2024 (7) TMI 109 - AT - Service Tax

Multiplex operator wins service tax dispute as notices under pre-2012 provisions held invalid for post-July 2012 period under Section 65B(44)

CESTAT Allahabad allowed the appeal in a service tax classification dispute involving a multiplex operator providing film screening services to ... Classification of services - Renting of Immovable Property Service or Business Support Service - providing services of screening of films, in his multiplex, on revenue sharing basis, to the distributors of the films - HELD THAT:- From the perusal of the show cause notices which were issued to the appellant, it is quite evident that these show cause notices have been issued on the basis of the provisions of the Finance Act, 1994 as they existed before 01.07.2012, i.e. prior to introduction of levy of service tax on the services other than those specified in the negative list or exempted. It is quite evident the show cause notice has not made any averment in respect of the definition of Service as per Section 65 B (44) as introduced by the Finance Act, 2012 or about the negative list - there are no hesitation in holding that the impugned order has travelled beyond the show cause notice while upholding the demand made. It is noted that issue for the period post 01.07.2012, was considered by the Mumbai Bench in case of M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI [2022 (3) TMI 1256 - CESTAT MUMBAI] has held that '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 rights conferred upon the appellant.' There are no merits in the impugned order and the same is set aside - appeal allowed. Issues Involved:1. Liability to pay Service Tax on screening of films under 'Business Support Service.'2. Applicability of exemptions and the negative list under Section 66D of the Finance Act, 1994.3. Validity of show cause notices and whether the adjudicating order traveled beyond the show cause notice.4. Relevance of previous judgments and circulars issued by CBEC.Detailed Analysis:1. Liability to Pay Service Tax on Screening of Films under 'Business Support Service':The appellant was engaged in screening films in their multiplex on a revenue-sharing basis with film distributors. The department issued show cause notices (SCNs) demanding Service Tax under the category of 'Business Support Service.' The appellant argued that they did not provide any support service to the film distributor, and the revenue-sharing arrangement did not constitute a taxable service.The Tribunal noted that the appellant had disclosed the gross amount received from ticket sales and the amounts paid to distributors in their profit and loss account. The Tribunal held that the appellant was not liable to pay Service Tax for screening films and payments to distributors in their theater, as established in the previous order dated 29.08.2017.2. Applicability of Exemptions and the Negative List under Section 66D of the Finance Act, 1994:The adjudicating authority confirmed the demand by observing that the activity of film exhibition on a revenue-sharing basis was taxable and not exempt under the negative list in Section 66D of the Act. The appellant contended that their appeal against the earlier demand was allowed, covering the period up to March 2013, and the exemption under SI. No. 47 of Notification No. 25/2012-ST was applicable.The Tribunal found that the exemption for services provided by way of exhibition of movies by an exhibitor to the distributor was only available from 01.04.2015 onwards, as per Notification No. 6/2015-ST. For the period in question (2013-14 to 2014-15), no such exemption was available.3. Validity of Show Cause Notices and Whether the Adjudicating Order Traveled Beyond the Show Cause Notice:The Tribunal observed that the SCNs were issued based on the provisions of the Finance Act, 1994, as they existed before 01.07.2012. The SCNs did not reference the definition of 'Service' as per Section 65B(44) introduced by the Finance Act, 2012, or the negative list. The Tribunal held that the adjudicating order traveled beyond the SCNs, making the order invalid.The Tribunal reiterated that the SCNs define the boundaries for adjudication, and any order beyond these boundaries is bad in law. The Tribunal also noted that the demands in the present SCNs were based on the earlier SCN dated 12.09.2014, which had been set aside by the Allahabad Bench in its order dated 29.08.2017.4. Relevance of Previous Judgments and Circulars Issued by CBEC:The Tribunal referred to the judgment in the case of INOX Leisure Ltd., where the same issue was decided in favor of the assessee. The Tribunal also referenced Circular No. 148/17/2011-ST, which clarified that screening of a movie is not a taxable service except where the distributor leases out the theater and the theater owner receives a fixed rent.The Tribunal found that the revenue-sharing arrangement did not imply the provision of services unless a service provider and service recipient relationship was established. The Tribunal also noted that the Supreme Court had dismissed the revenue's appeal against the CESTAT order in the INOX Leisure Ltd. case, affirming that the Tribunal's view was correct.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order. The Tribunal held that the appellant was not liable to pay Service Tax for screening films and payments to distributors in their theater, as the adjudicating order had traveled beyond the SCNs and the revenue-sharing arrangement did not constitute a taxable service under 'Business Support Service.' The Tribunal's decision was based on previous judgments and circulars issued by CBEC.