TMI Blog2022 (3) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed in the case of AB MOTIONS PVT LTD. VERSUS COMMISSIONER OF C.E. S.T., LUDHIANA [ 2019 (4) TMI 2043 - CESTAT CHANDIGARH] , can be sustained in view of the decision of Hon ble Madras High Court in case of MEDIAONE GLOBAL ENTERTAINMENT LTD. VERSUS THE CHIEF COMMISSIONER OF CENTRAL EXCISE AND OTHERS [ 2013 (7) TMI 22 - MADRAS HIGH COURT] . b) Whether the circular which has been upheld by the Hon ble Madras High Court, can be ignored by the CESTAT, while deciding the concerned issues squarely covered by the said circular. c) Whether the decisions rendered by the tribunal in case of PVS Multiplex and AB Motion Pictures are correct exposition of the law on the subject. - Service Tax Appeal No. 61293 of 2018 - Interim Order No.25/2022 - Dated:- 13-1-2022 - MR. ASHOK JINDAL, MEMBER (JUDICIAL) AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Present for the Appellant: Shri Naveen Bindal, Advocate Present for the Respondent: Ms. Jaspreet Kaur, Authorised Representative ORDER This appeal is directed against order in appeal No LUD-EXCUS-001-APP-1069-2018 dated 07.05.2018 of the Commissioner (Appeal) Ludhiana. By the impugned order Commissioner (Appeal) has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be taken against them under Section 77 of the Act for not obtaining the registration for the said service. iv. Penal action should not be taken against them under Section 78 of the Act for suppression of value of taxable services. 2.3 The show cause notice was adjudicated by the jurisdictional Deputy Commissioner, as per the following order: (i) I confirm the demand of Service Tax amounting to ₹ 25,92,789/ - (Rupees Twenty FiveLaR Ninety Two Thousand Seventy Hundred Eighty Nine Only) (including education cess and higher education cess) under Section 73 of the Finance Act, 1994 and order recovery of the same alongwith appropriate interest under section 75 of the Act (as amended and as applicable) against M/S Sikri Multiplex Cinema (P) Ltd., Bhai Randhir Singh Nagar, Ludhiana. (ii) I impose a penalty of ₹ 10,000/- (Rupees Ten Thousand Only) under Section 77 (1)(a) of the Finance Act 1994 upon M/s Sikri Multiplex Cinema (P) Ltd., Bhai Randhir Singh Nagar, Ludhiana. (iii) I impose a penalty of ₹ 25,92,789/- (Rupees Twenty Five Lakh Ninety Two - Thousand Seventy Hundred Eighty Nine Only) under Section 78 of the Finance Act, 1994 upon M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras High Court in the case of MediaoneGlobal Entertainment Limited [2014 (34) STR 819 (Mad)]. 4.3 Adjudicating authority has in his order held as following:- The limited issue to be decided in the present case is that whether the services provided by the Theatre Owner to the Distributors/sub distributors by way of providing cinema hall and other infrastructure for the exhibition of the movies in the theatre fall under the definition of Business Support Services. The service tax on 'Business Support Services' has been made applicable w.e.f. 01.05.2006 vide Notification No. 15/2006 ST dated 24.04.06 and has been defined under Section 65 (104) as under: 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 operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5A of Finance Act, 1994. The noticee have provided the business, infrastructural support to the said entity for the exhibition of the movies in its theatre and hence the service provided by the noticee to the said person/unincorporated entity is clearly a taxable service and Service Tax needs to be levied on the amounts earned by the Noticee for providing this service. In the case of Mediaone Global Entertainment Ltd. Vs. Chief C.C.E, Chennai 2014 (34) S.T.R. 819 (Mad.), the Hon'ble High Court of Madras examined one type of arrangement wherein the exhibitors apart from letting out its premises also support services for the business of distributors, such that the arrangement between the parties acquired a distinctive character and became a joint venture/new entity, which was distinct from its constituents and held that: 50. By a combined reading of Section 66DC), 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-distributo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributor or sub-distributor of the movie and thereby gaining in the share of revenue earned from the sale of tickets. According to Board's Circular No. 148/17/2011-ST dated 13.12.2011 such support provided by the theatre owner to distributor/sub distributor of movie is leviable to service tax under Business Support Services or Renting of Immovable property services, where the theatre is given on hire to distributor or sub distributor. It is also observed that the definition of Business Support Services amended in 2011 budget include operational or administrative assistance in any manner. 4.4 Commissioner (Appeal) has by the impugned order held as follows: 8.2 Therefore, the issue before me for determination is whether the service provided by the Theatre Owner to the Distributors/ sub-distributors by way of providing cinema hall alongwith other infrastructure for exhibition of movies in the theatre falls under the definition of Business Support Service . 8.3 Before proceeding, further, for the sake of convenience, the definition of Support Services of Business or Commerce and relevant Board Circulars are required to be seen. Section 65 (104c) of the Act befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a movie theatre was taxable as per the above said circular. 