TMI Blog2022 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness in its absolute and sole discretion. 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 the said clause. In fact, the distributor agreed to grant to the Appellant the non exclusive license to exploit the theatrical rights of a motion picture during the term. This issue had come up for consideration before a Division Bench of the Tribunal in M/S PVS MULTIPLEX INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT-I [ 2017 (11) TMI 156 - CESTAT ALLAHABAD] . The Bench observed that as the appellant was screening films on revenue sharing basis, the appellant was not liable to pay service tax on the payments made to the distributors for screening the films - This apart, a revenue sharing arrangement does not necessarily imply provision of services, unless the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated on principal to principal basis. After placing reliance upon the judgment of the Supreme Court in Faqir Chand Gulati vs. Uppal Agencies Pvt Ltd [ 2008 (12) STR 401 ], the Commissioner observed that there was no doubt that the enterprise created by the Agreement between the appellant and the distributor was a joint venture. The Commissioner also relied upon the Circular dated 13.12.2011 issued by the Central Board of Excise and Customs regarding the levy of service tax on distributors of films and exhibitors of movies to reject the contention of the appellant that the transaction was on a principal to principal basis and accepted the contention of the Department that the transaction lead to the emergence of new entity having the character of Association of Persons. The relevant portion of the order is reproduced below: 36. xxxxxxxxxxxxx I have no doubt that the enterprise created by the agreement between the noticee and a distributor is a Joint Venture. There is no explicit contract or deed to this effect. However, as held in several judicial pronouncements, such an enterprise would fall under the category of an incorporated joint venture. 37. The noticee s claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Shri Gopal Mundhra assisted by Ms. Ginita Bodani and Shri Akash Khandelwal, learned counsel for the appellant made the following submissions: (i) The issue involved in the appeal has been decided in favour of the appellant in the following decisions of the Tribunal: (a) Inox Leisure Ltd. vs. Commissioner of Service Tax, Hyderabad [2021 (10) TMI 893-CESTAT HYDERABAD] (b) M/s. PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-l [2017 (11) TMI-156- CESTAT Allahabad] (c) M/s. Moti Talkies vs. Commissioner of Service Tax, Delhi-l [2020 (6) TMI 87- CESTAT New Delhi ]; (d) M/s. The Asian Art Printers (Sheila Theatre) vs. Principal Commissioner of Service Tax, Delhi-l [2020 (12) TMI 1012- CESTAT New Delhi]; (e) Shri Vinay Kumar, Proprietor of M/s. Regal Theatre vs. Principal Commissioner of Service Tax, Delhi-l [2020 (11) TMI 436- CESTAT New Delhi]; (f) M/s. Golcha Properties Pvt. Ltd. vs. Principal Commissoner of Service Tax, Delhi-l [2020 (11) TMI 137- CESTAT New Delhi]; and (g) Satyam Cineplexes Ltd. vs. Principal Commissioner of Service Tax, Delhi-l [2020 (8) TMI 1222- CESTAT New Delhi]; (ii) A revenue sharing arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributors/producers; (ii) The producers/suppliers of films require a theatre to screen the films and the appellant provides assistance and support for screening the films. Thus, the appellant extends support to the producers/suppliers of films by providing the infrastructure and this activity would fall under the definition of BSS; and (iii) In view of the Circulars dated 23.02.2009 and 13.12.2011 issued by the Central Board of Excise and Customs in connection with service tax on movie theaters, the appellant is not justified in contending that service tax would not be leviable if revenue is shared between the appellant and the producers of films. 8. The contentions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the Department have been considered. 9. Support services of business or commerce has been defined in sub-section 104(c) of section 65 of the Finance Act to mean as follows: 65(104c) 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 fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 6 months of the Net Collection Advance to be paid prior to release date 30.00% Toward s Distributor s sharre after 6 months onwards TERMS CONDITIONS Licensed Rights: The Distributor hereby grants to the Exhibitor, in perpetuity, the non-assignable theatrical exhibition rights for the theatre (s) as mentioned above only at the Location ( not outside) in relation to the above mentioned Movie. Any remake, prequel, sequel or re-release with any picture / sound / digital enhancement/s or with any additional lootage are specially excluded from the licensed rights. Net Collection: Gross Box-office collections less Applicable Entertainment Tax less Municipal Show Tex, if any, less Exact hire of Indian News Reel from the Grass collection. No other deductions shall be allowed. Payment: (a) The Payment of the Distributor's share shall be in accordance with the arrangement specified above and in the name of PVR Pictures Ltd (b) The invoices raised against this contract shall be cleared by the Exhibitor within 7 days of the last play date the week for which the invoice has been raised (c) in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: 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 distributor by renting of immovable property or even any other service in relation to such renting. The agreements that have been executed between the appellant and the distributors confer rights upon the appellant to screen the film for which the appellant is making payment to the distributors. The distributors are not making any payment to the appellant. Thus, no consideration flows from the distributors to the appellant for the alleged service. xxxxxxxxxxxx 18. It is not possible to accept the reasonings given by the Commissioner (Appeals) for confirming the demand of service tax under renting of immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in Mormugao Port Trust, Old World Hospitality and Delhi International Airport. 19. 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 venture, consortium or joint undertaking. Regardless of the name or the legal form in which the same are conducted, they are essentially in the nature of partnership with each co-venturer contributing some of the resources for the furtherance of the joint business activity. The Tribunal held that such public private partnerships meet the test laid down by the Supreme Court in Faqir Chand Gulati vs. Uppal Agencies Pvt Ltd [2008 (12) STR 401 ], for ascertaining whether or not the arrangement is one of joint venture. The relevant observations of the Tribunal in Mormugao Port Trust are reproduced below: 12 .. In our view this arrangement in the nature of the joint venture where two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner. 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/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent. 20. The Civil Appeal filed by the Department (Commissioner vs. Mormugao Port Trust) against the aforesaid decision of the Tribunal was dismissed by the Supreme Court both on the ground of delay as well as on merits and the judgment is reported in 2018 (19) GSTL J 118 (SC). 21. The Circular dated 23.02.2009 issued by the Central Board of Excise and Customs, infact supports the case of the appellant. The relevant portion of the Circular, which is in connection with service tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral 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 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 distributor and the exhibitor etc will be a taxable service. Whereas, in cases the character 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. (emphasis supplied) 23. In view of the decision of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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