The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that no service tax leviable on the sale of foodstuff in PVR Complex and the provisions of Service Tax (Determination of Value) Rules, 2006 will not be applicable.
M/s. PVR Limited, the appellant has challenged the Order passed by the Commissioner of Service Tax confirming the demand for service tax under Section 73(1) of the Finance Act, 1994 (the Act) on the supply of food and beverages at their counters provided in the cinema halls.
The appellant is primarily engaged in the business of running a chain of Multiplexes under the brand name “PVR” for the exhibition/screening of movies in theatres. For this, the appellant has various categories of screens i.e. normal screens and premium screens i.e. Gold Class Screens and Director’s Cuts. The appellant along with the activity of screening of movies has also provided for the facility of sale of food and beverages over the counters/stalls set up by them in the common lobby of the multiplexes.
An investigation was conducted by the Directorate General of Goods and Service Tax Intelligence (“DGGSTI”) and it was observed that the appellant has failed to pay due service tax on the activity of sale of food and beverages. Accordingly, show cause notice involving demand on the ground that the service portion in the supply of food and beverages by the appellant from its air-conditioned establishment/outlets is a taxable service w.e.f. 01.04.2013 and also as per Rule 2C of the Service Tax (Determination of Value) Rules, 2006, the value of the service portion involved in the supply of food and beverages is 40% of the total amount charged for the said supply.
The demand was confirmed by adjudication holding that the activity of the appellant is much more than the sale of the food and beverages as it involves an element of service by way of delivery of food and beverages and hence, is covered under Section 66 E (i) of the Finance Act, 1994.
The appellant submitted that the activity of supplying food and beverages in the cinema hall is a pure transaction of sale as it does not involve any service element rendered to the customers. He distinguished the same by submitting that no services like dining facility, washing area, clearing of the tables after the food has been eaten etc were involved.
It was argued that the activity of sale of food and beverages within the premises of the cinema hall involves an element of service as well along with supply of food which is taxable in terms of section 66E(i) of the Act.
On the introduction of restaurant services in 2011, the Circular dated 28.02.2011 clarified that pick up or delivery of foods or goods sold at MRP would amount to sale and would be outside the purview of service tax.
A two-member bench of Ms Binu Tamta, Member (Judicial) And Mr P V Subba Rao, Member (Technical) held that no service tax can be charged on the sale of foodstuff in the PVR complex to the viewers of the movie, the provisions of Service Tax (Determination of Value) Rules, 2006 will not be applicable.
“As the service tax itself is not chargeable, there is no question of interest and penalty”, the CESTAT held while setting aside the order and allowed the appeal.
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