The petitioner is a cricketer and is a former captain of the Indian Cricket Team. He participated in the IPL Cricket tournament held in India as a member of the Kolkata Knight Rider Team. At all material times he acted and still acts as brand ambassador for various products. He also acted as anchor in television shows and particularly on Zee Bangla Channel. The petitioner is also engaged in writing articles for Sports Magazines.
The demand raised by the Department can be broken up and summarized as under:
|Nature of Activity||Remuneration received|
|Service Tax (Rs.)|
|Writing Articles in|
|Anchoring TV Shows||2,00,00,000/-||20, 60,000/-|
|Playing Cricket in|
3. The aforesaid amounts of service tax have been claimed by the Department under the heads of ‘Business Auxiliary Service’ or ‘Business Support Service’. Business auxiliary service is defined in Sec. 65(19) of the Finance Act which has been set out earlier in this judgment. It is an exhaustive definition and not an inclusive one. Broadly speaking, it means any service in relation to promoting, marketing, or selling goods produced or provided by or belonging to a client or promoting or marketing service provided by the client. It must be a service rendered in the field of trade and commerce or any kind of business. It is a service rendered by a person to popularize the product or service of a client and/or enhance the sale of such product or service. It also encompasses service provided on behalf of the client as also procurement of goods or service which are inputs for the client. Customer care service rendered on behalf of the client also comes within the purview of ‘Business Auxiliary Service’. It also includes a service incidental or auxiliary to any of the aforesaid activities and includes services as a commission agent. Thus, what activities amount to business auxiliary service have been defined with precision in the Finance Act, 1994. It was not the intention of the legislature that any and every kind of activity which can loosely be termed as ‘Business’ would attract service tax. It being a taxing provision, the same must be construed strictly and any benefit of doubt in the matter of interpretation of the provision must go in favour of the assessee.
Similarly, Sec. 65 (104c) of the Finance Act which has been noted above defines ‘Support Service of Business or Commerce’. The said term or expression has been defined to mean certain activities in relation to business or commerce. The activities mentioned in the definition Section which are perhaps illustrative and not exhaustive, are all meant to enhance some business or commerce. In order to qualify as business support service, in my view, an activity should be one of which primary object is to advance a business or commercial interest.
Writing articles for newspapers or sports magazines or for any other form of media cannot by any stretch of imagination be said to be amounting to rendering business auxiliary service within the meaning of Sec. 65(19) or business support service under Sec. 65(104c) of the Finance Act, 1994. Writing article for publication in a media is for the benefit of the readers who have interest in the concerned topic. The petitioner wrote articles for media, primarily for the sports lovers. It would be preposterous to suggest that in writing such articles the object of the petitioner was to advance any business or commercial venture. The articles were meant for information and even entertainment of the general public interested in sports. An article written by a celebrity in an issue of a magazine may to some extent boost the sale of that issue but I do not think it can be said that the object of the author in writing the article or permitting publication thereof was to promote circulation of the concerned magazine. That might be an incidental effect but the same cannot foist service tax liability on the author of the article. Hence, in my view, the remuneration received by the petitioner for writing articles would not attract service tax.
For similar reasons, the remuneration received by the petitioner for anchoring TV shows cannot be brought within the service tax net. Television shows are meant for entertainment of the viewers. In contemporary world watching television is a primary form of recreation. It would be absurd to say that anchoring TV shows amounts to rendering business auxiliary service or business support service. By anchoring a TV show, a celebrity or for that matter any other person does not render service with the object of enhancing any business or commercial interest. No reasonable authority with proper application of mind could classify anchoring of TV show as business auxiliary service or business support service. Hence, in my view, the remuneration received by the petitioner for anchoring TV shows does not attract service tax.
