CESTAT Quashes Service Tax Demand Against Jharkhand State Cricket Association

Jharkhand State Cricket Association Vs Commissioner of Central Excise & Service Tax (CESTAT Kolkata)

The Jharkhand State Cricket Association (JSCA), a non-profit organization engaged in promoting cricket, was involved in a legal dispute over service tax demands. The association received grants from the BCCI for stadium development and cricket promotion but also generated revenue through advertisements, renting stalls, and corporate boxes during cricket matches. The central issue was whether the services provided by JSCA, such as selling advertisement space, renting stalls, and corporate boxes, were taxable under various service categories, including advertisement, franchise, and maintenance services.

JSCA contested the tax demands primarily on the grounds of limitation, arguing that the demands were based on their published financial records and could not justify invoking an extended limitation period. Citing prior rulings, the court agreed that the extended period was not applicable since no suppression of facts was involved. The tribunal ruled that JSCA’s activities were “bundled services” related to cricket promotion, which, being a charitable activity, were exempt from service tax both before and after 30 June 2012, as per the Finance Act and the Mega Exemption Notification.

Tax Exemptions and Penalties

For periods before and after 1 July 2012, JSCA’s services were exempt from tax due to its charitable status and the nature of the services being tied to sporting events. Additionally, the tribunal upheld the adjudicating authority’s decision to drop demands related to business auxiliary services, event management, and mandap keeper services. The court concluded that the subsidies from BCCI were not taxable, as they were not tied to any commercial activity, and that renting out grounds for cricket matches was not a taxable service. Consequently, the demands for penalties and interest were also dismissed, and the tribunal allowed JSCA’s appeal while rejecting the Revenue’s claims.

FULL TEXT OF THE CESTAT KOLKATA ORDER

Service Tax Appeal No. 75887 of 2015 has been filed by M/s. Jharkhand State Cricket Association, Post Box No. 68, Keenan Stadium, Jamshedpur – 831 001 (hereinafter referred to as the appellant/ ‘JSCA’) against the Order-in-Original No. 07/S.Tax/Commr/2015 dated 03.06.2015 passed by the Ld. Commissioner of Central Excise and Service Tax, Jamshedpur wherein the Ld. Commissioner has confirmed the Service Tax demand of Rs.16,47,763/-, along with interest. He has also imposed equal amount of tax as penalty under Section 78 of the Finance Act,1994 along with a penalty of Rs.30,000/- under Section 77 of the Act. The Ld. Commissioner, however, dropped the Service Tax demand amounting to Rs.17,12,27,323.80/- made in the Notice.

1.1. Against dropping of the above said demand, the Revenue is in appeal vide Service Tax Appeal No. 75952 of 2015. JSCA has also filed a cross objection to the appeal filed by the Revenue by way of Service Tax Cross Objection No. 75212 of 2016.

1.2. As all the appeals emanate from the same Order-in-Original, all the appeals are taken up together for decision by a common order.

2. The facts of the case are that JSCA are a non­profit, charitable institution engaged in promoting and controlling the sport of cricket throughout the State of Jharkhand. JSCA is established with the sole aim and objective of promoting, encouraging, organizing and controlling the game of cricket throughout the State of Jharkhand. The properties and management of the association is vested in the Board of Trustees / Committee of Management which acts for the attainment of the above said objective of the association.

2.1. JSCA is a Member of the Board of Control for Cricket in India (BCCI). BCCI draws up its income and expenditure account annually and distributes a portion of the excess of income over expenditure to its members in the form of subsidies/subvention, etc., i.e., TV/Media right subsidy, IPL subvention (subsidy), etc., for the purpose of promotion of the game of cricket and development of infrastructure such as stadium, etc., in their respective States.

3. On the basis of intelligence, it was alleged that JSCA was liable to pay Service Tax of Rs.21,63,19,261 .11/- on various income received by them. The break-up of the demand as per the Show Cause Notice is as under: –

3.1. Upon adjudication, the Ld. Commissioner has confirmed the demand of Service Tax of Rs.16,47,763/- on the various services, is as under:

3.2. The Ld. Commissioner has dropped the demand of Service Tax of Rs.17,12,27,323.90/-, the breakup of which is extracted below:

4. JSCA has submitted that they are challenging the demand confirmed in the impugned order only on grounds of Limitation and they are not challenging the demand on merits. In this regard, the following contentions were put forth by JSCA: –

(i) The demand in the instant case is raised on the basis of Annual Report for the year 2008-09 to 2013-14 which is published every year. Further the demand is also raised on the basis of Ledger A/c maintained by them.

