Cinepolis Wins Appeal; Service Tax Demand of Over Rs. 18 Crore Quashed
In a landmark decision, the Customs Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has ruled that the sale of food and beverages at cinema hall counters constitutes a transaction of sale of goods and not a service. This decision comes as a relief to M/s Cinepolis India Private Limited, which was facing a substantial service tax demand of Rs. 18,84,18,323, along with penalties amounting to Rs. 16,45,68,787, imposed by the Additional Director General (Adjudication) of Directorate General of GST Intelligence.
The Tribunal, comprising Ms. Binu Tamta, Member (Judicial), and Mr. P.V. Subba Rao, Member (Technical), delivered its judgment on December 18, 2025, following a detailed examination of the case and relevant legal precedents. The bench upheld the argument that transactions involving the sale of packed or reheated food items at cinema counters do not constitute a "service" under the Finance Act, 1994, thus exempting them from service tax.
The appellant, represented by Advocate Shri Gopal Mundhra, contended that the sale of food items like popcorn, samosas, and sandwiches at cinema counters is purely a sale of goods, with no service element involved. This argument was bolstered by a previous ruling in the case of PVR Limited v. CST, New Delhi, which was affirmed by the Supreme Court.
The Tribunal's judgment emphasized the dominant purpose test, noting that the primary function of cinema halls is to enable movie viewing, with the sale of food items being incidental. The Tribunal reinforced that the availability of food items is merely a convenience for patrons during movie intervals and does not constitute a taxable service.
This decision aligns with the precedents set by the Supreme Court and other judicial bodies, reaffirming the stance that such transactions should be classified as sales rather than services. The ruling provides significant relief to multiplex operators by clarifying the tax implications of their operations.
The judgment not only quashes the service tax demand but also nullifies the penalty imposed under Section 78 of the Finance Act, 1994. Cinepolis India Private Limited is now entitled to consequential relief as a result of the Tribunal's decision.
Bottom Line:
Sale of food and beverages in cinema halls at counters is a transaction of sale of goods and not a service transaction under the Finance Act, 1994. Service tax is not applicable to such transactions as they do not constitute a "service" as defined under the Act.
Statutory provision(s): Finance Act, 1994 Sections 65B (44), 66E, 73, 78
