Sourav Ganguly Vs Commissioner of Service Tax (CESTAT Kolkata)
It transpires from the records that after the passing of the order dated November 12, 2012 by the Commissioner, the appellant deposited the confirmed demand of Rs. 1,51,66,500/- on February 26, 2014 and subsequently also deposited an amount of Rs. 50 lacs on March 21/26, 2014 in compliance of an interim order dated March 10, 2014 passed by the Calcutta High Court, in the Writ Petition filed by the appellant to assail the order passed by the Commissioner. The said Writ Petition filed by the appellant was allowed by a learned Judge of the High Court on June 30, 2016 and the amount deposited was directed to be refunded with interest at the rate of ten percent per annum from the date of deposit till the date of payment. The Department however, filed an appeal before a Division Bench of the Calcutta High Court against the order of the learned Judge and by an interim order dated February 16, 2017, the Division Bench directed that the amount of Rs. 2,01,66,500/- (1,51,66,500+50,00,000/-) should to be deposited by the Department with the Registrar General of the High Court, which amount was to be invested in an interest bearing fixed deposit. The Division Bench, by judgment and order dated August 14, 2019, allowed the appeal filed by the Department and directed that the amount deposited by the Department with the Registrar General of the High Court shall be returned to the appellant with accrued interest as on the date of refund.
The contention of the appellant is that no interest has been paid to the appellant from the date of deposit of the amount of Rs. 1,51,66,500/- on February 26, 2014 with the Government till the date the said amount was deposited by the Government with the Registrar General of the High Court. Likewise, the appellant has not been paid interest on Rs. 50 lacs from the date it was deposited with the Government on March 21/26, 2014 till the said amount was deposited by the Government with the Registrar General of the High Court. It has, therefore, been urged by learned counsel of the appellant that the appellant should get interest on the amount of Rs. 2,01,66,500/- from the date of deposit with the Government till the said amount was transferred to the Registrar General of the High Court, if it is ultimately held that the appellant is not entitled to pay service tax.
As the appeal filed by the appellant is being allowed and the demand confirmed by the Commissioner is being set aside, there is no reason why the appellant should not be granted interest on the amount of (Rs. 1,51,66,500 and 50,00,000) deposited with the Government from the date of deposit of the amount upto the date of transfer of the said amount to the Registrar General of the High Court.
Thus, for all the reasons above, the impugned order dated November 12, 2012 passed by the Commissioner is set aside and the appeal is allowed. The appellant shall also be entitled to interest on the amount of Rs. 1,51,66,500/- and Rs. 50,00,000/- from the date of deposit of the amount with the Government upto the date the amount was transferred to the Registrar General of the Calcutta High Court at the rate of ten percent per annum. This amount shall be paid to the appellant within a period of one month from the date of this order, failing which the appellant would be entitled to get interest at the same rate from the date of this order upto the date of payment of the amount.
FULL TEXT OF THE CESTAT JUDGEMENT
The reliefs claimed in this appeal, which is directed against the order dated November 12, 2012 passed by the Commissioner of Service Tax, Kolkata1 confirming the demand of service tax under “business auxiliary service”2 and “support services of business or commerce”3 with interest and penalty, are for setting aside the aforesaid order passed by the Commissioner and for granting interest to the appellant on the amount of Rs. 1,51,66,500/- deposited with the Department on February 26, 2014 towards the demand of service tax as also Rs. 50 lacs deposited on March 26, 2014 towards penalty, from the date of deposit till the date the amount was transferred to the account of the Registrar General of the Calcutta High Court.
2. BAS has been defined under section 65 (19) of the Finance Act 19944 to mean inter-alia, any service in relation to promotion or marketing or sale of goods produced or provided by or belonging to the client; or any service in relation to promotion or marketing of service provided by the client. This service is taxable under section 65(105) (zzb) of the Finance Act which defines “taxable service” to mean any service provided or to be provided to a client by any person in relation to BAS.
3. Section 65(104c) of the Finance Act defines BSS to mean services provided in relation to business or commerce. It is taxable under section 65 (105)(zzzq) of the Finance Act.
4. It needs to be noted that w.e.f. July 1, 2010, any service provided or to be provided to any person, by any other person, through a business entity or otherwise, under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a logo of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event became taxable under section 65 (105)(zzzzq) of the Finance Act.
