TaxTMI 
TaxTMI 
2022 (3) TMI 509
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....ation of demand as ordered above, to the Jurisdictional Deputy/Assistant Commissioner within 15 (fifteen) days of receipt of this order and the Jurisdictional Deputy/Assistant Commissioner shall calculate and convey the recalculated demand amount to the appellant (assessee) within 30 days therefrom. (ii) Cum-tax benefit is allowed to the appellant and the jurisdictional Deputy/ Assistant Commissioner is directed to requantify the demand after extending the benefit of cum-duty price if there is nothing to the contrary on record. The appellants shall place the relevant records before the original adjudicating authority within a period of fifteen days from receipt of this order and the original adjudicating authority shall pass necessary order within a period of thirty days of submission of relevant record by the appellant; (iii) I refrain from imposing any penalty. 2.1 Acting on an information that the Appellant were engaged in providing the Business Support Service" by way of providing cinema hall and other infrastructure for the exhibition of movies in their theatre but were not discharging the Service Tax liability on the amounts earned by them for providing t....
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....re the Commissioner (Appeal) which was decided by the Commissioner (Appeal) as per impugned order referred in para 1, above. 2.5 Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Naveen Bindal, Advocate for the appellant and Ms Jaspreet Kaur Authorized Representative for the revenue. 3.2 Arguing for the Appellant learned counsel submits that • the issue involved in the matter is squarely covered by the decision of this bench in case of AB Motion Pictures [2019-TIOL-3781-CESTAT-CHD] • the decision in the case of AB Motion Pictures is relying on the earlier decisions in Wave Infratech Pvt Ltd vs. CCE & ST, Lucknow - Final Order No. ST/A/71252/2018-CU[DB] dt. 27.06.2018 and PVS Multiplex India Pvt Ltd vs. CCE & ST, Meerut-I - Final Order No. ST/A/71279/2017-CU[DB] dt. 29.08.2017 • Following the judicialprecedence appeal be allowed. 3.3 Arguing for the revenue learned Authorized Representative, while reiterating the findings recorded in the impugned order, submits that- • The order referred to by the counsel, have not been accepted by the revenue and appeal against the order in case of AB Motion Pictures ....
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.... Services" has been amended in budget 2011 to include "operational or administrative assistance in any manner" in its definition. It is observed that noticee entered into a proper agreement with the distributors/sub distributors who approach them for the display of their films and other support systems at their theatre. Sh.Vinod Sharma, Accountant &Authorised Signatory of the noticee admitted in his statement that the distributor/sub-distributor appointed one person in their theatre to keep a watch on the working of the theatre and give suggestions for improvement in the services and sort out any complaint. Further, it is observed that these two entities i.e. the Theatre Owner and the distributor/ sub-distributors were apparently working together 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'. The CBEC (TRU) vide its circular C.No. 148/17/2011-ST dated 13.12.2011 has further clarified the issue. The relevant text of the said circular is reproduced below: "Th....
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.... 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 regard to the variant modes of arrangements between the distributors/sub-distributors of films and exhibitors of movie, C.B.E. & C. was justified in issuing the Circular clarifying the transactions between the distributor/ sub-distributor and owners of the theatres and levy of Service Tax and that the nature of transaction determines the leviability of Service Tax and decision to be taken on case-to-case basis. The impugned Circular No. 148/17/2011-S.T., dated 13-12-2011 cannot be said to be beyond the powers of Central Board of Excise and Customs. The Circular does not restrict the powers of the officials to decide a particular dispute in a particular manner and the impugned circular is not violative of Section 37B. All the writ petitions are liable to be dismissed. 52. In the result, all the writ petitions are dismissed Consequently, the connected miscellaneous petitions are closed. Interim stay grunted in the various writ petitions stands vacated. However, there is no order as to costs." ....
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....elemarketing 3. Processing of purchase order and fulfillment service 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 assistance for marketing 9. Formulation of customer service & pricing policies 10. Infrastructural support service and 11. Other transaction processing" On going through all the above points, it can be noted that before 01-05-2011 the appellant has not provided any such service to the distributor while he has taken the film for exhibition. The Appellant therefore, cannot be brought under the head "Business and Support Service" and raising of demand before 01-05-2011 on that count is therefore, liable to be set aside. 8.5 Vide CBEC Circular No. 109/03/2009 dated 23-02-2009 it was clarified as under 2.5. The matter has been examined. By definition 'Business Support Service' is a generic service of providing support to the business or commerce of the service receiver'. In other words the principal activity is to ....
