PVR Limited Vs Principal Commissioner of Goods & Service Tax & Central Excise (CESTAT Delhi)
New Delhi: The supply of food and beverages over the counter within a cinema complex does not constitute a taxable ‘service’ but is merely a transaction of sale of goods, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Delhi bench has ruled. The decision provides clarity for multiplex operators concerning service tax liabilities on standard concessions offered to moviegoers, distinguishing them from premium services like ‘Gold Class’ where a service element is present.
The case involved PVR Limited challenging demands for service tax on food and beverage sales within its cinema premises for the period spanning 2015-16 to June 2017. The central question before the tribunal was whether these transactions fell under the definition of ‘service’ or ‘declared service’ as per the Finance Act, 1994.
The tribunal observed that the issue was not new and had already been settled by its own previous ruling concerning the same appellant. The CESTAT bench referred to its Final Order No. 51577-51580/2023, dated November 30, 2023, which dealt with the identical issue for the period 2013-2014 to 2015.
In that earlier decision, the tribunal had held that the supply of food and beverages in standard cinema halls, primarily involving over-the-counter sales of packaged or merely reheated ready-to-eat items, did not contain a discernible service element. The tribunal had reasoned that customers typically purchased these items at counters, stood in queues, and then consumed them at their seats, a process akin to buying ‘take away’ food. The availability of food within the complex was viewed as a convenience for viewers during the movie duration, especially given the short interval times.
The previous CESTAT order had distinguished this from the comprehensive service provided in a traditional restaurant setting, which includes elements like table layout, waiter service, menu explanations, and crockery handling. Such extensive services, often the predominant element in a restaurant transaction, justify classifying it as a supply of service. In contrast, the tribunal found that the predominant element in the standard cinema food transaction, from the consumer’s perspective, was the supply of the food item itself, not a suite of accompanying services designed to enhance consumption on the spot in a dedicated service environment.
The tribunal in its earlier ruling had also applied the ‘dominant purpose’ test, concluding that the primary purpose of a cinema complex is movie viewing, and the food counter facility is merely incidental to this main activity.
In arriving at its conclusion in the previous case, the CESTAT had also drawn support from judicial precedents. It referred to the Delhi High Court’s decision in Indian Railways C. & T. Corpn. Ltd. Vs. Govt. of NCT of Delhi – 2010 (20) STR 437 (Delhi), which suggested that transactions involving the supply of food with minimal incidental activities like heating are essentially sales of goods. The tribunal also noted a decision from the Court of Justice of the European Union (Finanzamt Bergdorf V Manfred Bog (C-497& 499/09)), which similarly differentiated between the supply of goods and services in the context of providing food, based on the qualitative predominance of accompanying services.
The tribunal had, however, differentiated the standard cinema offering from premium services like those provided in ‘Gold Class’ where dedicated seating, personal waiter service, and other enhanced facilities are offered. It was noted that service tax was indeed being paid for such premium categories due to the significant service component involved.
Given that the facts and the central issue in the present appeal for the period 2015-16 to June 2017 were identical to those of the previously decided case involving PVR, the CESTAT found no compelling reason to deviate from its earlier ruling.
Following its previous decision which held that service tax is not leviable on the sale of packaged or reheated food items in cinema halls due to the absence of a significant service element, the CESTAT set aside the impugned order demanding service tax from PVR Limited for the subsequent period. The appeal was consequently allowed. The ruling reinforces the distinction between a pure sale of goods and a transaction where the service component is integral and dominant, particularly in the context of taxation under the erstwhile service tax regime, while acknowledging that premium services involving substantial service elements may attract different tax treatment.
FULL TEXT OF THE CESTAT DELHI ORDER
