TMI Blog2022 (3) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The exhibitor decides which screens would play the motion picture, the numbers of shows, the show timings and the ticket pricing including the right to decide on a week to week basis, whether or not to continue to exhibit the motion picture. The distributor/producer had granted the exhibitor the non exclusive license to exploit the theatrical rights of a motion picture and each party was entitled to conduct its business in its absolute and sole discretion. In MORMUGAO PORT TRUST VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, GOA- (VICE-VERSA) [ 2016 (11) TMI 520 - CESTAT MUMBAI] , 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich appeared to be classifiable under support services of business or commerce [BSS ] . 4. The appellant filed a reply to the show cause notice but the demand was ultimately confirmed by the Commissioner by order dated 17.12.2018. The Commissioner noted that the bone of contention was whether the arrangement between the appellant and the distributors would lead to constitution of an Association of Persons or whether the same has to 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) The impugned order to the extent it alleges that the appellant provided BSS to the distributors/or an unincorporated association of persons, therefore, deserves to be set aside; (iv) No service tax is payable in the absence of provision of any service by the appellant to the distributor/producer/ unincorporated joint venture; (v) It is settled law that unless the authorities provide evidence to the contrary, an agreement is required to be read in a manner that it reflects the true intention of the parties as regards their respective roles and obligations; (vi) The Commissioner failed to appreciate that the essential parameters laid down for existence of a joint venture are (a) joint ownership and control, (b) sharing profits and losses, (c) salaries commonly and jointly fixed, and (d) community of interest and intention. A joint venture or association of persons cannot be said to be constituted / created in the absence of such parameters. In support of this contention, reliance has been placed on the following decisions of the Supreme Court: (a) G. Murgugesan and Brothers vs. Commissioner of Income-Tax, Madras [1973 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing office 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) for confirming the demand of service tax under renting of immovable property for the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in Mormugao Port Trust are reproduced below: 12 .. In our view this arrangement in the nature of the joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 movie theatres, is reproduced below: 2.4. The arrangement most commonly entered into between a theater owner 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as per rules of classification of service as embodied under Sec 65A of Finance Act, 1994. (emphasis supplied) 21. In view of the decision of the Supreme Court in Faqir Chand Gulati and the decision of the Tribunal in Mormugao Port Trust, no service tax can be levied on the appellant under BSS. 22. All the aforesaid issues were also examined 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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