Service Tax To Be Paid By Distributor, Not By Theatre Owner For Film Screening: CESTAT

Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) stated that “the purpose of the agreement and the intention of the parties is for screening of the film in the theatre, which cannot be treated as “Renting of Immovable Property Service”. Moreover, the element of consideration, i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent. The revenue has not been able to establish the service provider and service recipient relationship between the assessee and the distributor. Consequently, no service tax can be levied on the assessee.”

The assessee/appellant is the owners of a Cinema Hall/theatre and is engaged in lending the theatre to the film Distributors/Sub-distributors for depicting the films, whose copy rights are retained back by the Distributors themselves.

It was found that the assessee had short paid/not paid service tax on “Renting of Immovable Property” on screening of film, share of Net Box Office Collection, transfer of copyright and admission of entertainment.

The show cause notice was issued to the assessee and the Commissioner confirmed the demand of service tax along with interest and penalty.

The issue before the bench was whether the assessee has rendered the services of “Renting of Immovable Property” by screening/exhibiting the films in their theatre.

As per the bench the assessee has been exhibiting the films in their theatre implies that the right in the film was transferred to the assessee to screen the film in the theatre and thereby the assessee is engaged in communicating the film to the public.

The assessee after receiving the right to screen the film either temporarily or permanently exhibits the film to the public at large. The act of the assessee would squarely come under the purview of Section 14(d)(iii) of the Copy Right Act, added the Tribunal.

The Tribunal referred to the CBEC Circular No.148/17/2011-ST dated 13.12.2011. As per the Circular, where distributor or sub-distributor transfers the rights to exhibitor or theatre owner, the distributor or sub-distributor is liable to collect the service tax under “Copyright Service” & deposit it with the Government exchequer.

The bench opined that there is no scope for deviation from the aforesaid Circulars which in clear terms imposes the liability to pay service tax on the distributor. Therefore, the service tax is to be levied and paid by the distributor under “Copy Right Service” for transfer of right by licence to screen the film in the theatre of the assessee.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s. M2K Entertainment (P) Ltd. v. Commissioner of Central Tax, (Delhi West)

Case Number: Service Tax Appeal No.54027 of 2018

Counsel for Appellant/ Assessee: Udit Jain and Vibhor Sharma

Counsel for Respondent/ Department: Anand Narayan

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