By TIOL News Service

MUMBAI, SEPT 23, 2013: THE appellant is a member of the Board of Control for Cricket in India (BCCI). From the income proceeds of BCCI, the members were given reimbursement under various categories such as, TV Rights subsidy, Tournament receipts, IPL subsidy players' expenses reimbursements and subsidy for international matches. These amounts are given to promote the game of cricket and also to undertake construction of infrastructure for playing cricket within the jurisdiction of the members.

The CCE & ST, Nagpur was of the view that the amounts received from BCCI by the appellant is for providing infrastructure support to BCCI for conducting tournaments and, therefore, the same is classifiable under the category of 'Business Support Services'.

A Service Tax demand of more than Rs.21 crores was raised under two SCNs on the consideration received by the appellant during the period 2006-07 to 2009-10 and 2010-11. These notices also included service tax demands raised under the category of 'Club or Association and Advertising Services', 'Mandap Keeper Services', 'Renting of Immovable Property Services' and "Sale of space or time for advertising'.

Since the CCE & ST, Nagpur confirmed these demands and imposed penalties and interest, the appellant is before the CESTAT.

It is submitted that bulk of demand is under the category of 'Business Support Services' and the amount under other categories is approximately Rs. 1.8 crores against which they have already made a pre-deposit of Rs. 1.63 crores.

As for the majority of the demand of Service Tax, it is submitted that they are not providing any services to BCCI and they are affiliated to BCCI; that from the BCCI's income they are given grant/subsidy for promoting cricket within the region and, therefore, the question of levy of Service tax would not arise at all; that similar proceedings were initiated against the Gujarat Cricket Association and the Saurashtra Cricket Association by the Commissioner of Service Tax, Ahmedabad proposing to demand Service Tax under the category of 'Event Management Services' on the amounts received from the BCCI and these proceedings were dropped by the jurisdictional Commissioner by Order No. STC/06/COMMR/AHD/2007 dated 24.9.2007 and No. 05/COMMR/2009 dated 27.3.2009; that in the case of Maharashtra Cricket Association, the Commissioner of Central Excise, Pune vide Order No. P-III/BBP/119/05 dated 28.7.2005, dropped the demand on the said assessee in a similar transaction under the category of 'Event Management Services'; that in the present case, the only difference is that the demand of Service Tax is raised under the category of 'Business Support Services'. Reliance is also placed on the apex court decision in the case of Secretary, Ministry of Information & Broadcasting Vs. Cricket Association of Bengal- 1995 (2) SCC(161). Inasmuch as the impugned order is not sustainable in law, the appellant submitted.

The Revenue representative reiterated the findings of the adjudicating authority and submitted that in the present case, the demand is made under the category of 'Business Support Services' for providing infrastructure facility to BCCI and, therefore, the facts of the case are distinguishable from those decided by the Commissioner of Service Tax, Ahmedabad and the Commissioner of Central Excise (Appeals), Pune.

The Bench while granting Stay observed - (2013-TIOL-808-CESTAT-MUM) -

"5.1 To come under 'Business Support Services', service has to be provided in relation to business or commerce and such services which are mentioned under Section 65 (104c) are evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. By way of explanation, the expression "infrastructural support services"has been defined to include providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and Security. The expression 'infrastructure support service' used in the said Section has to be understood and construed by following the principles of ejusdem generis. In other words the services rendered should be similar to the services mentioned therein. Promotion of cricket or giving the cricket stadium for conducting cricket matches, which is the transaction involved in the present case, is not similar to any of the activities specified in the said section. Further, there is no evidence led by the Revenue to show that the services have been rendered in relation to business or commerce."

The appeals were heard recently.

The Member (Technical) held thus -

+ Mandap Keeper Services - the appellant himself has admitted to the tax liability. Therefore, the demand in this regard along with interest liability, if any is upheld.

+ Renting of immovable property - the said service falls squarely within the definition of taxable service as defined in section 65(105)(zzzz) of the Finance Act. After citing the decisions in Retailers Association and others vs. UOI - (2011-TIOL-523-HC-MUM-ST) Home Solutions Retails (India) Ltd. vs. UOI and others - (2011-TIOL-610-HC-DEL-ST-LB), the Bench observed - "Though the matter is pending in appeal before the Hon'ble Apex Court, the ratio of these decisions has not been set aside. Therefore, the demand of service tax on this activity by the appellant under the category of renting of immovable property service is sustainable in law and we hold accordingly. Needless to say, our decision in this regard is subject to the outcome of the appeals pending before the Hon'ble apex court."

