No Service Tax on revenue sharing agreement between exhibitor & distributor for exhibiting film

The Hon'ble Supreme Court in Commissioner of Central Excise and Service Tax Ludhianav. AB Motions Pvt. Ltd. [Civil Appeal Diary No(s). 12044/2020dated May 17, 2024] has disposed the appeal filed by Revenue challenging earlier order passed in favour of the Respondent by the CESTAT, which had set aside the demand for service tax w.r.t revenue sharing agreement between Exhibitor and Distributor pertaining to showcasing of films/ movies.

Facts

AB Motions Pvt. Ltd. ("the Respondent") had entered into revenue sharing agreements with various distributors/sub-distributors towards exhibiting films/movies at the multiplex. However, the Revenue was of the view that the respondent is providing 'Business Support Services' as defined under Section 65(105)(zzzq) of the Finance Act, 1994 by way of Exhibition of the movies in their multiplexes.

The Revenue also contended that the amount earned by the appellant by providing the said service has not been reflected in their statutory returns filed with the department and no service tax had been paid on the same and hence, order in original dated March 8, 2016, was passed wherein demand u/s 73(1) of the Finance Act was confirmed to the tune of Rs. 3,72,02,750/- along with levy of interest and penalty.

Upon Appeal filed before the CESTAT by the Respondent, it was ruled by the CESTAT that both the parties have mutually agreed to work together, wherein the appellant being the owner of the theatre is exhibiting the movies provided by the distributors/sub-distributors. However, the copyrights of the filmare retained by the distributors themselves.

All the revenue receipts have duly been reflected in the books of accounts of the appellants. At the same time the revenue which has been paid by the appellant to the distributors/ sub distributors hasbeen reflected and expenditure towards purchase of film rights forscreening of the movies have also been reflected in the books of accounts.

Reliance was placed upon the judgement of PVS Multiplex India Pvt Ltd v. CCE & ST, Meerut-I, and accordingly it was held that there is no service element from the appellant to the distributor or sub-distributor. Subsequently, the impugned order was set aside.

Thus, Revenue has preferred an appeal before the Hon'ble Supreme Court.

Issue

Whether revenue sharing agreements between the exhibitor and distributor towards showcasing of films/movies can be held to be 'Business Support Services' and thereby taxable?

Held:

The Hon'ble Supreme Court in Civil Appeal Diary No(s). 12044/2020 held as under:

• Appeal disposed citing order passed by co-ordinate bench in similar matter viz. Commissioner of Service Tax v. Inox Leisure Ltd. [C.A. No. 1335 of 2022 dated February 28, 2022].

Our Comments

The co-ordinate bench of Hon'ble SC had earlier disposed of Appeal filed by the Revenue against CESTAT order in the matter of Inox Leisure Ltd. v. Commissioner of Service Tax, which had setaside the demand against Inox under 'business support services' (BSS) with interest & penalty and held that the Appellant has been granted the non-exclusive license to exploit theatrical rights of a motion picture for a term and opining that a revenue sharing arrangement does not necessarily imply provision of services, unless the service provider and service recipient relationship is established.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED BELOW