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: (104) .. On breaking up the definition into various services given in that section, we get the following: Support services of business or commerce means services provided in relation 10 business or commerce and includes: 1. Evaluation of prospective customers 2. Telemarketing 3. Processing of purchase order and fulfillment services 4. Information and tracking of delivery schedules 5. Managing distribution and logistics 6. Customer relation management services 7. Accounting and processing of transactions 8. Operational or administrative assistance in any manner 9. Formulation of customer service pricing policies 10. Infrastructural support service and 11. Other transaction proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax under applicable service head 11. It is understood that the Circular dated 23-2-2009 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 07 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. 8.8 In view of the legal position explained hereinbefore, it is clear that the demand of service tax on the business support service for the period from 01.05.2011 onward is liable to be upheld and the demand for period prior to 01.05.2011 is not sustainable. 8.9 The ld. Advocate has argued that as per entry 62 of list II of 7th schedule of Constitution of India, taxation on amusement and entertainment is subject matter of State Govt. and levy of service tax on these activities of Appellants beyond the legislative competence of the Central Government. The entertainment tax is levied on the sale of tickets. The said tax is collected by theater owners (i.e. appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes. Thus it is necessary to examine different types of arrangements under which a movie is screened, in order to determine whether any tax liability arises on the activities undertaken by a theater owner and a distributor. Typical types of arrangements normally entered into between a theater owner and a distributor are as under:- 2.1. Under one type of arrangement, the distributor leases out the hall for screening of the movie. Here, the theater owner gets a fixed rent from the distributor. The profit or loss from exhibiting the film is borne by the distributor. In such a case, the theatre owner provides the taxable service of Renting of immovable property for furtherance of business or commerceand is accordingly liable to pay service tax. 2.2. Another type of arrangement is where the contract between the theatre owner and the distributor is on revenue sharing basis i.e. a fixed and predetermined portion i.e. percentage of revenue earned from selling the tickets goes to the theater owner and the balance goes to the distributor. In this case, the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular dated 23.02.2009 stated that service tax is payable on renting of immovable property . In the Circular, it was clarified that definition business support service is generic - providing support to the 'business or commerce' of the service-receiver. It was felt that screening/exhibition of a movie in a theatre is not support or assistance activity, but is an activity on their own accord and such an activity cannot fall under business support service . 17. With effect from 1.7.2010, Business of licensing of copyrights was brought within the service tax net by making amendment to the definition of taxable service under Clause (105) of Section 65 by introduction (zzzzt). Section 65(105) (zzzzt) defines taxable service as under: Taxable service means any service provided or to be provided to any person, by any other person, for - (a) transferring temporarily; or (b) permitting the use or enjoyment of, any copyright defined in the Copyright Act, 1957, except the rights covered under sub-clause (a) of clause (l) of Section 13 of the said act. Thus, the first category of copyright i.e., original literary, dramatic, musical and artistic wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emporarily transfer it or permit its use by another person for a consideration and this activity is being taxed under the service and it would have an impact on royalty payments when producer/ right-holder allows such use to another person say the distributor. 21. The clarification dated 28.04.2011, stated that what was taxed under the new levy was temporary transfer or permission to use the cinematographic film and the accompanying sound track, since the members of the association of exhibitors are not purchasing the rights from the producer, they will not be covered under the said levy. However for any different arrangement other than those mentioned in the letter of the association, may be covered under any other service classified under Section 65 (105) of the Finance Act as amended. 22. Therefore, the clarification dated 28.04.2011, made it clear that the exhibitors who do not purchase rights from the producer will not be subjected to service tax under the head 'copyright service'. Any other different arrangement was not kept out of the purview of the service tax net and it was clarified that they may be covered under any other service. The impugned clarific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributor or any other person] who directly or indirectly enters into an agreement with the exhibitor [normally theater owner] for screening of the film. There are also other variant modes of transaction in the industry. 4. In cases where distributor transfers the rights to sub-distributor, area distributor, exhibitor or theatre owner, the distributor is liable to collect the service tax under copyright service deposit it with the government exchequer. Similarly when the sub-distributor 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 distributor, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject-matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. The independence of joint venture as a separate legal entity, away from its constituent members, has further been fortified in the case of M/s Gammon India Ltd. Vs Commissioner of Customs, Mumbai, 2011-TMI - 204309 wherein the honble Supreme Court categorically denied the benefit of exemption to the JV as the impugned goods were directly imported by constituent member. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, held that the builder was a service provider and the complaint under the Consumer Protection Act was maintainable. The ratio laid down in the case of Faqir Chand Gulati cannot be of any assistance to the petitioners to buttress their contention. 35. The circular relies upon the judgment in New Horizons Ltd. to explain the expression joint venture. In fact the decision in New Horizons Ltd., has been relied on in the case of Faqir Chand Gulati. Therefore, we are not inclined to accept the contention that the decision in New Horizons Ltd., has been set at naught to hold that joint venture partners do not provide service to each other. As noted above, in the case of Faqir Chand Gulati , the Hon'ble Supreme Court found that though the nomenclature of the agreement was a joint venture, it was not a joint venture in the true sense. Thus, it boils down to the proposition that each case has to be examined individually on its facts to ascertain the true intent and conduct of the parties. 36. The circular at best could be taken to have examined one type of arrangement, where the exhibitors apart from letting out its premises is also giving support services for the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. 39. By a reading of Section 65(104c), we find that the word includes occurs in the Section as well as in the Explanation. The word includes occurring in Section 65(104c) is very significant that the Section does not restrict to business or commerce , but also includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, ......operational or administrative assistance in any manner. 40. The word includes has been judicially interpreted in number of judgments. Interpreting the word includes and observing that generally word includes should be given wide interpretation and by employing such , legislature intends to bring in, by legal fiction, something within accepted connotation of substantive part, in RAMALA SAHKARI CHINI MILLS LTD. VS. COMMISSIONER OF C.EX., MEERUT-I, ((2010) 14 SCC 744 = (2010) (260) E.L.T. 321 (S.C)), it was held as under: 14. Similarly, in ESI Corpn. v. High Land Coffee Works, (1991) 3 SCC 617, another three-Judge Bench of this Court had observed that: (SCC pp.619-20, para 7) 7. ... The amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressions services provided in relation to business or commerce operational or administrative assistance in any manner and infrastructural support services as contained in clause (104c) of Section 65 has expanded the definition of support services and this has given rise to certain doubts in the minds of the assesses as well as the field officer which has been eventually clarified in the impugned circular. 42. Mr.K.Vaitheeswaran learned counsel places reliance on the decision of the Hon'ble Supreme Court in P.KASILINGAM VS. P.S.G.COLLEGE OF TECHNOLOGY, (1995) SUPP (2) SCC 348 = AIR 1995 SC 1395 to contend that the use of the word means the definition is a hard and fast definition and no other meaning can be assigned to the expression than it is put down in the definition. The word includes when used, enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import, but also those things which the clause declares that they shall include. The words means and includes on the other hand indicates an exhaustive explanation of the meaning which for the purpose of the Act must invariably be attached to these wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be looked into on its own merits and decision taken on case to case basis. Therefore, the revenue is right in contending that the writ petitions are pre-mature. 45. Petitioners then contended that in the light of the sweeping changes brought in service tax regime, and in view of operation of Negative List and Section 66D(j) exempting admission to entertainment events or access to amusement facilitates and also the mega notification No.25/2012 dated 20.06.2012, exhibition of film in cinema theatre is exempted from levy of service tax and therefore the impugned Circular No.148/17/2011-ST alone becomes otiose and in this context the impugned circular is liable to be quashed. 46. The Finance Act, 2012 has completely revamped the service tax regime. Under the new service tax regime, as per Section 66D, all services will be liable to tax except those which are specifically mentioned in the exemption notification and the Negative List. Section 66B of the Act levies tax on all services other than those services specified in the Negative List. Section 66D of the Finance Act 1994 sets out the various services that are not liable to be taxed in the sense that they do not fall unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary transfer or permitting the use or enjoyment of a copyright, - (a) covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical or artistic works; or (b) of cinematograph films for exhibition in a cinema hall or cinema theatre. 50. By a combined reading of Section 66D(j), Notification Nos.25/2012-S.T dated 20.06.2012 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. 51. As we pointed out in W.P.No.29398 of 2010 etc., batch, with more multiplexes and single theaters on rise right from cities to moffusil, there is a huge rise in business over all. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the films as income in their books of account and duly reflected the same in profit and loss accounts of the relevant period under the caption Film Revenue . The share of the distributor as per the agreement entered into are recorded as expenditure and duly reflected as other direct expenses under the caption Film Hire Charges . On the basis of the above details, it has been contended that the charges of suppression, mis-representation or intention to evade the duty are not present in the given facts of the case; therefore, extended time provided for demanding tax cannot be invoked. It has also been contended that actually no cash revenue ratio is being received by the appellant from the distributor in lieu of providing any business support service rather the revenue from the screening of the films is being received by them from the customers who come to watch the movie in the multiplex. The revenue received from the customers is shared between the appellant and the distributor, and therefore, there is no service to distributor in this case. Hence, it is wrong to say that the appellant is providing any service to distributors/ sub distributors. It has further been mentioned tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All the revenue receipts have duly been reflected in the books of accounts of the appellants. At the same time the revenue which has been paid by the appellant to the distributors/ sub distributors has been reflected and expenditure towards purchase of film rights for screening of the movies have also been reflected in the books of accounts. We further find that as per the agreement entered into between the appellant and the distributors/ sub distributors, both the parties have mutually agreed to work together, wherein the appellant being the owner of the theatre is exhibiting the movies provided by the distributors/ sub distributors. However, the copy rights of the film are retained by the distributors themselves. The appellant provides the theatre and other facilities such as arrangement of projector and other related equipments to screen the film. We find that under this arrangement, both the parties are working for mutual benefit of each other. They are not providing any service to any other party whereas they are providing services to self. We also find that revenue generated by the appellant which is shared by the appellant and the distributors is from the sale of movie t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t side and have shown the amounts paid to the distributors on the debit side under the head film software expenses . So far the other head of service is concerned, we allow this appeal by way of remand to the Ld. Commissioner, so as to reconcile the payments made by the tenants for the period prior to 30.09.2011. The appellant is also directed to reconcile their accounts and if any amount is payable by them for the period subsequent to 30.09.2011, calculate the same and after depositing the tax, if any, intimate to the adjudicating authority. As regards the other issue regarding differential tax demanded ₹ 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 hereinabove. The appellant shall be entitled to consequential benefits in accordance with law. We also take notice of the fact that the amount of ₹ 22,21,130/- was deposited by the appellant under VCES Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under a different arrangements/agreements to distribute among themselves amounts collected from exhibition of the movie and thus had together formed a new entity, an incorporated partnership/Joint venture having the character of a 'person'. It is observed that in the case of Mediaone Global Entertainment Ltd. the Hon'ble High Court has upheld the circular issued by CBEC, levying Service tax on the various arrangements being undertaken by the Theatre owner and distributor/sub distributor. On considering the statement of Sh. Vinod Sharma, Authorised Signatory, wherein he had stated that mostly the agreement with the distributor/sub-distributor are either on hire basis or on revenue sharing basis and in a few cases, they get a fixed amount as their share, and revenue earned over and above the fixed amount going with the distributor/sub-distributor. From the statement, it is clear that mostly the relation between exhibitor, distributor/ sub-distributor whereby the theatre owner i.e. noticee are involved in providing support services with regard to infrastructure etc. to the distributor or sub-distributor of the movie and thereby gaining in the share of revenue earne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave come to the notice. Moreover, they are not registered with the department, not paid appropriate tax, not filed statutory returns and thereby violating the provisions of Rule 4, 6 7 of the Service Tax Rules, 1994 and intended to suppress information from the department. Therefore, the Noticee have rendered themselves liable to penal action under Section 78 of the Act, being a fit case for making them liable to penalty. The extended period also needs to be invoked in this case, for above stated violations. In Neminath Fabric case-2010 (256) E.L.T. 369 (Guj.), the Hon'ble High Court of Gujarat held that if any of the ingredients for invoking extended period of limitation is present, then mandatory penalty under Section 11AC of the Central Excise act is imposable. A larger bench of this tribunal in Union Quality Products Ltd. case [2013 TIOL-1072-CESTAT-AHM-LB=2013 (294) E.L.T. 222] also held the same view. Therefore, penalty under Section 78 equal to duty sought to be evaded is sustainable. We do not find any reason to differ from these observations recorded by the adjudicating authority. 4.13 Though in our view the impugned order needs to be upheld, but in view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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