CESTAT Rules Food Sales at PVR Cinemas Counters Not Taxable as Services, Except in Gold Class Category [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that no service tax is leviable on food and beverages sold at cinema counters within PVR multiplexes, except in the Gold Class category where table service is provided.

PVR Limited, the appellant, operates cinema multiplexes across India and sells food and beverages within its premises. The dispute arose concerning the service tax liability on such sales during the period from 2015-16 to June 2017. The Principal Commissioner had passed an order demanding service tax on these transactions, which was challenged by the appellant before the tribunal.

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The appellant argued that the supply of food and beverages at cinema counters does not constitute a "service" or "declared service" under Sections 65B(44) and 66E of the Finance Act, 1994.

The appellant argued that the transactions were limited to reheating or sale of pre-packaged items over the counter, without any element of service. The customers stood in queues during intermissions, purchased food and beverages, and consumed them at their seats, without any waiter assistance or table service.

The appellant relied on a prior decision by the same bench in their own case, PVR Limited & Ors. v. CST, New Delhi, where it was held that the supply of food in this manner constituted a mere sale of goods and not a service.

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The revenue counsel argued that the appellant had earlier paid service tax on such activities and that the same transaction could not be treated as taxable in some instances and non-taxable in others. They explained that the composite nature of the cinema-going experience, including access to food, qualified the activity as a service liable to tax.

The two-member bench comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) distinguished the Gold Class category offered by PVR, where food is served by staff at the viewers’ seats on dedicated trays, and the used crockery is later collected, a feature akin to restaurant-style service.

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The tribunal held that such services attract service tax, but regular counters serving pre-packaged or reheated food for takeaway within the cinema premises do not involve any service element and are not open to the general public but only to ticket-holders, thereby classifying the activity as the sale of goods. The tribunal allowed the appeal.

To Read the full text of the Order CLICK HERE

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