TaxTMI 
TaxTMI 
2025 (11) TMI 506
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....rate I impose a penalty of Rs. 4,68,101/-(Rupees four lakh sixty-eight thousand one hundred and one) only under Section 78 of the Finance Act 1994." 2.1 Appellant is registered with the Department, vide Service Tax Code No.AETPG1412MSD001 under the category of Renting of Immovable Property Service under the Finance Act, 1994. 2.2 During the audit of the records of the appellant, it was found that the appellant had entered into agreement with M/s Mudit Entertainment Industries Pvt Ltd (the STARWORLD) for the purpose of carrying on the business of exhibiting Cinematic Film as well as to carry on Associated Retail Activities such as retailing of variety of foods & beverages, sale of books, music, candies, displays, exhibitions, memorabilia, signage's promotional events etc from the said Cinema premises. It is agreed between the parties that the Conducting Charges which is the aggregate income arising out of Net Revenue and income from Associated Retail Activities based on occupancy, as defined under clause I of the agreement, shall be paid by the STARWORLD to the appellant on monthly basis in lieu of handed over possession of the Palace Cinema Premises. 2.3 From ....
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.... film distribution & clarified that the nature of the arrangement entered into between the contracting parties is not the determining factor for applicability of the tax. While correctly recognizing that remuneration or payment arrangements on the basis of a fixed or revenue sharing or profit sharing formula or hybrid versions of the aforesaid model could exist, the Circular states that the nature of transaction and not the nature of the arrangement would determine the leviability of service tax. It is being represented that in certain situation the distributer 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. The Circular envisages the above arrangement as distinct from a contract between two principals and proceeds on the basis that in such an arrangement, the contr....
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....ic Films as well as to carry on Associated Retail Activities from the said Cinema premises and in lieu of that received Conducting Charges based on occupancy & other revenues generated from the specified signage, and other brand promotion internal advertising areas, billboards activities, including rental income received from concessionaires. Thus, the services being provided by the appellant is rightly classifiable under 'Renting of Immovable Property service as envisaged in the definition provided under sub-section (41) of Section 65B of the Act read with clause (a) of the Section 66E of the Act and mere change of nomenclature as revenue sharing would not impact the livability of service tax. 5. It is also observed that under the self-assessment procedure prescribed under the statute, the appellant was required to assess & pay their Service Tax liability correctly, whereas the appellant has not paid service tax and non payment of Service Tax could be detected only during auditing of the records of the appellant. Thus, I find that there was suppression of facts with the intent to evade payment of Service Tax, on the part of the appellant and as such, the extended peri....
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.... applicable Occupancy Period, and any payment due to the DEVELOPER will be payable by STARWORLD within 5 days of the close of the Occupancy Period, in accordance with clause 4.12." "4) Other Revenues: Apart from the above payments as enumerated in clause 4.11 and 4,19, STARWORLD shall also pay to the DEVELOPER 30% (thirty percent) of all other revenues, net of taxes, generated from specified internal advertising areas, billboards, signages, and other brand promotion activities, including Rental income received from concessionaires. In case any Advertising income is generated on the Outside ile. Façade of the Palace Cinema or parking area, Starworld shall share 75% of the said Revenue collected [less Taxes with the Developer. A detailed break up of income from all such sources of revenues will be submitted to the DEVELOPER on a monthly basis and the DEVELOPER's share of the income will be paid by STARWORLD to the DEVELOPER by the 5th of the month for the revenue share pertaining to the previous month. A combined statement of accounts will be submitted to the DEVELOPER on a monthly, Quarterly, half-yearly and annual basis. The DEVELOPER ....
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....unning of the cinema and affiliated retail activities. DEVELOPER shall extend all necessary cooperation in this regards and shall promptly sign and execute the necessary documents/forms without delay. However the Developer shall undertake to obtain the Cinema Licence and NOC's at its own time and expense. 6. After paying the shares (Conducting charges and the DEVELOPER'S share of Other Income) of the DEVELOPER, STARWORLD shall only then be entitled to derive and retain all the revenues and commercial benefits derived from the said Theatre." 4.4 On perusal of the above conditions, I observe that the appellant has not rented out the premises. He entered in a 'revenue sharing' with M/s Mudit Entertainment Industries Pvt. Ltd. for the said premises, there is no fix rent agreed in the agreement and the same is dependent upon the revenue generated by the portion of the said premises. It can be more, less or even his income for certain period is nil, as the payments made do not qualify to be the rent for said premises. The clause2 of the agreement clearly provides that appellant had engaged the services of M/s Mudit Entertainment Industries Pvt. Ltd. to operate and man....
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....g. Explanation.- For the purposes of this clause, the expression "infrastructural support services" includes providing 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 o....
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....llant 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 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 ....
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....hether 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 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 w....
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....on merits and the judgment is reported in 2018 (19) GSTL J 118 (SC). 19. 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 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....