CESTAT Quashes Rs. 18.84 Crore Service Tax Demand on Multiplex Food Sales

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench, has set aside a service tax demand of over Rs. 18.84 crore raised against a leading cinema chain on the sale of food and beverages at multiplex counters. The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) held that the sale of snacks and drinks at cinema halls constitutes a pure sale of goods and does not involve any element of taxable service under the Finance Act, 1994. The appeal arose from an Order-in-Original passed by the Additional Director General (Adjudication), Directorate General of GST Intelligence (DGGI), confirming service tax demand of Rs. 18,84,18,323 along with interest under Section 75 and imposing a penalty of Rs. 16.45 crore under Section 78 of the Finance Act, 1994. The demand was raised under Section 73 on the ground that sale of food and beverages at multiplex counters involved a service element taxable as a “declared service” under Section 66E(i) of the Finance Act. The Department contended that selling popcorn, snacks, soft drinks, and packaged water inside cinema premises was not merely a sale of goods but included an inherent service component, making it liable to service tax. The cinema operator argued that it merely sold ready-to-eat or packaged food items across counters on a takeaway basis. Customers queued up, purchased food, and carried it to their seats themselves, with no table service, wait staff, or dining-related services involved. Hence, the transaction was one of sale of goods, not provision of service, and fell outside the service tax net. The CESTAT noted that the issue was no longer res integra. The Tribunal observed that in thePVR Limited case, it had already been conclusively held that sale of packaged or reheated food items at cinema counters amounts to sale of goods. There is no service element involved merely because food is sold within cinema premises. Any minimal activity such as reheating food is incidental and does not change the nature of the transaction Cinepolis India. The Bench emphasized that cinema food counters are not akin to restaurants, as they lack essential service features such as table service, waiters, menu explanation, or ambience designed for on-the-spot dining. Customers exercise limited choice and consume food while watching the movie, making the dominant intention the viewing of the film, not availing food services. The Tribunal took note that the Supreme Court had dismissed the Revenue’s civil appeals against the PVR ruling in January 2025, thereby affirming the Tribunal’s view that such transactions are not eligible for service tax. Though the apex court kept the question of law formally open, it found no reason to interfere with the Tribunal’s reasoning. The Tribunal reiterated the distinction earlier drawn in PVR’s case between regular cinema patrons, who buy food over the counter (non-taxable sale of goods), and premium or “Gold Class” viewers, where food is served at seats by staff using crockery and tables, involving a clear service element and hence taxable. Since the present case concerned only counter sales, the service tax demand was held unsustainable. Following the binding precedent and Supreme Court affirmation, the CESTAT allowed the appeal, set aside the entire demand, interest, and penalty, and granted consequential relief to the appellant. Case Details Case Title: M/s Cinepolis India Private Limited Versus Additional Director General (Adjudication) Case No.: SERVICE TAX APPEAL NO. 50804 OF 2021 Date: 18.12.2025 Counsel For Appellant: Gopal Mundhra, Advocate Counsel For Respondent: Aejaz Ahmad, Authorized Representative Click Here To Read Order Read More: MeitY Issue Notice To X Over Alleged Misuse of Grok AI for Obscene Content; Seeks Action Taken Report Within 72 Hours

CESTAT Quashes Rs. 18.84 Crore Service Tax Demand on Multiplex Food Sales

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