the prescribed period of one year contemplated under section 73(1) of the Finance Act and, therefore, this demand deserves to be set aside. Merits 48. It has now to be seen whether the convenience fees that is charged by the appellant from each user over and above the prescribed value of the movie ticket can be subjected to service tax under OIDAR. 49. For this purpose, it would be necessary to refer the Terms & Conditions for purchase of a movie ticket and they are as follows. "Terms and Conditions Online Booking Contest and Promotion By accessing and using this website the user accepts and agrees to be bound by the Terms and Conditions. Users should check for current Terms and Conditions as these can be updated and changed from time to time. Definitions PVR means and includes all the brands working under the head of PVR Limited. User means the person accessing the website and availing the online booking facility. Customer includes all the patrons of PVR and also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 50. The explicit terms of the contract are always the final word with regard to the intention of the parties. This is what was observed by the Supreme Court in Nabha Power Limited. The terms of contract have also to be treated on their face value and should be presumed to mean what they say and must be acted upon unless proved to be sham or farce, as was observed by the Allahabad High Court in Reliance Industries Limited. In CMS (l) Operations & Maintenance Co. P. Ltd. vs. C.C.E., Pondicherry [2007 (7) S.T.R. 369 (Tri.- Chennai)], the Tribunal observed that the pith and substance of an agreement has to be determined and that the main purpose and not the incidental purpose for determining whether tax is leviable or not has to be examined. 51. A perusal of the Terms & Conditions of the contract reproduced above show that the transaction can basically be split into three parts which are as under: Stage 1: Viewing of information i.e. movie show timings/date of release/availability of vacant seats etc. This Facility is provided free of cost; Stage 2: Booking of tickets by selecting the seats and making payment through an online portal; In making this payment, an amount of conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance of the transaction is, therefore, to book a ticket online and thereby engage in e-commerce. It cannot, therefore, be said that convenience fee is charged for any access/retrieval of information or database as contemplated under OIDAR service. 55. In this connection reference needs to be made to the decision of the Tribunal in Click for Steel Services, wherein the assesse was engaged in the business of conducting online auctions for various commodities such as MS Steel for a commercial consideration. The allegation of the Department that the assessee had been providing "online information and database access or retrieval service" was not accepted by the Tribunal and it was held that e-commerce service was provided. The observations of the Tribunal are as follows: "4. We have carefully considered the submissions made by both sides. From the facts of the case, we find that the respondent is running website through which the interested steel manufacturer/trader are making trade. The respondent is buying and selling the steel product of various steel manufacturer/trader. We do not find that the buyer of the goods is accessing any information online or data online on the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to another and the charges recovered for such services. It is understood that this is done to inter connect various networks so as to reach the server where the information is stored. It is informed that interconnection of one ISP to another is a commercial and technical arrangement under which service providers connect their equipment, networks and services to enable their customers to have access to the data or information. Through this arrangement, it is the customer of an ISP who ultimately receives on-line information and database access and/or retrieval service. Service tax on the amount charged from him is payable. Therefore, interconnection charges paid by one ISP to another ISP are not liable to service tax. 57. The Terms and Conditions of online booking facility do not mention that the essence of the contract is for accessing or retrieving any information or data. Infact, the terms are restricted to the facility of online booking. An arrangement which is predominantly for OIDAR would have provisions clearly indicative of the nature of data/information that is permitted to be accessed or retrieved, obligations pertaining to copyright violations, reproductions, replicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as separate taxable service in its own right. A service, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply, is considered as a supply ancillary to the principal supply. 3.3 Section 65A states the principles for classification of taxable services. Classification of a composite service is based on that component of the service which gives the essential character. There is a need to determine whether a given transaction is the one containing major and ancillary elements or the one containing multiple and separate major elements. In the case of a transaction multiple and separate major elements. In the case of a transaction containing major and ancillary elements, classification is to be determined based on the essential features or the dominant element of the transaction. A supply which comprises a single supply from an economic point of view should not be artificially split. The method of charging or invoicing does not in itself determine whether the service provided is a single service or multiple services. Single price normally suggests a single supply though not decisive. The real nature and substance of the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax of Rs. 1.27 crores for the period 01.04.2007 to 31.03.2011 out of the total demand of Rs. 2,02,31,146/- covered under the two show cause notices dated 14.06.2012 and 15.03.2014 cannot also be sustained for the reason that it is for a period beyond the prescribed period of one year contemplated under section 73(1) of the Finance Act and the extended period of limitation could not have been invoked. 64. In this view of the matter it would not be necessary to examine the submissions made by learned counsel for the appellant that the subsequent Circular dated 09.11.2016 issued by the Board clarifying that booking services or tickets to entertainment events do not fall under OIDAR service would help the appellant or that the service tax was required to be computed on cum-tax basis. 65. As the confirmation of demand under the two notices cannot be sustained, the imposition of penalty and interest under sections 78 and 75 of the Finance Act cannot also be sustained. 66. Thus, for all the reasons stated above, the impugned order dated 25.07.2014 confirming the demand of service tax under the two show cause notices dated 14.06.2012 and 15.03.3013 is liable to be set aside and is s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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