By TIOL News Service

MUMBAI, JULY 10, 2015: THE Petitioner was proceeded against on the footing that it is engaged in the business of running, conducting, operating and managing multiplex theaters. They are exhibiting cinematographic films in the theaters taken on rental basis from others. For exhibiting the cinematographic films, the noticee has adopted revenue sharing arrangement with distributors, sub-distributors or others. The Department alleged that the Petitioner, who was engaged in the activity of exhibiting cinematographic films either in the theatre owned by it or in the theatre taken on rent basis, is not paying Service Tax on the revenue retained by it.

The notice alleged that the invoices revealed that nature of services and to the Association of Persons appear to be classifiable under the head Business Support services.

Accordingly, ST of Rs.40,41,21,978/- was demanded along with imposition of interest and penalty thereon.

The Commissioner adjudicated the notice and apparently upheld the allegations leveled.

The Petitioner is before the Bombay High Court &claims that the Circular No. 148/17/2011-Service Tax , dated 13th December, 2011, and the order-in-original dated 12th February, 2015 passed by the CCE, Thane-II are both ultra vires the Finance Act, 1994 and/or Articles of the Constitution of India.

At the outset, the Counsel for the Revenue raised a preliminary objection as regards the maintainability of the Writ Petition. It is submitted that against the order passed by CCE, Thane II , an appeal lies to the Appellate Tribunal and that the contentions of the petitioner can be raised conveniently before the Appellate Forum.

The petitioner inter alia submitted that the SCN and the o-in-o are founded only on the above Circular and no useful purpose will be served by going before the Appellate Tribunal as the Circular cannot be declared as ultra vires by the Tribunal.

The High Court observed -

"The Commissioner's findings may refer to a Circular issued by the Board, but prima facie, it is not entirely based on the same. It is based on some understanding of the legal provisions by the Commissioner and their applicability to the given facts and circumstances. That may not be entirely accurate as urged before us. Similarly, the Hon'ble Madras High Court has also in somewhat similar backdrop clarified that merely making a reference to some Circular would not mean that the Appellate Tribunal cannot be approached or that the Appellate Tribunal will not view the matter in its entirety and in proper perspective."

The High Court also added -

+ …in the event the Petitioner approaches the Appellate Authority by filing an Appeal and within a period of four weeks, the Appellate Authority, namely, the Tribunal shall entertain the Appeal and not dismiss it on the ground that it is barred by limitation.

Incidentally, the High Court also gave the following directions -

"…The Tribunal shall permit the Petitioner to raise all contentions including that the issue must be examined in the light of the arrangements, prevalent practices and customs peculiar to the film industry. Such arrangements and which are in vogue for decades together do not create any relationship and which is assumed to be created by the Revenue. The Circular therefore will have no application and would not apply. Equally, an opportunity should be given to the Petitioner to rely upon such Judgments and decisions in order to support its submissions and distinguish those referred to in the Circular as well. Therefore, all contentions on the applicability of the Circular, its interpretation and particularly in the context of the legal provisions are kept open for being raised before the Tribunal…."