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ST – Remuneration received by cricketer Piyush Chawla from franchisee M/s KPH Dream Cricket Pvt. Ltd. cannot be taxed as ‘Business Support Service’: CESTAT

2019-TIOL-2092-CESTAT-DEL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO 2, R K PURAM PRINCIPAL BENCH, NEW DELHI-110066

Appeal No. ST/54359/2015-CU (DB)

Arising out of Order-in-Original No.25/ST/SVS/DL-III/2015, Dated: 24.7.2015
Passed by the Principal Commissioner, Service Tax Commissioner, Delhi-III

Date of Hearing: 28.06.2018
Date of Decision: 28.06.2018

CENTRAL EXCISE, CUSTOMS AND CGST
DELHI-III

Vs

PIYUSH CHAWLA

Appellant Rep by: Shri G R Singh, DR
Respondent Rep by: Shri B K Singh, Adv.

CORAM: V Padmanabhan, Member (T)
Ajay Sharma, Member (J)

ST – The assessee is a cricketer – M/s. KPH Dream Cricket Pvt. Ltd. and franchisee (M/s KPH) raised a team of players and for that they had entered into an agreement with various players including the assessee – It was the franchisee who was responsible for appointing players for playing in different events organized by BCCI and others – The assessee entered into tripartite agreement with M/s. KPH and M/s. BCCI and he was engaged by the franchisee to play in different events for which he was paid remuneration – The players including assessee were also required to participate in the specially arranged promotional activities through media or others – According to department, assessee did not pay service tax against payments received for rendering taxable services in or in relation to IPL tournaments held during the financial years 2008-09 to 2011-12 and accordingly a SCN was issued to assessee – It is clear that the terms and conditions of agreement made the assessee employee of KPH – He was rather playing for KPH without having any independent entity – Whatever output/goals were achieved, were by the team as a whole and there could not be any quantification of any work done or service provided by assessee – He was simply a purchased member of team working under KPH – It is settled legal position that services provided by an employee, for the activities undertaken by the employer, for and under the instruction of the employer, cannot be termed as service provided by the employee – An identical matter titled as Sourav Ganguly 2016-TIOL-1283-HC-KOL-SThas been decided by Calcutta High Court in favour of cricketer – The High Court held that the Petitioner therein was not providing any service as an independent individual worker and his status was that of an employee – Therefore it cannot be said that the Petitioner was rendering any service which could be classified as Business Support Service – This Tribunal also in various decisions viz. Shri Karn Sharma, Swapnil Asnodkar 2018-TIOL-92-CESTAT-MUM & Umesh Yadav while relying upon the decision of Calcutta High Court in Sourav Ganguly’s case have taken a similar view and held that the cricket player is not liable for service tax under Business Support Service – The remuneration received by assessee from the franchisee M/s KPH cannot be taxed as ‘Business Support Service’ and therefore, the appeal filed by the department is rejected: CESTAT

Appeal rejected

Case laws cited:

Sourav Ganguly v. UOI & Ors – 2016-TIOL-1283-HC-KOL-ST… Para 7

Commissioner of Cus, & C. Ex., Goa vs. Swapnil Asnodkar – 2018-TIOL-92-CESTAT-MUM… Para 8

FINAL ORDER NO. 52483/2018

Per: Ajay Sharma:

1. This appeal has been filed by the Department from the impugned order dated 24.7.2018 passed by the Principal Commissioner, Service Tax Commissioner, Delhi-III.

2. The respondent is a cricketer. M/s. KPH Dream Cricket Pvt. Ltd. and franchisee (M/s KPH) raised a team of players and for that they had entered into an agreement with various players including the respondent. It was the franchisee who was responsible for appointing players for playing in different events organized by BCCI and others. The respondent entered into tripartite agreement with M/s. KPH and M/s. BCCI and he was engaged by the franchisee to play in different events for which he was paid remuneration. The players of the franchisee including the respondent used to wear team clothing and used the equipments during the match as well as during specially organized occasions, supplied/authorized by the franchisee. Such uniforms/products were having the logo/marks/Trademarks of the products to be promoted. The players including the respondent were also required to participate in the specially arranged promotional activities through media or others.