5. The appellant is a former captain of the Indian Cricket Team in the IPL Tournament and has also represented the Kolkata Knight Riders Sports Pvt. Ltd.5. According to the appellant, he received fees for playing cricket; for acting as a „brand ambassador‟ for various brands; for anchoring TV shows; and for writing sports articles for magazines.
6. The Directorate General of Central Excise Intelligence, Kolkata initiated investigation against the appellant on November 5, 2009 and sought certain records. Ultimately, a show cause notice dated September 26, 2011 was issued to the appellant proposing to demand service tax on the amount received by the appellant during the period from May 1, 2006 to June 30, 2010 by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act.
7. The show cause notice mentions that the appellant had rendered his celebrity image as a „brand ambassador‟ for promotion and marketing/sale of various products, for which he had received remuneration as per the agreements. This service would appropriately be classified as BAS, but service tax was not paid by the appellant. In addition, the appellant also received remuneration from an IPL franchisee KKR for rendering promotional activities to market logos/ brands. This remuneration that the received was in addition to his playing skills and this service that he rendered would be classified under the head BSS, but the appellant did not discharge the service tax liability.
8. The show cause notice notes that commercial advertisements had taken different shapes and forms with the passage of time and the trend was to advertise a brand by using a celebrity to associate him with the brand so as to create an impression in the minds of the customers that the product and services of that brand have the level of excellence comparable to that of the celebrity. Thus, a “brand ambassador” works under a contract for a reasonably long period and promotion or marketing of sale of goods or services are covered under BAS. The show cause notice thereafter distinguishes BAS and the newly introduced service of “promotion of brand of goods and services” w.e.f. July 1, 2010 in the following terms:
“The difference between the services classifiable under “BUSINESS AUXILIARY SERVICE”(effective from 1-7-2003 & 10-92004) i.e., BAS and newly introduced service of “PROMOTION OF „BRAND‟ OF GOODS, SERVICES, EVENTS, BUSINESS ENTITY ETC SERVICES” (effective from 01-7-2010) is that the latter has a wide coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/ corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/ marketing/ sale of goods, provision of services, holding of events, undertaking social activities etc.
If the brand name/ house mark etc is promoted by a celebrity without reference to any specific product or services etc, it is difficult to classify it under BAS. Such activities like mere establishing goodwill or adding value to a brand would fall under this newly introduced service as above.”
9. In regard to BSS relating to IPL, the show cause notice mentions that prior to the Finance Act 2010, sponsorship service did not include “services” in relation to sponsorship of sport events and, therefore, service tax was largely not paid on the sponsorship under IPL. However, sponsorship of a team does not come within the scope of the exclusion clause and so sponsorship of IPL is not sponsorship of sports events but of an entity of franchisee and, therefore, taxable. On the same analogy, the sponsorship fee received by a player or a team would be independent of sports event and hence taxable.
10. After having so observed, the show cause notice mentions:
“4. Function of the Noticee and Classification of the Service Rendered:
4.1 From the investigation conducted against the said notice vis-à-vis the statutory provisions, the following salient points emerged;
Shri Sourav Ganguly, Ex-Captain of Indian Cricket Team residing at 6, Biren Roy Road (East), Kolkata-8 (holding IT PAN No. AFTPG6407P) had rendered his celebrity image as “brand Ambassador” for promotion, marketing /sale of various products by appearing in AD-Media against which he had received service charges/ remuneration as per agreements with various corporate clients. Investigations undertaken by DGCEI, KZU had revealed that for rendering of the service referred to above, Shri Sourav Ganguly had received considerable sum of money from various corporate clients from 1.5.2006 (09-5-06) onwards till 30.6.2010 and such services are appropriately classifiable under the service head of “Business Auxiliary Service” as per the provisions of Section 65(19) read with Section 65 (105)(zzb) of the Finance Act 1994. But the service tax accruable on account of receipt of service charges/ remuneration for rendering of „Business Auxiliary Services‟ was not discharged by the noticee from 1.5.2006 to 30.6.2010.
In addition to above, M/s Sourav Ganguly had received substantial remuneration from IPL Franchisee (Knight Riders Sports Private Limited) for rendering of promotional activities to market logos/ brands/ marks of franchisee/ sponsorers. Such fees/remunerations have been paid to Shri Sourav Ganguly by the franchisee in addition to his playing skills and thus the services rendered by the notice in this regard in this regard is squarely classifiable under the taxable service head of “Business Support Service” as per the provisions of Section 65(104c) read with Section 65(105)(zzzq) of the Finance Act 1994.