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....stance in any manner, the appellant/ cinema exhibitor came into the preview of the taxable services under the head of "Business Support Service" as they have provided the operational or administrative assistance in any manner; and thus, liable to be taxed after 01-05-2011. 8.7 l find that consequent to amendment in the definition of "Support Service of Business or Commerce" another clarification has been issued by the Board vide Circular No. 148/17/2011-S.T., dated 13-12-2011 which has been relied upon and discussed extensively in para 4.3 of the impugned order and to some extent, rightly so, as the paras 10 and 11 of the above said circular summarizes the clarification, which reads thus: "10. To sum-up the above, the arrangements entered into by the distributor or sub-distributor or area distributor etc. and the exhibitor or theatre owner etc. in exhibiting the film produced by the producer, the original copyright holder, the arrangements and their respective service tax classification is tabulated as under: Type of Arrangement Movie Exhibited on whose account Service Tax Implication Principal to Principal Basis Movie being exhibited by theatr....
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....rovided by the appellant to the new entity who acquires the character of a "person", due to the agreement/ arrangement entered into by the distributor or sub distributor or area distributor with the exhibitor or theatre owner, with the understanding to share revenue/profits and not provide the service on principal-to principal basis. Hence, demand is raised as per law and rightly confirmed." 4.6 Against dropping of the demand for the period prior to 01.05.2011, revenue has not preferred any appeal or filed any cross objections in the present appeal and hence we are not considering the matter for period for which Commissioner (Appeal) has dropped the demands. 4.7 In case of Mediaone Global Entertainment Ltd [2014 (34) STR 819 (Mad)], Hon'ble Madras High Court held as under: "15. In 2009, a query had been raised by the field formation as to whether the activity of screening of film supplied by a film distributor would fall under any of the taxable services and accordingly, whether the theatre owners are required to pay service tax on amount received by them from distributors. In the light of the queries raised, Circular No.109/03/2009 dated 23.2.2009 was issued clarify....
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....gement 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 Serviceto 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 definition Business Support Service is a generic service of providing support to the business or commerce of the service receiver. In other words the principal activity is to be undertaken by the client while assistance or support i....
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.... business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, [Operational or administrative assistance in any manner]*, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation. For the purposes of this clause, the expression infrastructural support servicesincludes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. (*Substituted for "operational assistance for marketing" by the Finance Act, 2011 w.e.f. 1.5.2011) The word includes finds a place not only in the Section, but also in the Explanation, which we would elaborate later. 19. In the light of the amendments bringing in temporary transfer of copyright within the service tax net....
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....tax net, by inserting Section 65(105)(zzzzt) and also the amendment in Section 65(104c) - "Support Services of business commerce", the impugned Circular No.148/17/2011-ST dated 13.12.2011 came to be issued. In the light of the changes made in the law, there were three activities attracting levy of service tax. (i) exhibiting movie by hiring cinema theatre for which service tax is leviable under Section 65(105)(zzzz) - renting of immovable property(ii) Business Support Services, as amended by Section 65(104c); (iii) on the temporary transfer of copyrights or permitting or use or enjoyment of the Copyrights (Section 65(105)(zzzzt). Representations were received requesting clarification on taxability of consideration earned by the distributors/sub-distributors/area distributors of Indian & Foreign films in the form of 'revenue share' from the exhibitors of the movie, and on revenue retained as percentage by the exhibitors of the movie from the sale of tickets have been received from certain sections of service providers. 24. The Circular No.148/17/2011-ST dated 13.12.2011 clarifies levy of service tax on distributors/sub- distributors of films and exhibitors of movie.....
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....o include operational or administrative assistance in any manner in its definition. 6. It is being represented that in certain situation the distributor and the theatre owner conduct business together and hence no service tax is leviable. Arrangement amongst two or more entities can either be on principal-to-principal basis or on partnership/joint/collaboration basis. In the former, the constituent members are independent of each other and do not share any risk/revenue/profit/loss/liability of the other while in latter the constituent members join hands for mutuality of interest and share common risk/profit together. 7 to 11 ...." 25 to 30..... 31. The Circular No.148/17/2011-ST dated 13.12.2011 recognises arrangement under unincorporated partnership/joint/ collaboration basis. For recognition of such joint venture as a new entity, the Circular refers to New Horizons case ((1995) 1 SCC 478). In the Circular, recognition of unincorporated joint venture as a new entityand reference to New Horizons case, (1995) 1 SCC 478, reads as under: "7. Unincorporated joint venture, not operating on principal-to-principal basis, will exist only if the ....