3. According to the department, the respondent did not pay service tax against the payments received for rendering taxable services in or in relation to IPL tournaments held during the financial years 2008-09 to 2011-12 and accordingly a show cause notice dated 23.10.2013 was issued to the Appellant as to why:-

(i) The service provided by him to M/s KPH are not classifiable under “Business Support Service’as taxable in terms of section 65(105) (zzb) of Finance Act, 1994;

(ii) Service tax including Edu./SHE Cess not paid amounting to Rs. 56,48,343/-(Rs. Fifty six lakh forty eight thousand three hundred and forty three only) in respect of services provided under ‘Business Support Service’should not be demanded and recovered from him under provision of Section 73(1) of the Act by invoking h the extended period;

(iii) Penalty under Section 77(1)(a) of the Finance Act, 1994 should not be imposed upon them for contravention of Section 69 of the said Act by way of not getting registered for providing the taxable service;

(iv) Interest at the appropriate rates on the aforemention amount should not be recovered from him under Section 75 of the Finance Act, 1994;

(v) Penalty should not be imposed on him under the provisions of Section 76,77,78 of the Finance Act, 1994 for the aforementioned contraventions.

4. The Adjudicating Authority vide impugned order dated 24.7.2015 dropped the proceedings initiated against the respondent vide show cause notice dated 23.10.2013. According to ld. DR appearing for the department, the respondent has willfully suppressed the value of taxable services provided under the category of “Business Support Service” and thereby contravened various provisions of Finance Act, 1994 with an intent to evade payment of service tax. He further submitted that the payments received against the contract agreement were liable to service tax under taxable service “Business Support Service” pursuant to clause 4 of the contract agreement titled as “sponsorship, Media and Promotional Activities” as the respondent granted rights to the franchisee to get photographed, filmed, televised, identified and otherwise, to record his performance during the matches for the promotion of the franchisee’s commercial interest. As per sub-clause 4.2, he had agreed to assist and co-operate with the franchisee to maximize their promotional benefits and commercial interests from his association with the franchisee. As per clause 5 titled “Team Clothing” he had agreed to wear and use only the team clothing authorized and/or supplied to him by the franchisee, any helmet which the player wears bear only sponsors logo. He further submitted that the services rendered by him were distinct from playing cricket only and as such were appropriately classifiable under ‘Business Support Service”, thus services rendered by him to the franchisee in connection with the IPL were liable to service tax. It was his further submission that the franchisee M/s. KPH provided ‘Sponsorship Services’to various sponsors and this way M/s. KPH were serving the business or commercial interest of the sponsors through the players who were agreed upon to take part in such promotional activities against the consideration.

5. The ld. Counsel for the respondent supported the finding of the ld. Principal Commissioner in the impugned order. He submitted that the reading of the entire agreement establishes the fact that playing cricket is the primary reason for which IPL was formed and promotional activities are ancillary to the main purpose that of playing cricket. He further submitted that the main activity of the respondent, as per contract, is to play cricket, the other rights i.e. photography, film, television otherwise recording and performance during the matches and periods, including training and press conference granted to IPL and its franchisee are ancillary or incidental thereto, to make it commercially viable. He further submitted that as per clauses 1.2(a) and 4.8 of agreement dated 18.3.2008, if a player is unable to play matches but participate for two days of promotional activities, he can retain 10% of player fee. Which means that the expectation of sponsors for one season of tournament for promotional activities is two days in the total period of 60 days tournament which is just incidental to whole tournament and also simultaneously proves that 90% of the payment, the respondent is receiving is on account of playing cricket matches alone and the payment for such promotional activities is 10% of the total fees and the time devoted for these activities are just ancillary to the main activity of playing cricket. He also submitted that the show cause notice is time barred being issued on 23.10.2013 for the period 2008-09 to 2010. He further submitted that there was no intent to evade payment of tax as the amount received by the respondent is not a consideration for any service provided by him rather it is remuneration for playing cricket match.

6. It is clear that the terms and conditions of the agreement made the respondent employee of KPH. He was rather playing for KPH without having any independent entity. Whatever output/goals were achieved, were by the team as a whole and there could not be any quantification of any work done or service provided by the respondent. He was simply a purchased member of the team working under KPH. He was in employment of KPH-IPL and was not an independent worker. It is settled legal position that services provided by an employee, for the activities undertaken by the employer, for and under the instruction of the employer, cannot be termed as service provided by the employee.

