CESTAT Chennai Deletes ₹10.26 Lakh Service Tax Demand On Mayajaal Over Revenue-Sharing Model

On 29 June, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that amounts retained by Mayajaal Entertainment Ltd. under revenue-sharing arrangements with restaurant and retail operators are not liable to service tax as Business Support Service.

Technical Member Vasa Seshagiri Rao and Judicial Member Ajayan T.V. allowed the appeal filed by Tvl. Mayajaal Entertainment Ltd. Following its earlier decision in the company's own case, the Tribunal set aside the service tax demand of Rs. 10.26 lakh raised for a subsequent period, holding:

“The arrangement between the appellant and the occupier are purely on revenue sharing basis, hence, would not fall under the scope of Business Support Service.”

Mayajaal Entertainment entered into agreements permitting restaurants and retailers to operate from its entertainment complex. Instead of charging fixed rent, the company retained an agreed percentage of the net revenue earned by the licensees. The Department treated the arrangement as the provision of Business Support Service and confirmed a service tax demand of Rs. 10.26 lakh along with interest and penalty.

Before the Tribunal, Mayajaal Entertainment argued that the Tribunal's earlier decision in its own case, involving identical agreements for an earlier period, squarely covered the issue. The Revenue defended the impugned order.

The Tribunal noted that it had already examined the agreements in detail and held that the parties dealt with each other on a principal-to-principal basis by sharing business revenue rather than by providing support services.

It also relied on the CBEC Circular dated 23 February 2009 and the Supreme Court's affirmation of INOX Leisure to reiterate that revenue-sharing arrangements do not attract service tax under the category of Business Support Service. The Bench observed:

“In light of the aforesaid decision in the appellant's own case for the earlier period, adhering to judicial discipline in accordance with the binding precedents in CCE, Mumbai v. Bigen Industries Ltd. and Jayswals Neco Ltd. v. CCE, Nagpur, we follow the same and hold that the impugned order is liable to be set aside.”

Accordingly, the CESTAT held that its earlier decision squarely governed the present dispute after attaining finality and set aside the impugned order and allowed the appeal with consequential reliefs.

For Appellant: Shri G. Baskar, Advocate

For Respondent: Shri N. Satyanarayana, Authorized Representative