Sale of Food And Beverages at Cinema Counters Not a Taxable Service: CESTAT in Cinepolis India Case [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that sale of food and beverages at cinema counters does not amount to a taxable service under the Finance Act, 1994.

Cinepolis India Private Limited, the appellant, operates multiplex cinema halls across India. Apart from exhibiting films, the appellant sells food and beverages such as popcorn, snacks, soft drinks, and packaged water through counters located inside the cinema premises. These counters are accessible only to movie ticket holders, and the food items are sold across the counter during intervals.

The department took the view that the activity of selling food and beverages inside cinema halls involved a service element and was taxable as a declared service under Section 66E(i) of the Finance Act, 1994. On this basis, a show cause notice was issued proposing demand of service tax along with interest and penalty. The adjudicating authority confirmed the demand and imposed a penalty under Section 78 of the Finance Act. Aggrieved by the adjudication order, the appellant approached the CESTAT.

The appellant’s counsel argued that the issue was already settled by the Tribunal in the case of PVR Limited, where it was held that sale of food items at cinema counters is a transaction of sale of goods and not a service. It was argued that customers purchase food items across the counter and carry them to their seats without any table service, serving staff, or dining facility.

The counsel argued that the activity does not involve any service element and is purely a sale transaction. It was also argued that the decision in PVR Limited had been upheld by the Supreme Court, and the issue no longer required reconsideration.

The revenue counsel argued that the sale of food and beverages within cinema halls involves a service element because it is linked to the experience of watching movies. The revenue relied on the findings of the adjudicating authority and argued that such activity falls within the scope of declared service underSection 66E of the Finance Act. The revenue sought to sustain the demand of service tax, interest, and penalty.

The two-member bench comprising Ms. Binu Tamta (Judicial Member) and Mr. P.V. Subba Rao (Technical Member) examined the matter and observed that the issue involved was squarely covered by the earlier decision of the Tribunal in the case of PVR Limited. The tribunal observed that sale of food and beverages at cinema counters is a sale of goods and does not involve provision of any service.

The tribunal explained that customers purchase food items across the counter and consume them at their seats, and there is no element of service such as table service or assistance by staff.

The tribunal pointed out that the facility of food counters inside cinema halls is incidental to the main activity of exhibiting films and does not change the nature of the transaction. The tribunal also observed that the Supreme Court had dismissed the appeal filed by the revenue against the decision in PVR Limited, which confirmed the legal position on the issue.

In view of the settled legal position, the tribunal set aside the demand of service tax, interest, and penalty. The appeal filed by the appellant was allowed with consequential relief.

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