7. An identical matter titled as Sourav Ganguly v. UOI & Ors.; 2016(43) STR 482 (Cal.) = 2016-TIOL-1283-HC-KOL-ST has been decided by the Hon’ble Calcutta High Court in favour of cricketer. The Petitioner therein entered into an agreement with the franchisee under which he was obliged to participate in promotional activities apart from playing cricket for their franchisee and the department sought to tax the consideration received by the Petitioner from their franchisee under ‘Business Support Service’. The Hon’ble High Court of Calcutta held that the Petitioner was engaged as a professional cricketer for which the franchisee was to provide fee to the petitioner. He was under full control of the franchisee and had to act in the manner instructed by the franchisee. The Hon’ble High Court further held that the Petitioner therein was not providing any service as an independent individual worker and his status was that of an employee. Therefore it cannot be said that the Petitioner was rendering any service which could be classified as Business Support Service. The relevant paragraphs of the said decision are extracted as under:-

68. “As regards the remuneration received by the petitioner for playing IPL cricket, in my opinion, the service tax demand raised on such amount under the head of Business Support Service” is also not legally tenable. Accordingly to the Department, the terms of the contract that the petitioner entered into with M/s Knight Riders Sports Pvt. Ltd. would reveal that the petitioner”s obligation was not limited to displaying his cricket skills in a cricket match. He also lent himself to business promotional activities. Thus he provided taxable service when he wore apparel provide by the franchisee that was embossed with commercial endorsement or when he participated in endorsement event. The Department admits that the free charged for playing the matches will fall outside THE purview of taxable service”.

[Emphasis Supplied]

“However, the Department contends that the petitioner has been paid composite fee for playing matches and for participating in the promotion activities but the component of promotion activities could not be segregated for charging service tax. Accordingly, service tax is chargeable on the composite amount. For this contention, the Department on the letter dated 26 July, 2010 issued by the Central Board of Excise and Customs which is also under challenge in this writ petition. In his order dated 12 November, 2012 the respondent No.3 has held that the petitioner has received substantial remuneration from IPL franchises (Knight Riders sports Pvt. Ltd.) for rendering of promotional activities to market logos/brands/marks of franchisee/sponsors. Such fees/remuneration have been paid to the petitioner by the franchisee in addition to his playing skills and thus the service rendered by the petitioner are classifiable under the taxable service head of Business Support Service” as per the provisions of Sec. 65f (104c) read with sec. 65(105) (zzzzq) of the Finance Act, 1994. There appears to be inherent inconsistency in such decision of the respondent No.3 Sec. 65 (105) (zzzzq) pertains to brand promotion whereas Sec. 65(104c) pertains to business auxiliary services. They are two distinct and separate categories. As already indicated above, the taxable head of brand promotion was not in existence prior to 1 July, 2010, hence, reliance on that head for levying tax on the amount received by the petitioner from the IPL franchisee is misplaced and misconducted. This is sufficient to vitiate the order.

69. “Further, I find from the contract entered into by the petitioner with the IPL franchisee that the petitioner was engaged as a professional cricketer for which the franchisee was to provide fee to the petitioner. The petitioner was under full control of the franchisee and had to act in the manner instructed by the franchisee. The apparel that he had to wear was team clothing and the same could not exhibit any badge, logo, mark, trade name etc. The Petitioner was not providing any service as an independence individual worker. His status was that of an employee rather than an independent worker or contractor or consultant. In my opinion, it cannot be said that the petitioner was rendering any service which could be classified as business support service. He was simply a purchased member of a team serving and performing under KKR and was not providing any service to KKR as an individual. In this regard, I fully endorse and agree with the order dated 6 June, 2014 passed by the Commissioner of Central Excise (Appeals) Delhi-III in Appeal No. 330-332/SVS/RTK/2014, the facts of which case was similar to the fats of the instant case, excepting that the player concerned in that case was a member of the Chennai Super Kings.”

[Emphasis Supplied]

71. “In view of the aforesaid, in my view, the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service.”

8. This Tribunal also in various decisions viz. Shri Karn Sharma Vs. Commissioner of Central Excise & S.T, Meerut-I Appeal No. ST/59766/2013-CU(DB) (Tri-Allahabad|), Commissioner of Cus, & C. Ex., Goa vs. Swapnil Asnodkar 2018[10] G.S.T.L. 479 (Tri-Mumbai) = 2018-TIOL-92-CESTAT-MUM & Umesh Yadav vs. Commissioner of Central Excise, Nagpur Appeal No. ST/85079/15 and ST/85381/15 (Tri.-Mumbai) while relying upon the decision of the Hon’ble Calcutta High Court in Sourav Ganguly’s case (supra) have taken a similar view and held that the cricket player is not liable for service tax under Business Support Service

9. In view of the above, we are also of the opinion that the remuneration received by the respondent from the franchisee M/s KPH cannot be taxed as ‘Business Support Service’and therefore, the appeal filed by the department is rejected.

(Dictated in open court)

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