CESTAT, MUMBAI BENCH
Royal Western India Turf Club Ltd.
Commissioner of Service Tax, Mumbai-I
Order Nos. A/498 to 500/2012/CSTB/CT
Appeal Nos. ST/203,217 & 218 of 2010†
May 22, 2012
P.R. Chandrasekharan, Technical Member
There are three appeals which are taken up for consideration together as the issues involved are common.
2. The appellant, M/s. Royal Western India Turf Club Ltd. (Turf club, in short) is engaged in the activity of conducting horse racing. During the horse race, licensed book makers (bookies in short) accept bets from the public in the premises of the appellant and these bookies have been provided with stalls. The appellant charges fees from the bookies in two components, one is a fixed amount under the Head “Stall fees” and the other is a variable amount under the Head “Commission” which is collected as a percentage of the betting amounts collected by such bookies. The Turf Club conducts live telecast of the races which can be viewed at other racing clubs in India located in Bangalore, Kolkata, Hyderabad, Mysore, Delhi, Madras and Ooty. The technical support for the live telecast of horse race events held in Mumbai and Pune is provided by M/s. Essel Shyam Communications Ltd., NOIDA. For such broadcasting, the Turf Club receives royalty income from other race clubs and the royalty amounts are worked out either on a fixed percentage of betting placed at the respective clubs or a fixed lump sum amount depending upon the understanding made with the respective race clubs. The Turf Club also receives royalty from caterers who have been permitted to use the infrastructural facilities and to operate within the premises of the Turf Club.
2.1 Four show-cause notices were issued to the Turf Club for the period from 01.04.2002 to 31.03.2009 demanding service tax on the amounts received by the Turf Club from the bookies, caterers and also from other race clubs. For the period from 01.04.2003 to 30.06.2006, a show-cause notice dated 26.03.2007 was issued demanding service tax of Rs. 1,19,61,049/- under two categories – the royalty/commission received from other race clubs was classified as ‘Broadcasting Services’ and the royalty/commission received from bookies and caterers were classified as ‘Business Support Services’. The said show-cause notice was adjudicated by the Commissioner of Central Excise, Thane I vide Order No. 22/BR-22/ST/TH-1/2010 dated 30.03.2010 wherein the Commissioner upheld the demand of service tax of Rs. 1,19,61,049/- under the category of ‘Mandap Keepers Services’, ‘Broadcasting Services’ and Business Support Services’ under Section 73 of the Finance Act, 1994. The Commissioner also demanded interest under Section 75 of the Act ibid and imposed penalties on the Turf Club under Sections 76, 77 and 78 of the said Finance Act.
2.2 Another show-cause notice dated 17.10.2007 was issued demanding service tax for the period from 01.07.2006 to 31.03.2007 amounting to Rs. 1,08,66,910/- categorizing the variable royalty/commission received from other race clubs under ‘Intellectual Property Rights Services’ and categorizing the receipts as fixed amount for live telecast under the category of ‘Broadcasting Services’. Similarly in respect of fixed amount paid by the bookies, the same was categorized as ‘Business Support Services’ and the variable paid by the bookies was categorized as ‘Intellectual Property Right Services’. As regards the royalty amount from the caterers, the same was classified as income from ‘Business Support Services’. The said notice was adjudicated vide Order No. 23/BR-23/ST/TH-I/2010 dated 31.03.2010 wherein the Commissioner confirmed the service tax demand classifying the services under ‘Broadcasting Services’, ‘Intellectual Property Right Services’ and ‘Business Support Services’ under Section 73 of the Act ibid along with interest under Section 75 and imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994.
2.3 Two more show-cause notices were issued on 03.10.2008 and 09.10.2009 for the Financial Years 2007-08 and 2008-09 demanding service tax amount of Rs. 1,63,15,303/- and Rs.2,12,15,287/- respectively and these show-cause notices were adjudicated vide Order No. 24 & 25/ST/BR/09-10 dated 08.02.2010 by the Commissioner of Service Tax, Mumbai who confirmed the service tax demands under the category of ‘Intellectual Property Right Services’, ‘Broadcasting Services’ and ‘Business Support Services’ and imposed penalties under Sections 76, 77 and 78 apart from demanding interest on the service tax amount confirmed.
2.4 The appellant is in appeal before us against the impugned orders.
3. The Ld. Counsel for the appellant makes the following submissions:-
(1) As regards the demand of service tax under the category of ‘Business Support Services’, this Tribunal in Madras Race Club v. CST  18 STT 399 (Chennai-CESTAT) had prima facie held that the amounts received from book makers by the Race Club does not come under the category of ‘Business Support Services’.