(ii) It is submitted that the demand for 2013-14 will only be within limitation under ‘Club of Association Service’.

(iii) In the Show Cause Notice extended period of limitation is invoked on the following grounds:-

“JSCA appear to be contravened various provisions of Finance Act, 1994 (hereinafter referred as ‘Act’) and the Rules made there under with deliberate and willful intent to evade service tax payable on the instant service. Hence, the extended period of limitation as envisaged in the proviso to sub-section (1) of Section 73 of the Act is in vocable for suppression of facts with intent to evade payment of Service Tax”.

(iv) In the case of Commissioner of C.Ex. vs. Hindustan Cables Ltd. (2022) 382 E.L.T. 188(Cal.) it is held that by the Hon’ble Calcutta High Court that when SCN issued on the basis of book of accounts maintained by the assessee and not discovery of new facts by Department, extended period of limitation cannot be invoked.

(v) In the case of U.T Ltd. Vs. Commissioner of C.Ex. reported in (2001) 130 E.L.T 791 (Tri­Kol.), it is held that when demand is based on balance sheet which is a published document, no intention to suppression fact can be imputed and extended period of limitation. Similar views have been expressed in the case of Rolex Logistics Pvt. Ltd. Vs. Commissionerof C. Ex.[2009 (13) S.T.R 147 (Tri-Bom.)]

4.1. In respect of the confirmation of demand of Rs.7,59,779/- under the category of ‘sale of space of time for advertisement service’, JSCA submits that they have not provided / sold any ‘space’ or ‘time’ for advertisement; they have only permitted / granted rights to the parties to put up their own displays / electronic scoreboards for advertisement inside the stadium, which cannot be subjected to Service Tax under Section 65(105)(zzzm) of the Finance Act, 1994 under the category of ‘sale of space or time for advertisement service’.

4.2. Regarding the demand of Service Tax of Rs.7,72,500/- under the category of ‘franchisee service’, they have submitted that the said amount was received by them towards franchisee right for operating cricket team for three years in T-20 Jharkhand Premier League for the sole aim of promoting the game of cricket in Jharkhand; the said amount does not relate to provision of any franchisee service; no franchisee agreement was ever entered into between the parties for granting any representational rights to sell or manufacture goods or to provide services, and therefore there is no provision of ‘franchisee service’ within the meaning of Section 65(105)(zze) of the Finance Act, 1994. Accordingly, JSCA submits that the basic ingredients required to levy Service Tax under the category of ‘franchisee service’ are absent in this case. Hence, JSCA have prayed for setting aside the demand confirmed under the above said category of service.

4.3. Regarding the demand of Service Tax of Rs.1,09,819/- under the category of ‘club or association service’, JSCA have submitted that this demand has been confirmed on the Affiliation and Entry Fees received by JSCA from its members, under the category of ‘club or association service’ as defined under Section 65(25aa) of the Act read with Section 65(105)(zzze) up to 30.06.2012 and under Section 66B read with Section 65B(44) of the Act after 30.06.2012. JSCA submits that they have not rendered any club or association service; they are a member of the BCCI and are engaged in promoting and controlling the game of cricket in the State of Jharkhand; hence, the demand of Service Tax confirmed under this category is not sustainable.

4.4. Regarding the demand of Service Tax of Rs.5,665/- under the category of ‘management, maintenance or repair service’, JSCA submits that in the year 2011-12 and 2013, they had allowed their ground at Ranchi stadium for playing tennis matches; for the purpose of readying the ground for the said matches, they had collected labour charges, cleaning charges, etc., from the said teams. It is their contention that the said amounts were not collected by them in connection with management, maintenance or repair service. Accordingly, it is contended by JSCA that the demand confirmed under this category is not sustainable.

4.5. Regarding the dropping of the demands and the corresponding appeal filed by the Revenue, JSCA has stated the following:

(i) The ld. adjudicating authority has dropped the demand raised under the category of ‘business auxiliary service’; the amount received in the form IPL subvention/TV/Media Right (subvention) which were in the nature of “subsidies”, are not taxable under the category of “Business Auxiliary Services” as the said subsidies are not received for providing any service for the promotion, marketing or sale of any product or service for the “client”. The said “subsidies” were merely in the nature of grants-in-aid by the BCCI for promotion of the game of cricket in the State of Jharkhand; they are engaged in the promotion of game of sports which is neither “product” nor “services”. JSCA is affiliated and a member of BCCI and JSCA, in turn, has given affiliation to district level association/ clubs, etc. For the period under the Negative List regime also, in terms of Clause 10(b) of the Mega Exemption Notification No 25/2012-S.T. dated 20.06.2012, w.e.f. 01.07.2012 any service provided by a recognized sports body to another is exempted from levy of service tax; accordingly, it is submitted that the ld. adjudicating authority has rightly dropped the demand raised in the Notice under this category.

