The Mumbai bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held thatthe exhibition of a movie provided by a distributor is not a support or assistance activity and Service Tax is not leviable Under ‘Business Support Service’.
M/s Cinepolis India Pvt Ltd, the assesseechallenged the order-in-original passed by the Commissioner of CGST, Mumbai arising from the unique deployment of constituents, that makeup channel entity involved in the exhibition of cinematographic films, in an arrangement by which several distributors participate in sharing of revenue with the appellant.
The tax authorities concluded that these are distinct entities rendering service in a de-mutualized capacity on a ‘principal-to-principal’ basis and do not acquire the status of partners asa consequence of their agreement. Tax liability of ₹ 17,62,76,317/- on a value of ₹ 1,33,58,26,691/- for the period from 2014-15 to 2015-16 was ordered for recovery under section 73 of the Finance Act, 1994, along with appropriate interest under section 75 of Finance Act, 1994, besides being imposed with penalties under section 76 and 77 of Finance Act, 1994.
In the case of Reliance Mediaworks Limited v. Commissioner of Service Tax, it was held that “the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but an activity of its own accord. That being the case such an activity cannot fall under ‘Business Support Service’.”
It was evident that screening a movie is not a taxable service except where the distributor leases out the theatre and the theatre owner gets a fixed rent. The service provided by the theatre owner would be categorized as ‘Renting of immovable property for furtherance of business or commerce’ and the theatre owner would be liable to pay tax on the rent received from the distributor.
A Coram comprising of C J Mathew, Member (Technical) and Ajay Sharma, Member (Judicial) viewed that whereas, in cases, the character of a “person” is not acquired in the business transaction and the transaction is as, on a principal-to-principal 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.
In light of judicial precedents, the Tribunal set aside the impugned order and allowed the appeals. Ms GinitaBodani, Advocate appeared for the appellant and Shri Anand Kumar appeared for the respondent.
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