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5.2. It is admitted position on record that the Shri Ganguly (the Noticee) obtained service tax registration only on 03-8-2010 relating to the service of „Promotion of „Brand‟ of Goods, Services, Events, Business Entity etc Services‟- but did not discharge his service tax liabilities before that under the “BAS” (Business Auxiliary Services) that appears to be lawfully due from him with appropriate interest as detailed herein above. Similarly, Shri Ganguly did not obtain service tax registration under BSS (Business Support Services) relating to service charges received from M/s Knight Riders Sports Pvt. Ltd and thus did not discharge his service tax liabilities that appears to be lawfully due also with appropriate interest. In view of the fact that Shri Ganguly (the notice) had rendered two taxable services namely, „Business Auxiliary services‟ (ref: Table-I) and „Business Support services‟ (Ref: Table-II), it appears Shri Sourav Ganguly (the noticee) stands liable to pay the service tax due in respect of service charges received from 1.5.2006 (09-5-2006) to 30-6-2010 (20-3-2010). But the same was not discharged by the Noticee as per the prevalent position of service tax law till the date of issuance of this Notice even after pointing out the legal obligations during investigation. So, in the back drop of facts narrated herein above, it appears that during 01-5-06 to 30-6-2010 the Service Tax plus Education Cess and S&H Edu. Cess total amounting to Rs.1,51,66,500/- (INR one crore fifty-one lakh sixty-six thousand & five hundred only)remains unpaid by Shri Ganguly because of willful nonpayment/ evasion of the tax on his part.”
(emphasis supplied)
11. The show cause notice also invokes the extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act and the relevant portion of the show cause notice concerning this issue is reproduced below:
“6. Applicability of Extended Period of Time Limit:
Shri Sourav Ganguly by way of his act of omission and failure, suppression of material facts with the intent to evade payment of Service Tax, did not discharge the due Service Tax liability amounting to Rs. 1,51,66,500/- (INR One Crore fifty-one lakh sixty-six thousand & five hundred only) during the period from 1.5.2006 to 30.6.2010 on the amount/ remuneration of service charges received from various corporate clients under the aforesaid two taxable services of BAS & BSS as detailed above. As envisaged in the first proviso to Sub-Section (1) of Sec 73 of the Finance Act, 1994 as amended, the said amount thus appears to be recoverable from Shri Sourav Ganfuly under the first proviso to Section 73 of the said Finance Act 1994 and under Sec. 91 and 95 of the Finance (No.2 Act, 2004 with penalty & interest as per law.”
12. The appellant was, therefore, required to show cause why:
“(i) Service Tax amounting to Rs. 51,52,914/- plus Education Cess of Rs. 1,03,058/- plus S&H Education Cess of Rs. 46,689/-relating to “Business Auxiliary Service” [as in Table-I]& Service Tax amounting to Rs. 95,76,543/- plus Education Cess of Rs. 1,91,531/- plus S&H Education Cess of Rs. 95,765/- relating to “Business Support Service” (as in Table-II) totaling to Service Tax of Rs. 14729457/- plus Education Cess of Rs. 2,94,589/-plus S&H Education Cess of Rs. 1,42,454/- [Grand Total of Rs. 1,51,66,500/-] should not be demanded and recovered from Shri Sourav Ganguly invoking the extended period of time limit as envisaged under first proviso to the Sub-Section (1) of Sec. 73 of the Finance Act, 1994 as amended.
(ii) Interest at the appropriate rate as applicable during the material period should not be charged/demanded and recovered from him under section 75 of chapter V of the Finance Act, 1994, as amended for the delayed payment of Service Tax including Education Cess and S&H Edu. Cess as in [i] above;
(iii) Penalty should not be imposed upon the Noticee in terms of Section 76, 77 and 78 of Finance Act, 1994 as amended for willful non-payment of the amount of Service Tax including Education Cesses and for contravention of the provisions of Sec. 68,69 and 70 of Chapter V of the Finance Act, 1994.”
13. The receipt from the various activities performed by the appellant, on which service tax has been computed in Tables I and II attached to the show cause notice, are as follows:-