As regards the claim of service tax to the tune of Rs. 20,60,000/- on the sum of Rs. 2,62,61,782/- received by the petitioner for brand endorsement, such claim has been made under the heading ‘Business Auxiliary Service’. The Department’s contention is that being a celebrity, the petitioner permitted the commercial use of his photographs, videos, speech and also appeared in person for promotion and marketing of products/services belonging to corporate entities engaged in business/commercial activities. For rendering such services, the petitioner received considerable amounts of service charges from corporate clients/service recipients. Such services provided by the petitioner were classifiable under the taxable service head of ‘Business Auxiliary Services’ with effect from 1 May, 2006. Thereafter, with effect from 1 July, 2010 the said services were placed separately under the head of ‘Promotion of Brands of Goods, Services, Events, Business Entity etc. Services’, in terms of Sec. 65(105)(zzzzq) of the Finance Act, 1994 as amended.
According to the Department, commercial advertisement has taken different shapes and forms with the passage of time. Apart from the advertisement in print and visual media and sponsorship, one of the recent trends is to advertise a brand (i.e. goods, services, events, business houses bearing a particular brand name or house name) usually by a celebrity to associate him/her with the brand. The intended impression that is created in the mind of customers or users is that the products and services of that brand have the level of excellence comparable to that of the celebrity. The difference between business auxiliary service (effective from 1 July, 2003) and the newly introduced service of brand promotion (effective from 1 July, 2010) is that the latter has a wide coverage since mere promotion of brand would attract tax under this service head even if such promotion cannot be directly linked to promotion of a particular product or service. If the brand name/house mark is promoted by a celebrity without reference to any specific product or service, it is difficult to classify it under business auxiliary service. Such activities like establishing goodwill or adding value to a brand would fall under the newly introduced service head of Brand Promotion. These contentions of the Department would appear from the show cause notice dated 26 November, 2011 which is under challenge.
On this issue, Ld. Counsel for the petitioner submitted that ‘Brand Endorsement’ was brought within the service tax net with effect from 1 July, 2010. The demand raised for brand endorsement for the period 1 May, 2006 till 30 June, 2010 under the head of ‘Business Auxiliary Service’ is illegal and without jurisdiction. The respondent no. 3 in his letter dated 12 November, 2012 has admitted that the receipt of Rs. 2,62,61,782/- by the petitioner was towards ‘Brand Endorsement Fees’. ‘Brand Endorsement’ and ‘Business Auxiliary Service’ are separate categories. If brand endorsement was covered under business auxiliary service, it would not have been necessary for Parliament to introduce a new category of ‘Brand Endorsement’ by way of amendment. If by making a substantive amendment to a taxing statute, a new levy is imposed, it implies that there was no such levy in existence prior thereto.
I am inclined to agree with the submission of Ld. Counsel for the petitioner that since by amendment of the Finance, Act, 1994, a new taxable service category of ‘Brand Promotion’ was introduced with effect from 1 July, 2010, the logical corollary and inevitable inference is that such category of service was not taxable prior to 1 July, 2010.
In this connection I am in agreement with the decision of the CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi-vs. -Shriya Saran (supra), and the decision of the Division Bench of the Bombay High Court in the case of Indian National Shipowners’ Association-vs. -UOI, (supra). Business auxiliary service and brand promotion are distinct service heads as admitted by the Department in the show cause notice under challenge. It is also admitted in the order of the respondent no. 3 that the amount of Rs. 2,62,61,782/- was received by the petitioner on account of brand endorsement. Since brand endorsement was not a taxable service during the period of time for which the tax demand has been raised, such demand cannot be sustained. Such service rendered by the petitioner could not be taxed under the head of business auxiliary service as has been sought to be done.
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. According 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 provided by the franchisee that was embossed with commercial endorsements or when he participated in endorsement event. The Department admits that the fee charged for playing the matches will fall outside the purview of taxable service. However, the Department contends that the petitioner has been paid composite fee for playing matches and for participating in promotional activities but the component of promotional activities could not be segregated for charging service tax. Accordingly, service tax is chargeable on the composite amount. For this contention, the Department relied 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 franchisee (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 services rendered by the petitioner are classifiable under the taxable service head of ‘Business Support Services’ as per the provisions of Sec. 65(1 04c) read with Sec. 65(1 05)(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(1 04c) 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 misconceived. This is sufficient to vitiate the order.
