Moti Talkies Vs Commissioner of Service Tax (CESTAT Delhi)
The issue under consideration is whether the department is correct in charging service tax on various services provided to the film distributors by the assessee without charging any consideration.
The appellant, M/s. Moti Talkies is the owner of a cinema hall and is engaged in the business of exhibiting films in its theatre. The copyright over the films is owned by the distributors. The appellant enters into agreements with the film distributors to obtain such copyrights under which the right to exhibit the films is transferred to the appellant, either temporarily or in perpetuity, depending upon the nature of the agreements between the parties. The Department is of view that appellant was providing various services to the film distributors and received charges in the garb of sharing cum theatre hire but did not discharge the service tax liability.
The agreements that have been executed between the appellant and the distributors confer rights upon the appellant to screen the film for which the appellant is making payment to the distributors. The distributors are not making any payment to the appellant. Thus, no consideration flows from the distributors to the appellant for the alleged service.
CESTAT states that service tax is levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another. Though, ―renting of immovable property‖ is a declared service under section 66E of the Finance Act, then too under section 67(1) of the Finance Act, the value shall, in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him. The appellant is not receiving any payment to the distributor and, therefore, no service can be said to have been provided by the appellant.
Hence accordingly the appeal is allowed.
FULL TEXT OF THE CESTAT JUDGEMENT
Agreements entered into between distributors and the Appellant, who is an exhibitor for screening pictures, have been considered to be agreements for ―renting of immovable property‖ as defined under section 65 (90a) of the Finance Act 19941 by the Department and accordingly, show cause notices have been issued to the Appellant demanding service tax. The demands made in the show cause notices have been confirmed by the Additional Commissioner (Adjudication) and the appeal filed by the Appellant to assail the said order has been dismissed by the Commissioner (Appeals). It is the dismissal of the appeal by the Commissioner (Appeals) by order dated 12 July 2016, that has led to the filing of this appeal.
2. The appellant is the owner of a cinema hall situated at Chandni Chowk, New Delhi and is engaged in the business of exhibiting films in its theatre. The copy right over the films is owned by the distributors. The appellant enters into agreements with the film distributors to obtain such copy rights under which the right to exhibit the films is transferred to the appellant, either temporarily or in perpetuity, depending upon the nature of the agreements between the parties.
3. An investigation was carried out by the Department and a view was entertained that the appellant was providing various elements of interconnected services to the film distributors like lending of theatre for exhibition of films, manpower to manage, control and make arrangements, projector and other related equipments to screen the films, arranging power supply and providing arrangements to collect the box office collections, with predominance of ―renting of immovable property‖ services. This service of ―renting of immovable property‖ provided by the appellant to the film distributor would be taxable under section 65 (105) (zzzz) of the Finance Act for the period upto 30 June, 2012 and under section 66E (a) of the Finance Act read with section 66F (3) (b) of the Finance Act for the period from 1 July, 2012 to 31 March, 2014. The Department believed that for the said ―renting of immovable property‖ service, the appellant received charges in the garb of sharing cum / theatre hire but did not discharge the service tax liability.
4. Details of the amount demanded in the two show cause notices dated 21 April, 2014 and 20 April, 2015 are as follows:-
| Sl. No. | Show Cause Notice Date | Period | Demand Amount (Rs.) |
| 1. | 21 April, 2014 | April, 2008 to March, 2013 | Rs. 46,67,592/- |
| 2. | 20 April, 2015 | April, 2013 to March, 2014 | Rs. 11,99,730/- |
| Total | Rs. 58,67,322/- | ||
5. The aforesaid two show cause notices were adjudicated by a common order dated 23 February, 2016 and total demand of Rs.34,03,274/- was confirmed with interest and penalties. The demand for the period April 2008 to September, 2008 was dropped as it was found to be beyond five years and the benefit of cum-tax was also extended to the appellant. The appellant filed an appeal before the Commissioner (Appeals), which was dismissed by order dated 12 July, 2016. It is this order passed by the Commissioner (Appeals) that has been impugned in the present appeal.
6. Learned Counsel for the appellant submitted that the appellant is not providing any service to the distributors and in fact, in terms of the agreement with the film distributors, it has only been granted a copy right license in the form of ―theatrical exhibition rights, for which the appellant is making payment to the distributors as a share of the net box office collection. Thus, the very basis of the demand is incorrect since no consideration has been agreed to be paid by the distributor to the appellant. On the other hand, it is the appellant which has paid certain amount to the distributors for the grant of the copy rights. The contention is that for a provision of service to exist, there has to be a definite and identified consideration for such provision.
7. Learned Authorised Representative of the Department has, however, supported the impugned order and has contended that it does not suffer from any illegality.
8. To examine the contentions advanced by learned Counsel for the appellant and the learned Authorised Representative of the Department, it would be necessary to examine the two agreements executed between the appellant, as owner of the cinema hall, and the distributors of the films. The relevant clauses of one such agreement dated 27 May, 2009 executed between the appellant and a distributor called R.S. Enterprises are as follows:-
“This Article of agreement made and entered herein Delhi between R.S. Enterprises Delhi (referred as Distributors as party of 1st part) and the under mentioned Exhibitor (referred as party of the 2nd part) for screening the picture/s on the terms and conditions mentioned hereunder and overleaf:
M/s. Moti Talkies Station: Delhi.