+ Sale of space or time for advertisement - From the agreement entered into by the appellant with Sporting Frontiers India Pvt. Ltd, it is seen that the appellant, having control of the ground for the purpose of stating the match/or extra match, has granted exclusive rights at the ground to use the advertising sites to sell and exhibit advertising of any kind, and advertising signs, during matches and extra matches and the right to erect, display, affix, maintain, renew, repair and remove or permit the erection, display, affixing, maintenance, renewal, repair or removal within two days following and the right at all times, during the matches and extra matches, to have access to and to enter or to authorize any employee, agent or subcontractor of SFIPL to enter the ground for the purpose of exercising its right pursuant to this clause (2.1) without affecting the conduct of the match or extra match. In other words, the appellant has allowed SFIPL to use the advertising space available in the ground. Similarly the appellant has allowed TFPL to erect giant screen for advertisement purposes. From the legal provisions cited above, any service "in relation to sale of space or time for advertisement, in any manner" will attract the levy of service tax. The sale of advertising rights to M/s SFIPL and TFPL is in relation to advertisement and the appellant has allowed these agencies to use the space for advertisement purposes. The expressions "in relation to" and "in any manner" are wide enough to cover the activities of the appellant. It is not necessary that the person to whom the space has been sold should himself advertise. If the space provided is used for advertising, it would suffice. There is no dispute in the present case that the space provided by the appellant has been used for advertising purposes. If that be so, the appellant cannot escape the tax liability in respect of such a transaction.

++ The argument of the appellant that they are sub-contractors of SFIPL/TFPL and since the main contractors have discharged the service tax liability, they are not liable to service tax has no merit whatsoever. The agreement entered into between the appellant with SFIPL/TFPL shows that it is on a principal to principal basis and there is no sub-contractor relationship between the appellant and SFIPL/TFPL. The appellant has also argued that the demand pertains to a revenue neutral situation. The concept of revenue neutrality applies when taxability arises within the same legal entity. That is not the situation here. The appellant and SFIPL and TFPL are different and distinct legal entities. The decision in Jay Yushin case - (2002-TIOL-126-CESTAT-DEL-LB) is referred to.

+ Club or Association Service - The appellant's claim is that they fall within the exclusion clause under section 65(25a) which reads as "any person or body of Persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature". It is argued that activity of promotion of cricket undertaken by the appellant is "public service" and the appellant is a charitable organization under the Income Tax Act, 1961 and hence they are not liable to service tax. The terms "Public service" or "Charitable organization" have not been defined in the Finance Act, 1994 and therefore, they have to be understood in their ordinary and natural meaning.

+ Public Service? - From the dictionary meanings it can be inferred that to constitute public service, the activity should sub-serve an essential public need. There are many countries in the world where cricket is not played at all and only in very few countries, cricket is played. Can it, therefore, be said that promotion of cricket sub-serves an essential public need? It is difficult to answer this question in the affirmative with any certainty.

+ Charitable Organization - Is the appellant a charitable organization merely because it is held so for the purposes of Income Tax Act. Income Tax Act and Finance Act, 1994 are not parimateria and they operate in totally different fields. There is nothing on record to show that the activities rendered by the appellant are for the benefit of the needy people who cannot pay for the benefits received. In view of the above legal and factual position, the plea of the appellant that they fall within the exclusion clause under section 65(25a) of the Finance Act, 1994 is not acceded to. The appellant is, therefore, liable to discharge service tax on the membership fees received under the Club or Association service. However, no service tax liability will arise on the sale proceeds of any goods (food, liquors, etc.) sold to the members.

+ Amounts received from BCCI by the appellant by way of subsidies - From the definition of Business Support services, it is evident that the support services should be provided in relation to business or commerce. The question is whether conducting cricket tournaments and telecasting the same would constitute business or commerce. From the Apex Court decision in the case of Secretary, Ministry of Information and Broadcasting vs. Cricket Association of Bengal it clearly comes out that sports organizations are not business or commercial organizations, conduct of sports or sporting events and their broadcasting/telecasting is not assertion of commercial rights. It thus clearly emerges that, the service, if at all any, rendered by the appellant is not in relation to any business or commerce and, therefore, there is no service tax liability on the said activity under section 65 (104c) read with 65(105)(zzzq) of the Finance Act, 1994. The appellant is not liable to service tax under the category of BSS and the service tax demands made in this regard in the impugned orders are unsustainable in law and accordingly are set aside.