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....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." 32. The petitioners would vehemently contend that the Finance Act does not contemplate any such joint venture and the circular attempts to create an artificial person, when the nature of arrangement between a distributor and an exhibitor is on a principal to principal basis. They would further contend that the reliance placed on, Section 65(104c) defining support services of business or commerce is thoroughly misconceived, as the said provision deals with services, which are outsourced and this is explicit from the budget speech of the Hon'ble Finance Minister while introducing the Finance Bill 2011. Contention of Petitioners is that screening of films by an exhibitor is a primary activity and not a support service. 33. Furthermore, it was contended that the circular has based its conclusion by relying upon the decision of the Hon'ble Supreme Court in case of New Horizons Ltd. vs. UOI, [(1995) 1 SCC 478] which has been considered in a subsequent judgment in Faqi....
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....o the distributor for exhibiting the film, the distributor by taking the premises exhibits the film. In addition to this transaction, if the exhibitor provides other services for the distributor for the purpose of exhibiting the film for which there is revenue sharing or some arrangement is made, then such service rendered by the exhibitor cannot be stated to be an arrangement simpliciter, as owner of a theatre. By virtue of the exhibitor being owner of the theatre, he offers the premises in which he is licenced by the State Government and other authorities to screen films. Any other service rendered by the exhibitor beyond the scope of his rights as owner of the theatre should definitely be distinguishable from his right as an exhibitor. This nature of transaction is explained in the circular as a joint venture/new entity, which is distinct from its constituents. 37. If we arrive at a such conclusion, it has to be seen as to whether such service rendered by the new entity would fall within any of the entries for levy of service tax. The revenue rests their case on clause (104c) of Section 65 as amended by Finance Act, 2011, w.e.f., 01.05.2011. The said clause defines supp....
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....es not restrict the original definition of seasonal factory but makes addition thereto by inclusion. The word include in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. The word includeis very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include. 15. Therefore, it is trite that generally the word include should be given a wide interpretation as by employing the said word, the legislature intends to bring in, by legal fiction, something within the accepted connotation of the substantive part. (Also see CIT v. Taj Mahal Hotel, (1971) 3 SCC 550; Indian Drugs & Pharmaceuticals Ltd. v. ESI Corpn. (1997) 9 SCC 71 and T.N. Kalyana Mandapam Assn. v. Union of India, (2004) 5 SCC 632.) It is also well settled that in order to determine whether the word includeshas that enla....
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.... the expression college as defined under Rule 2(b) of the Tamil Nadu Private Colleges (Regulation) Rules, 1976 which defines college to mean and include Arts and Science college, Teachers training college, Physical education college etc. In contradistinction to the said definition clause college which was considered in the decision of the Hon'ble Supreme Court, clause (104c) of Section 64 uses the expression support services of business or commerce means services provider in relation to business or commerce and includes evaluation of prospective customers etc. Therefore, the expression means and includesare not used in conjunction and there is a clear distinction as support services of business or commerce means services provided in relation to business or commerce and includes other categories some of which appear to be support services. 44. Further it is seen that there was a misunderstanding while interpreting the earlier circular dated 23.02.2009, even after the insertion of Section 65(105)(zzzzt) and the substitution in clause (104c) of Section 65. Since all revenue sharing arrangements irrespective of the nature of arrangement were interpreted to fall outside the....
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....r access to amusement facilitates", are exempted from service tax. Section 65B(24) defines "entertainment event" as under:- "entertainment event" means an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, by way of exhibition of cinematographic film, circus, concerts, sporting event, pageants, award functions, dance, musical or theatrical performances including drama, ballets or any such event or progamme." Section 65B(9) defines "amusement facility" as under: "amusement facility" means a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places but does not include a place within such facility where other services are provided." 47. As pointed out earlier, according to Section 66D(j), "admission to entertainment event or access to amusement facilities" are non-taxable Negative List services. What is not taxable is "tax on admission to entertainment events or access to amusement facilities", the reason, being, "tax on admission or entry of such events is covered in the State List, whi....
