Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta, J. (President) and C.L. Mahar (Technical Member) allowed an appeal against an order passed by the Principal Commissioner of Service Tax, Delhi that confirmed the demand of service tax under “renting of immovable property” service with penalty and interest.

The Appellant, an owner of a cinema hall called ‘Golcha Cinema’ and engaged in the business of exhibiting films in this theatre. The Appellant had entered into agreements with films Distributors under which the theatrical exhibition rights for exhibition of the films were transferred to the Appellant, either for a specified number of shows and period or in perpetuity. It is in exercise of such rights obtained from the Distributors that the Appellant exhibited movies in its theatre. The Department, however, believed that the Appellant was providing various elements of interconnected services to the Distributors, such as renting/ letting/ leasing of theatre for exhibition of films; manpower to manage the theatre operations, provision of the projector and other related equipment to screen the films; arranging of power supply and providing arrangements to collect the box office collections. According to the Department, the essential character of the bundle of services provided by the Appellant was in the nature of “renting of immovable property” service which would be taxable under Section 65(105) (zzzz) of the Finance Act 1994 and under Section 66E(a) of the Finance Act read with Section 66F(3)(b) of the Finance Act.

The counsel for the appellant, B.L. Narasimhan submitted that for an activity to fall under ‘renting of immovable property’ services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce. In the instant case, the immovable property i.e. the theatre is used and occupied by the Appellant in its own right to screen the film and at no point of time, the theatre is used by the Distributor and the agreements between the Appellant and the Distributors was on a revenue-sharing basis and hence, no service tax was leviable.

The Tribunal considered the judgment given by the counsel of the appellant in the case of Moti Talkies v. CST, 2020(6) TMI 87- CESTAT wherein it was held that the demand of service tax under ‘renting of immovable property’ service was not justified for the reason that the Appellant had not provided any service to the Distributor, nor the Distributor had made any payment to the Appellant as a consideration for the alleged service.

The Tribunal thus observed that the finding of the Principal Commissioner that ‘renting of immovable property’ service had been rendered by the Appellant to the film distributors was not sustainable and consequently demand of service tax on these income heads was not sustainable. The Tribunal allowed the appeal setting aside the impugned order.[Golcha Properties (P) Ltd. v. CST,  2020 SCC OnLine CESTAT 269, decided on 02-11-2020]

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Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and Ajay Rastogi, JJ has held that a construction worker who is registered under the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 19961 and is a beneficiary of the Scheme made under the Rules framed pursuant to the enactment, is a ‘consumer’ within the meaning of Section 2(d) of the Consumer Protection Act 1986.

The Court explained that the workers who are registered under the provisions of the Act of 1996 are beneficiaries of the schemes made by the Board. Upon registration, every worker is required to make a contribution to the fund at such rate per month as may be prescribed by the State government. It said that as per the statutory scheme, the services which are rendered by the Board to the beneficiaries are not services which are provided free of charge so as to constitute an exclusion from the statutory definition contained in Section 2(1)(o) and Section 2(d)(ii) of the Consumer Protection Act 1986.

“The true test is not whether the amount which has been contributed by the beneficiary is adequate to defray the entire cost of the expenditure envisaged under the scheme. So long as the service which has been rendered is not rendered free of charge, any deficiency of service is amenable to the fora for redressal constituted under the Consumer Protection Act 1986.”

Noticing that as per the definition contained in Section 2(1)(d), a ‘consumer’ includes not only a person who has hired or availed of service but even a beneficiary of a service, the Court held that the registered workers are clearly beneficiaries of the service provided by the Board in a statutory capacity.

The Court concluded by saying that public accountability is a significant consideration which underlies the provisions of the Consumer Protection Act 1986.

“The evolution of jurisprudence in relation to the enactment reflects the need to ensure a sense of public accountability by allowing consumers a redressal in the context of the discharge of non-sovereign functions which are not rendered free of charge.”

[Joint Labour Commissioner and Registering Officer v. Kesar Lal, 2020 SCC OnLine SC 327, decided on 17.03.2020]