No service tax liability can be attributed to the cricket players for promotional activities provided by them during the IPL prior to 01.07.2010. In the instant case, the appellant, Karn Sharma was playing for M/s Royal Challengers Bangalore. Under a franchise agreement entered into with the team. Karn Sharma received the fee for playing IPL in the year 2009-10. However , The service tax department took a view that the appellant was promoting activities of the franchise by wearing franchisee’s official cricket clothing, displaying franchisee’s mark/logo etc. which was nothing but akin to promotion or marketing of the logo/brands/marks of the franchisee/ sponsor. The department said that the services/promotional activities provided by appellant during the said IPL matches were covered und.er the category of ‘Business Support Service. Infect, Promoting a ‘brand’ of goods, services, events, business entity, etc. service is not covered under the category of “business support service” as envisaged under Section 65(104c) of Finance Act, 1994(hereinafter referred to as the Act) which has been defined under Business Support Service Section 65 (105) (zzzq) but falls under the newly defined taxable service under sub clause(zzzzq) of clause (105) of section 65 of the Finance Act, 1994 .
Departmental circular-For the scope of services provided with regard to promoting a., relevant extract of the Ministry’s Circular Letter DOF. No. 334/1/2010-TRU (Annexure A), dated 26-2-2010 is given below:
“4. Promoting a ‘brand’ of goods, services, events, business entity, etc.
4.1 Commercial advertisement has taken different shapes and forms. Apart from the advertisements in print and visual media and sponsorship, one of the recent trends is to advertise a brand (i.e., of goods, services, business houses bearing a particular brand name or house name) usually by using a celebrity (such as sports persons, film stars, etc.) to associate him/her with the brand. The intended impression that is created in the minds of customers or users is that the products and services of that brand have the level of excellence comparable to that of the celebrity. Unlike in case of advertisements using models, a brand ambassador works under a contract of a reasonably long period, where under he is not only required to advertise the goods or services in different media but also to attend promotional, product launching events, make appearances in public activities related to the brand of the brand-holder or use such goods or services in public. The contractual amounts are substantial and it may not only involve an individual celebrity but a group of celebrities such as a cricket team or the actors of a successful film.
It is important to note that promotion or marketing sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under Business Auxiliary Services (BAS). Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract service tax 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 Tata’s) 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 marks, 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.
This recent decision over the applicability of said service from 1st July 2010 was passed by CESTAT , Regional Bench , Allahabad, on Appeal no ST/59766/ 2013- CU(DB) Final order No- 70455/2018 Dated 10th January 2018 Karn Sharma Vs Commissioner of Central Excise & ST, Meerut- I , where the author himself appeared , contested and won the case. The Hon’ble judges Archna Wadhwa, Member (Judicial) and Anil .G. Shakkarwar, Member (Technical ) passed the order with the following content.
4. After hearing both sides , we find that Hon’ble Calcutta High Court in the case of Shri Sourav Gangully Vs Union of India & Others reported at 2016 (43) STR 482 (CAL) = 2016 –TIOL-1283-HC-KOL-ST has dealt with identical issue. For better application of the issue before the Hon’ble Calcutta High Court, we are reproducing Para no. 68 of the said order.
“(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. 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(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 misconceived. This is sufficient to vitiate the order.”
5. While deciding the above issue Hon’ble Calcutta High Court has held as under-
” (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 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. ”
6. As seen from the above decision Hon’ble Calcutta High Court has held that no service was provided by the player ,nor requiring him to discharge any service tax .
7. Accordingly, by following the said decision of Hon’ble Calcutta High Court, we set aside the impugned order and allow the appeal with consequential relief to the appellant.
Thus , It establishes that the brand promotion service was not liable to service tax and at best it can be said that the activities can be covered under this service after this date. The said services were made taxable by 2010 budget and being implemented from 1st July 2010.A new section 65 (105) (zzzzq) was added to it in the name of BRAND PROMOTION SERVICES and the scope of the said services was clarified vide TRU Circular D.O.F. No. 334/1/2010-TRU dated 26.02.2010.
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