2026-VIL-1180-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Cinema Exhibition on Revenue-Sharing Basis - Taxability under Service Tax – Appellant, a cinema theatre owner, enters into agreements with film distributors/sub-distributors to exhibit movies at its multiplexes on a revenue-sharing basis, wherein the appellant pays a pre-decided percentage of revenue earned to the distributors for obtaining exhibition rights, and records the entire revenue as its income under "Film Revenue" and the payments made to distributors as "Film Hire Charges" – Whether the appellant is liable to pay service tax on the amounts earned for providing Business Support Services to the distributors/sub-distributors or whether the arrangement constitutes a principal-to-principal revenue-sharing model where no service is provided by the appellant to the distributors – HELD - The arrangement between the exhibitor and the distributor and producer is not a service relationship but a principal-to-principal revenue-sharing model where each party conducts its business in absolute and sole discretion without any interference from the other. The payment flows from the exhibitor to the distributor as consideration for obtaining the license to exploit theatrical rights, and not as consideration for any service rendered by the exhibitor. No service is provided by the appellant to the distributors, and therefore, the activity undertaken by the appellant cannot be classified under the service tax category of "Business Support Service" and is hence not taxable. This position is supported by consistent judicial precedents of the Division Bench of the Tribunal in Moti Talkies, PVS Multiplex India, and the coordinate benches, which have been upheld by the Supreme Court in its judgment in the case of CST vs Inox Leisure Ltd. - Since the issue is squarely covered in favour of the appellant by binding judicial precedents, the impugned orders are set aside and the appeals are allowed
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