(2) He also relies on the clarification issued by the CBEC vide Circular No. 334/4/2006-TRU dated 28.02.2006 wherein it has been stated that business entities outsource a number of services for use in business or commerce and these services include ‘such as transaction processing, routine administration or accountancy, customer relationship management and tele-marketing, usually outsourced. In some cases, the business entities provide infrastructural support such as providing instant offices along with secretarial assistance known as “Business Centre Services’. The CBEC vide a Circular No. 109/3/2009-ST dated 23.02.2009 further clarified that ‘Business Support Service’ is a generic service of providing support to the business or commerce of the service receiver. In other words, the principal activity is to be undertaken by the client while assistance or support is provided by the taxable service provider. The services of accepting bets have not been outsourced by the appellant. The book makers are independent persons who accepts bets as independent persons. The book makers are appointed with the approval of the State Government in terms of the licence granted to the appellant. The provision of stall is incidental to his granting of approval as book maker by the State Government. Hence the appellant can not be said to have rendered any business support service to the book makers. Similarly in the case of services provided to caterers, the appellant has entered into agreement with the caterer and have provided them space to cook the food and serve the same to the members of the club and also the people who come to view the races. Thus they cannot said to have rendered any business support services to the caterer. He relies on the judgment of the hon’ble High Court of Bombay in the case of C.K.P. Mandal v. CCE  5 STT 1 in this regard.
(3) As regards for demand of service tax under the category of ‘Intellectual Property Right Services’, the Advocate relies on the CBEC Circular No. 80/10/2004-ST dated 17.09.2004 wherein it was clarified that the ‘Intellectual Property Right Services’ covers such rights as patent, copy rights, trade marks and designs under the Intellectual Property Rights laws applicable in India. Neither in the show-cause notice nor in the adjudication order, the adjudicating authority has classified the services rendered and the consideration received as falling under which Intellectual Property Right they would fall i.e., whether under the category of patents, copy rights, trade marks or designs.
(4) As regards the demand of service tax under the category of ‘ Broadcasting Services’, the learned Counsel submits that in the instant case the broadcasting is undertaken by M/s. Essel Shyam Communications Ltd., who has charged the appellant Turf Club for the services rendered under the category of ‘ Broadcasting Services” and the appellant has paid service tax to M/s. Essel Shyam Communications Ltd., for the services received, and, therefore, they cannot be treated as provider of service as well as recipient of the service at the same time.
(5) The ld. Counsel further submits that the activity of telecasting the horse races conducted by the Turf Club for viewing by other race clubs located in various parts of the country and receipt of royalty for the same was brought under the tax net with effect from 1-7-2010 vide clause (zzzzr) of section 65 (105) of the Finance Act which defined the said service as –
“(zzzzr) taxable service provided or to be provided to any person, by any other person, by granting the right or by permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage organised by such other person;”
Prior to 1-7-2010, the said activity was not taxable and the said entry was not carved out of any existing taxable services by amending the same. He relies on the judgment of this Tribunal in the case of Board of Control for Cricket in India v. CST  9 STT 399 (Mum-CESTAT) and the decision of the hon’ble High Court of Mumbai in the case of Indian National Shipowners Association v. Union of India  19 STT 408 (Bom.)
In the light of these submissions, the ld. Counsel prays for setting aside the impugned orders and allowing the appeals.
4. The learned Commissioner (AR), on the other hand, reiterated the findings given in the orders of the adjudicating authorities. However, he fairly conceded that the department has not made out any case for demand of service tax under the category of “intellectual property rights service”. He urged that the appellant can be considered to have rendered ‘ broadcasting service’ as the broadcasting was done at his behest by M/s Essel Shyam Communications and the appellant has received consideration by way of royalty from the other racing clubs. The actual broadcaster was only an agent of the appellant and the services should be deemed to have been rendered by the appellant. As regards, the book makers and the caterers, the appellant has provided office space for their business activities and therefore, they have provided infrastructure support to these entities and hence the activity rendered falls correctly under ‘business support service’ as defined in the Finance Act, 1994. Accordingly he pleads for upholding the impugned demands under the category of ‘broadcasting’ and ‘business support’ services.
5. We have carefully considered the rival submissions.
5.1 A perusal of the impugned orders clearly evidences the lack of clarity and understanding on the part of the department. The activity of live telecast of the horse race has been classified as ‘broad casting services’ during one part of the period and during another period, the very same activity is classified as ‘intellectual property rights service’. Further, during the same period, the activity has been classified under the above two categories based on the mode of payment for the services, that is, whether is payment is lump-sum or varying as a percentage of the bet amounts. In other words, the different classifications have been adopted based on different modes of payment, for the same activity. The same confusion prevails in respect of the consideration received from the book makers. There is a total confusion in the minds of the adjudicating authorities as to the ‘nature of the tax’ and the ‘measure of the tax’. On this ground alone the impugned orders deserve to be set aside.
5.2 Further where the demand for service tax has been made under the category of ‘Intellectual Property Right Services’, neither the show-cause notices nor the orders relating thereto give a clear proposal or finding as to what is the intellectual property rights involved in the transactions, i.e., whether it is a patent, copy rights, trade mark or design or any other category of intellectual property rights. When service tax is confirmed under the taxable service category of ‘Intellectual Property Right Services’, the order confirming the demand should clearly classify the transaction under one or more of the ‘Intellectual Property Rights’ which are covered under Intellectual Property Right Services’ law. The Board’s Circular issued on 17.09.2004 in this regard makes it abundantly clear that the ‘Intellectual Property Right Services’ covered under the service tax laws should be in respect of such services in respect of which laws have been made in India and such laws should cover the ‘Intellectual Property Right Services’ involved and only in such a situation, demand for service tax can be raised whenever there is a transfer of ‘Intellectual Property Rights’ by the holder of the ‘Intellectual Property Right to the person who receives or uses the Intellectual Property Rights. In the impugned orders we do not find any such findings by the authorities.
