Even after termination of the franchisee agreement with Kings XI Punjab by BCCI, KPH Dreams which owns the T20 team is still not out of trouble, it seems, as the Central Excise Department on Monday said it would pass an order within a month determining the company’s total tax liability.
The department, which had slapped a notice on KPH Dreams for payment of Rs 5.38 crore as service tax, would be passing an order to decide the final tax liability within a month after giving the company a third and last opportunity for hearing on October 27.
“The order (for determining tax liability) will be passed within a month after hearing the final arguments of the company on October 27,” Central Excise Commissioner HK Thakur told PTI on Monday.
The department had slapped a notice on KPH Dreams in February this year asking the company to pay up service tax to the tune of Rs. 5.38 crore for the payment received during the first season of IPL matches.
The department has already held two hearings of the company on September 22 and October 5. “During their replies filed with us, the company (KPH Dreams) claimed that it is not supposed to pay the tax. But we will go through their (KPH Dreams) replies before fixing the final tax liability,” said Thakur.
Besides tax liability, the company may also face penalty on tax, which can be imposed by the Central Excise Department in its final order.
Under section 78 of Service Tax Act, the department has the power to impose penalty which starts from minimum amount of Rs 5,000 up to the maximum of 200 per cent of due tax.
According to the notice issued to KPH Dreams, out of Rs 5.38 crore, the department had raised a demand of Rs 3.89 crore as service tax for payment it received from BCCI-IPL in the shape of share of revenue, prize money and share of official beverages.
The department had asked the Kings XI franchise to pay Rs 9.17 lakh as service tax on Rs 74.24 lakh worth services provided by overseas companies under reverse charge basis.
Rs 1.02 crore service tax was demanded on the services provided by overseas players and another Rs 37.55 lakh was demanded on the payment of ticket sales classified under exempted services.
Besides facing tax liability, venturing into IPL has not been a profitable opportunity for the company as it suffered a net loss of Rs 25 crore in 2008-09.
Kings XI Punjab, which had committed to pay USD 76 million as franchise fee for over ten years, in January this year had said that it is hoping to break even by March 2011.
According to the shareholding pattern in the company, actress Preity Zinta and industrialist Ness Wadia have 23 per cent stake each while Karan Paul, Chairman of Apeejay-Surrendra Group, has 4 per cent equity stake. The balance 50 per cent is with M B Finmart and Windy Investments.