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....variant modes of arrangements between the distributors/sub-distributors of films and exhibitors of movie, CBEC was justified in issuing the Circular clarifying the transactions between the distributor/sub-distributor and owners of the theatres and levy of service tax and that the nature of transaction determines the leviability of service tax and decision to be taken on case to case basis. The impugned Circular No.148/17/2011-ST dated 13.12.2011 cannot be said to be beyond the powers of Central Board of Excise and Customs. The Circular does not restrict the powers of the officials to decide a particular dispute in a particular manner and the impugned circular is not violative of Section 37B. All the writ petitions are liable to be dismissed." 4.8 In view of the findings recorded by the adjudicating authority and the appellate authority on the basis of the evidence available on record, we are of the view that the appellants are liable to payment of service tax under the category of Business Support Services. 4.9 Appellants have relied upon the decision of the tribunal in the case of A B Motion Pictures [2019-TIOL-3781-CESTAT-CHD] wherein following has been held: "It h....
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....ular No. 109/3/2009 dt. 23.02.2009 issued prior to Circular No. 148/17/2011- ST dt. 13.12.2011 clarified that in a revenue sharing model wherein the theatre owners and the distributors of the films shared the revenues earned from sale of cinema tickets, the contracting parties namely the appellant and the distributors were acting on a principal to principal basis and did not provide any services to each other. Thus, the circular, therefore, categorically provides that no service tax ought to apply on such arrangements. Relevant extract of the said circular is as under: "Other type of agreement 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 theatre 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 arrangement the activities are not covered under service tax." The learned advocate has also relied upon the judgments of this Tribunal in the cases of Wave Infratech Pvt Ltd vs. ....
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....s is from the sale of movie tickets to the customers and from this revenue he is also making payment to the distributors in spite of the fact that copy right of exhibiting the movie has not been passed on to him. This purely reflect that a partnership between the distributor and the appellant exist to display the movie in the appellants theater. We find that in such a situation the element of service from appellant to the distributor does not exist and rather we find that it is a service to himself. We have also considered the Circular No. 148/17/2011-ST dt. 13.12.2011. Relevant extract of the said circular is as under: ......... The above mentioned circular states that the arrangement under unincorporated partnership or joint collaboration basis, where services provided by each of the person i.e. the new entity/theatre owner or exhibitor/distributor or sub distributor or area distributor or producer etc as the case may be, is liable to service tax under the applicable head. The explanation which is given by the above circular does not take into consideration the fact that a mutual agreement have been made for screening of films and the revenue which is being rece....
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....ited by the appellant under VCES Scheme, the appropriation for the same have been granted by the Ld. Commissioner in the impugned order-in-original." The facts of the present matter are identical to the above mentioned decision, therefore, the above decision is very much applicable to the present matter also. 6. In view of the entire above discussion, we find that the activity undertaken by the appellant is not classifiable under service tax category of the 'Business Support Service' and therefore, not taxable. Accordingly, we hold that there is no merit in the impugned order-in- original ST/60150/2016-[DB] original; therefore, we set the same. The appeal is accordingly allowed." 4.10 This order of CESTAT has not been accepted by the Revenue and appeal filed against the same before Supreme Court, as reported at [2021-TIOL-32-ST-SCLB]. Further in view of the decision of the Hon'ble Madras High Court referred to us by upholding the circular, we are not in position to agree with the decision in the case of AB Motion Pictures, supra. Not every revenue sharing agreement results in a joint venture whether incorporated or unincorporated. To the specific query made by ....
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....the movie and thereby gaining in the share of revenue earned from the sale of tickets." In our considered opinion such services by the virtues of definition of 'business support services" as per the Finance Act, 1994 are classified as such and are liable to service tax under that category. 4.12 On the issue of limitation and penalties adjudicating authority has held as follows: "Further, I find that the noticee did not take the Service Tax Registration from the Central Excise & Service Tax department as provided under Section 69 of the Act read with Rule 4 of the Rules during the material period.; did not pay the service tax due on the of services provided as required under Section 68 of the Act read with Rule o of the Rules; did not submit ST-3 returns with the Central Excise department as required under Section 70 of the Act, read with Rule 7 of the Rules. Thus, I find that the noticee had contravened the provisions of Section 68, 69 and 70 of the Act, read with Rule 4, 6, and 7 of the Rules. As regards penalty under Section 77 of the Act, I find that the provisions of Section 77 are attracted to the facts of this case, in as much as, the Noticee have fail....