5.3 During the arguments, the ld. Commissioner AR gave up the claim under “Intellectual Property Rights Services” and stated that the activity of live telecast of horse races would come under the category of “broad casting” services.
“Broad casting as defined in the Finance Act, 1994 has the meaning assigned to it in section 2(c) of the Prasar Bharati Act, 1990 and includes programme selection, scheduling or presentation of sound or visual matter on a radio or television channel that is intended for public viewing.
Under the Prasar Bharati Act,
‘broadcasting’ means the dissemination of any form of communication like signs, signals, writing, pictures, images and sounds of all kinds of transmission of electromagnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations.
The dissemination in this case has been undertaken by M/s Essel Shyam Communication who has discharged the service tax liability on the consideration received by them. The appellant himself is not involved in the broadcasting activity. As regards the inclusive part of the definition, the broadcast is available for viewing only in other race clubs and only members or bookies in the other race clubs can view the programme. It cannot be, therefore, said that the broadcast is available for public viewing.
5.4 The appellant herein is involved in conducting the event of “horse racing”. The appellant has permitted other race clubs to commercially use or exploit this event. The appellant receives a royalty from these race clubs towards this right to commercial use or exploitation. Thus the activity undertaken by the appellant merits classification under the taxable category of “services of permitting commercial use or exploitation of any event organized by a person or organization” which was brought under the tax net with effect from 1-7-2010. It is only from this date, the service tax liability is attracted on this activity. In the instant case as the service tax demand is for the period 01.04.2007 to 31.03.2009, they will not be liable to service tax during this period.
5.5 The CBEC circular 334/1/2010-TRU dated 26-2-2010 clarified the position as under:
“5. Services of permitting commercial use or exploitation of any event organized by a person or an organization.
5.1 Like intellectual property rights, there are certain personal rights such as, right to privacy, easement right, right to secrecy. With the expansion in the field of information technology and broadcasting sector, many individuals or organizations offer to share/part with these rights for a consideration. A corporate sponsored cricket match or company sponsored music concert; film award events; celebrities marriages; beauty contests are some of such private functions, which a large number of viewers like to see on TV or media. In such cases, companies, broadcasting agencies and video producers are given right to capture these events or programmes for their commercial exploitation in future. Often such commercial exploitation results in provision of another taxable service such as broadcasting service or programme production service. The proposed service now seeks to tax the amount received by the person or organization, who permits the recording and broadcasting of the event from the broadcaster, or any other person, who seeks to commercially exploit the event.”
5.6 This Tribunal in the case of Board of Control for Cricket in India (supra) while considering the service tax demand on sale of television rights, sponsorship money and logo money by the Board of Cricket Control in India held that sale of such rights will not come under the category of advertising agency for the reason that no service is provided by sale of such rights. The ratio of this judgment applies to the facts of the present case.
5.7 In the Indian National Shipowners’ Association case (supra), the hon’ble high court of Bombay held that introduction of a new entry and inclusion of certain services in that entry pre-supposes that there was no earlier entry covering such services. Applying this principle to the facts of the present case, since the “Services of permitting commercial use or exploitation of any event organized by a person or an organization” was brought under the tax net from 1-7-2010 onwards and since this service was not carved out of ‘broadcasting services’, no tax liability arises for the period prior to 1-7-2010.
5.8 As regards the department’s claim for service tax under the category of ‘Business Support Services’ from the book makers and the caterer, the activity of the appellant was to make available space within the premises of the turf club by way of stall or canteen, for a consideration. This activity is nothing but hiring/leasing of immovable property defined under clause (zzzz) of section 65 (105) of Finance Act, 1994 which defines the service as “renting of immovable property or any other service in relation to such renting, for use in the course of or for furtherance of business or commerce”. Business support service is defined in clause (104c) of section 65 as follows:-
“Support services of business or commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation.- for the purposes of this clause, the expression “infrastructural support services” includes providing of office space along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.’
5.9 A reading of the above definition makes it very clear that mere renting of office space does not come within the definition. Such providing of space should be along with other facilities specified therein. It is not the case of the department such facilities have been provided to the book makers or the caterer. Therefore, we do not find any merit in the argument that the renting of office space to the caterer/book maker is liable to be classified as “business support service”.
5.10 The CBEC circular 334/4/2006-TRU dated 28-2-2006 makes this position very clear as under:-
“Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and telemarketing. There are also business entities which provide infrastructural support such as providing instant offices along with secretarial assistance known as “Business Centre Services”. It is proposed to tax all such outsourced services.”
It is not the department’s case that the book makers and the caterer outsourced infrastructural support from the appellant Turf Club.
6. In the light of the above discussion, we do not find any merit in the impugned orders confirming service tax demand. Accordingly we set aside the same and allow the appeals, with consequential relief, if any.