(ii) Regarding the dropping of the demand under the category of ‘event management service’, JSCA submits that the subsidies received from BCCI are in the nature of grants in aid for providing any service in relation to management of any event as an “event manager”. Accordingly, it is their submission that the ld. adjudicating authority has rightly dropped the demand raised under the category of event management service.

(iii) Regarding the dropping of demand under the category of ‘mandap keeper service’, it is the contention of JSCA that they had leased corporate boxes, hospitality boxes, etc., to corporate houses for viewing international matches for a specified period (not for all matches). This amount collected is in the nature of ‘entry fee’ booked in advance to privileged buyers and hence, the said activity could not be treated as a ‘service’ under the category of ‘mandap keeper service’. JSCA also submits that there is no exclusive letting out of the said corporate boxes, hospitality lounges, etc.; in the instant case, JSCA is neither a ‘mandap keeper’ nor are the corporate boxes ‘mandaps’.

Accordingly, they submit that the ld. adjudicating authority has rightly dropped the demand under this category.

(iv) Regarding the dropping of demand under the category of ‘renting of immovable property service’, JSCA submitted that the ‘letting out’ of its ground was for playing cricket matches only with the aim of promoting the game of cricket in the State of Jharkhand; playing cricket cannot be considered as ‘furtherance of business or commerce’ as defined under Section 65(105)(zzzz) read with Section 65(90a) of the Act.Service Tax is leviable on rent received for letting out of immovable property for furtherance of commercial activitiesonly; Further, land used for sports is not a commercial activity and letting out of such land cannot be subjected to Service Tax under the category of ‘renting of immovable property service’. It is their further submission that with effect from 01.07.2012, under the category of ‘declared services’, the ground rent received for playing cricket, which is not in furtherance of business, is not taxable. Accordingly, the ld. adjudicating authority has rightly dropped the demand under this category.

4.6. In view of the above submissions, JSCA has prayed for allowing their appeal and rejecting the appeal filed by the Revenue.

5. The Ld. Authorized Representative appearing on behalf of the Revenue reiterated the grounds of appeal urged by the Department. He submits that the ld. adjudicating authority has failed to consider that the amount received by the JSCA from BCCI on account of IPL subvention and media rights, shown in their ledger as Income for planning, organizing, promoting, presentation of cricket in the State of Jharkhand, were attributable to promotion and facilitation of service relating to cricketing events in the State of Jharkhand on behalf of the BCCI; the above activities squarely fall within the ambit of Service Tax under the category of ‘business auxiliary service’ as defined under Section 65(105)(zzb)of the Finance Act, 1994.

5.1. Regarding the dropping of demand under the category of ‘event management service’, the Revenue submits that the ld. adjudicating authority has failed to appreciate that the amount received by the JSCA for arranging, hosting and participation of various teams in different tournaments are related to organizing / conducting of different events as required and planned on behalf of the BCCI. They further contended that JSCA is not conducting such events on their own; these events are conducted by JSCA as per the schedule and requirement of the BCCI and as per the terms and conditions prescribed by the BCCI. Thus, Revenue submits that the activity carried out by JSCA squarely falls within the ambit of Service Tax under the category of ‘event management service’ as defined under Section 65(105)(zu) of the Act. The Revenue also points out that with effect from 01.07.2012, the said activity is neither included in the Negative List under Section 66D nor under the Mega Exemption Notification No.25/20 12-S.T. dated 20.06.2012.

5.2. Regarding the dropping of demand under the category of ‘mandap keeper service’, the Revenue points out that the ld. adjudicating authority failed to appreciate that JSCA was receiving amounts towards providing corporate boxes with air conditioning, pantry services, attached toilet, television set, refrigerator and microwave; This facility cannot be considered as viewing of matches alone; rather, JSCA was providing services of mandap keeper of these well-equipped and furnished boxes for exclusive usage of the specified allotees. Accordingly, the Revenue contends that this is appropriately classifiable under the category of ‘mandap keeper service’ as defined under Section (105)(m) of the Act and levy of Service Tax in this regard is required. It is also submitted by the Revenue that with effect from 01.07.2012,this activity has not been included in the Negative List under Section 66D and also does not comeunder the Mega Exemption Notification No. 25/2012-S.T. dated 20.06.2012.