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 independent 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 facts of the instant case, excepting that the player concerned in that case was a member of the Chennai Super Kings.
In so far the letter/instruction dated 26 July, 2010 issued by the CBEC is concerned, the material portion thereof has been extracted above in this judgment. The petitioner is aggrieved by the instruction in the said letter to the effect that in case the players (in IPL) are paid composite fee for playing matches and for participating in promotional activities, the component of promotional activities should be segregated for charging service tax and if it cannot be done then service tax should be leviable on the total composite amount. Having considered the submissions made in this regard and the decisions cited, I am of the view that the Board of Central Excise and Customs in its administrative capacity is not entitled to impose its views on its various subordinate authorities exercising quasi-judicial functions to interpret a particular provision of a statute in a particular manner. A circular/instruction/letter cannot create tax liability. The statutory provisions relating to service tax do not provide that the fees received by an IPL player would attract service tax. This is admitted by the Department even in the said circular which states, inter alia, that charges for playing matches will fall outside the purview of taxable service. If the statute does not provide for levying service tax on fee received for playing matches, such a liability cannot be created by issuing a letter/instruction/circular. A circular cannot travel beyond the statute. The statute does not provide that if a player receives a composite amount for playing matches and promotional activities and the segregation of the two elements is not possible, then the composite entire amount may be taxed. Such an act on the part of the Department will be de hors the statute and without jurisdiction or authority of law. It will also be in contravention of Art. 265 of the Constitution of India. The Central Board of Excise and Customs cannot seek to legislate by issuing circulars/instructions. As observed by the Hon’ble Supreme Court in the case of Ratan Melting & Wire Industries (supra), the clarifications/circulars issued by the Central Govt. or the State Govt. represent merely their understanding of the statutory provisions. In my opinion, if such circulars/instructions/clarifications are contrary to or inconsistent with the statutory provision in question or seek to create a liability which the statute does not contemplate, such circular/instruction is liable to be struck down. A misconceived and legally untenable interpretation of a statutory provision and/or an erroneous understanding thereof, which if applied by the quasi-judicial authorities will unduly prejudice the citizens of the country, cannot be allowed to stand.
Accordingly the impugned circular/instruction dated 26 July, 2010 is quashed to the extent it states that if composite fee received for playing matches and for participating in promotional activities cannot be segregated, then service tax should be levied on the total composite amount.
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.
It was not necessary for me to go into the merits of the case and express my view on whether the service tax demand raised on the petitioner is legally sustainable on merits. I am conscious of the fact that a Writ Court is not ordinarily concerned with the decision of an Authority but with the decision making process. However, if the order impugned is ex fadie illegal and contrary to the provisions of the statute in question or if the order is so unreasonable that no reasonable person could have passed the order keeping in mind the facts of the case and the applicable law, it is the duty of the Writ Court to intervene. (See the case of Associated Provincial Picture House Ltd. -vs. -Wednesbury Corporation, (1947) 2 All ER 680)). Since I have heard the Ld. Counsel for the parties on the merits of the case, I felt it proper to express my opinion in that regard.
In conclusion, I hold that the show cause notice impugned in this petition is without jurisdiction as being time barred. The demand made in the show cause notice is barred by limitation. The order of the respondent no. 3 is consequently also without jurisdiction and ex facie Even on merits the claim of the Department is not sustainable. Both the show cause notice and the said order are set aside. The impugned letter dated 26 July, 2010 issued by the Central Board of Excise and Customs is also set aside. The petitioner is entitled to refund of the sum of Rs. 1,51,66,500/- and the sum of Rs. 50,00,000/- that he has deposited in terms of this Court’s order along with interest at the rate of 10 per cent per annum from the date of deposit till the date of payment. Such refund is to be made to the petitioner within a period of four weeks from date.