5.3. Regarding dropping of the other demands by the ld. adjudicating authority, the Revenue claims that the ld. adjudicating authority has failed to appreciate the liability of Service Tax on the respective services and dropped the demands without giving proper reasoning. It is therefore the submission of the Revenue that the ld. adjudicating authority has wrongly dropped these demands. In view of the above, they prayed for setting aside the impugned order to the extent of dropping of the demands to the tune of Rs.17,12,27,323.90/-. The Revenue has also prayed for upholding the confirmation of the demands made by the ld. adjudicating authority in the impugned order.

5.4. In support of his contentions, the Ld. Authorized Representative for the Revenue relied upon the decision of the Tribunal in the case of Vidarbha Cricket Association v. Commissioner of C.Ex., Nagpur [2015 (38) S.T.R. 99 (Tri. – Mum.)].

6. Heard both sides and perused the appeal documents.

7. We observe that JSCA is a non-profit, charitable institution engaged in promoting and encouraging the sport of cricket in the State of Jharkhand. They have received grants-in-aid from the BCCI for the purpose of development of stadiums etc., in the State of Jharkhand and for promoting the game of cricket thereof. In the course of such promotion of the game of cricket, JSCA engaged in various activities to generate additional revenue. They have sold space for advertisement to various advertisers for displaying their advertisement during the course of such cricket matches. Similarly, JSCA have rented out stalls for the purpose of selling soft drinks, snacks and various items during the course of the cricket matches. They have also let out corporate boxes and hospitality boxes to privileged clients for international cricket matches.

7.1. We observe that the adjudicating authority has confirmed the demands under the following categories of services:

(i) Selling of space or time for advertisement service

(ii) Franchisee service

(iii) Club or Association service

(iv) Maintenance and repair service

7.2. In respect of the above demands confirmed in the impugned order, the appellant has contested the demands only on the grounds of Limitation and did not challenge the demand on merits.

7.3. In this regard, we observe that the demand has been raised in the notice on the basis of Annual Report for the year 2008-09 to 2013-14 which is published every year and the Ledger A/c maintained by them. When the demand is raised on the basis of the books of accounts maintained by the appellant, extended period cannot be invoked. This view has been held in the case of Commissioner of C.Ex. vs. Hindustan Cables Ltd. (2022) 382 E.L.T. 188(Cal.) wherein the Hon’ble Calcutta High Court has held that when Show Cause Notice issued is on the basis of book of accounts maintained by the assessee and not discovery of new facts by Department, extended period of limitation cannot be invoked. We observe that the same view has been held in the case of U.T Ltd. Vs. Commissioner of C.Ex. reported in (2001) 130 E.L.T 791 (Tri-Kol.), wherein it is held that when demand is based on balance sheet which is a published document, no intention to suppression fact can be imputed and extended period of limitation. Similar views have been expressed in the case of Rolex Logistics Pvt. Ltd. Vs. Commissionerof C.Ex. [2009 (13) S.T.R 147 (Tri-Bom.).

7.4. By relying on the decisions cited above, we hold that the demands confirmed in the impugned order for the extended period of limitation is not sustainable. No penalty is imposable as suppression of fact with intention to evade the tax is not established in this case.

7.5. Further, we observe that all these activities undertaken by JSCA are for generating revenue with the aim of promoting the game of cricket. All these activities are undertaken during the course of hosting the cricket matches alone. If there are no cricket matches played, then all these services become irrelevant and without having any relation with the cricket matches, these services cannot possibly be rendered. Thus, we observe that all these services are required to be considered as ‘bundled services’ provided in connection with promoting the game of cricket by JSCA. For the sake of ready reference, the definition of ‘bundled services’ as provided under Section 66F of the Finance Act, 1994, is reproduced below: –

“SECTION 66F. Principles of interpretation of specified descriptions of services or bundled services. —

(1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service.

(2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.

(3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely :—

(a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character;

(b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.

Explanation. — For the purposes of sub-section (3), the expression “bundled service” means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.”

7.6. From the above, we observe that all the services rendered by the appellant are naturally bundled together with the game of cricket. In the present case, we observe that promoting the game of cricket is the primary objective of the cricket association/JSCA and all the services rendered are in association with promoting the game of cricket. When matches are not played, all the services become irrelevant and JSCA earns money only when these services are provided during the course of cricket matches. Accordingly, we hold that JSCA has rendered ‘bundled services’ in connection with promoting the game of cricket.

7.7. Since services rendered in connection with promotion of sporting events is exempted from the levy of Service Tax prior to 30.06.2012, no service tax is payable by the JSCA, being a charitable institution engaged in the activity of promoting the game of cricket. For the period after 01.07.2012, vide Mega Exemption Notification No 25/2012-S.T. dated 20.06.2012, exempts all the services rendered by JSCA in connection with sports from the levy of service tax. Accordingly, we hold that JSCA are not liable to pay Service Tax for the services rendered by them in connection with promotion of sports.

8. Regarding the dropping of the demands by the ld. adjudicating authority, we observe that he has dropped the demand raised under the category of ‘business auxiliary service’ which has been raised on the amount received in the form IPL subvention/TV/Media Right (subvention) which were in the nature of “subsidies”. In this regard, we agree with the observation of the Ld. Adjudicating authority.

The amount received are not taxable under the category of “Business Auxiliary Services” as the said subsidies are not received for providing any service for the promotion, marketing or sale of any product or service for the “client”. The said “subsidies” were merely in the nature of grants-in-aid by the BCCI for promotion of the game of cricket in the State of Jharkhand. The services rendered in connection with promotion of sports is not liable to service tax prior to 30.06.2012. For the period under the Negative List regime also, in terms of Clause 10(b) of the Mega Exemption Notification No 25/2012-S.T. dated 20.06.2012, w.e.f. 01.07.2012 any service provided by a recognized sports body to another is exempted from levy of service tax. Accordingly, we hold that that the ld. adjudicating authority has rightly dropped the demand raised in the Notice under this category.

8.1. Regarding the dropping of the demand under the category of ‘event management service, we observe that the subsidies received from BCCI are in the nature of grants in aid for providing any service in relation to management of any event as an “event manager”. Accordingly, we hold that the ld. adjudicating authority has rightly dropped the demand raised under the category of event management service.

8.2. Regarding the dropping of demand under the category of ‘mandap keeper service’, we observe that JSCA had leased corporate boxes, hospitality boxes, etc., to corporate houses for viewing international matches for a specified period (not for all matches). This amount collected is in the nature of ‘entry fee’ booked in advance to privileged buyers and hence, the said activity could not be treated as a ‘service’ under the category of ‘mandap keeper service’. JSCA also submits that there is no exclusive letting out of the said corporate boxes, hospitality lounges, etc.; in the instant case, JSCA is neither a ‘mandap keeper’ nor are the corporate boxes ‘mandaps’. Accordingly, we hold that the ld. adjudicating authority has rightly dropped the demand under this category.

8.3. Regarding the dropping of demand under ‘renting of immovable property service’, we observe that the ‘letting out’ of its ground was for playing cricket matches only with the aim of promoting the game of cricket in the State of Jharkhand; playing cricket cannot be considered as ‘furtherance of business or commerce’ as defined under Section 65(105)(zzzz) read with Section 65(90a) of the Act. Service Tax is leviable on rent received for letting out of immovable property for furtherance of commercial activities only; Further, land used for sports is not a commercial activity and letting out of such land cannot be subjected to Service Tax under the category of ‘renting of immovable property service’. Accordingly, we hold that the service rendered in this regard by JSCA is not liable to service tax prior to 30.06.20 12. W.e.f. 01.07.2012, under the category of ‘declared services’, the ground rent received for playing cricket, which is not in furtherance of business, is not taxable. In respect of the other services wherein demands were dropped by the ld. adjudicating authority, we do not find any infirmity in the dropping of the demand by the ld. adjudicating authority.

8.4. Accordingly, we hold that all the said demands have been rightly dropped by the ld. adjudicating authority and thus, we uphold the same.

9. In view of our above discussion, we set aside the demands confirmed by the ld. adjudicating authority in the impugned order. We also uphold the dropping of the demands vide the impugned order.

10. Since the demand itself is set aside, the question of demanding interest and imposing penalties does not arise.

11. In the result, the appeal filed by JSCA is allowed and the appeal filed by the Revenue is dismissed. The cross-objection filed by the JSCA is also disposed of in the above manner.

(Order pronounced in the open court on 05.09.2024)