+ Limitation - bona fide belief is not blind belief. Belief can be said to be bona fide only when it is formed after reasonable considerations are taken into account. No evidence has been led before us to show that the appellant undertook such precautions either by way of referring the matter to the Departmental authorities or by seeking a legal opinion. Therefore, the argument of bona fide belief lacks conviction and is not convincing. It appears to be an argument of convenience rather than anything else. On the other hand, it is clear from the records that the appellant did not obtain service tax registration and did not comply with the statutory procedures and requirements of service tax law. Therefore, the inevitable conclusion that emerges is that the appellant has suppressed the facts of their activities from the Department with intent to evade service tax. Decision of Supreme Court in Usha Rectifier Corporation (I) Ltd. - (2011-TIOL-08-SC-CX) & Gujarat High Court in Neminath Fabrics - (2011-TIOL-10-HC-AHM-CX) cited.

+ Interest: Once the service tax demands are upheld, interest liability thereon is automatic and consequential. Interest is a compensatory payment for the delay in payment of tax. The demand for interest is upheld.

+ Penalties: While penalty under section 76 is for the default in payment of tax and no mensrea is required to impose this penalty as held in Krishna Poduval case - (2006-TIOL-77-HC-KERALA-ST), penalty under section 77 is for non-compliance with the statutory provisions/requirements such as registration, filing of returns and so on. Therefore, penalties imposed under sections 76 and 77 of the Finance Act, 1994 are upheld. As regards the penalty imposed under section 78, except in the case of renting of immovable property (where the levy itself is under challenge before the Supreme Court), there is no reason to interfere with the same.

Summary -

a) the confirmation of service tax demands under the taxable service category of Mandap Keeper Service, Club and Association service, Renting of Immovable property service and Sale of space for advertisement service is sustainable in law. In the case of Club & Association service, the tax demand has to be recomputed excluding the bar sales subject to the appellant producing satisfactory evidence in this regard.

b) the appellant is liable to pay interest on the above service tax demands in accordance with law.

c) the appellant is liable to penalty under Sections 76 and 77 of the Finance Act, 1994.

d) the appellant is also liable to penalty under Section 78 of the said Finance Act except in the case of Renting of Immovable property service.

e) the demand of service tax under the category of Business Support Services is unsustainable in law and the same is set aside. Consequently, there will be no interest and penal liability on account of this demand.

The Member (Judicial) was in agreement with the confirmation of tax liability for Mandap keeper service, Renting of immovable property and Sale of space. However, he had a different take on the following limited issue of whether the appellant is a charitable organization inasmuch as the Member (Technical) had held that the appellant is a non-charitable organization.

Following are the views of the Member (Judicial) -

Charitable Organization:

+ Both the Finance Act, 1994 and the Income Tax Act, 1961 are Acts framed by the Parliament of India under the scheme of the Constitution of India. ‘Charitable purpose' as defined in Section 2(15) of the Income Tax Act includes education and the advancement of any other object of general public utility (emphasis supplied). The objects of the appellant includes cricket education, study & research, to promote other sports, etc. Advancement of sports and games is definitely in larger public interest.

+ The Finance Act, 1994 or the Service Tax Rules, 1994 do not define either ‘charitable purpose' or ‘charitable organisation'. Further there is no stipulation in the Finance Act, 1994 or the Rules, that definition of other Act(s) or particularly Income Tax Act, 1961 is not applicable. Every term or phrase cannot be defined in every Act. Disregard to the provisions of other Acts, for the terms/phrase(s), where the relevant Act is silent, will lead to anomalous situation. Thus, the recognition of the appellant as a charitable organisation under the Income Tax Act is relevant and applicable for the purposes of Finance Act, 1994. Accordingly, the appellant is a ‘charitable organisation' for the purpose of the levy of Service Tax.

+ Co-ordinate Bench of this Tribunal in the case of Board of Control for Cricket in India (BCCI) vs. Commissioner of Service Tax, - (2007-TIOL-684-CESTAT-MUM) have held that the BCCI is not a commercial concern or an Advertising agency. Credence was placed on the status of BCCI being recognized as a ‘Charitable Institution' under the Income Tax Act, 1961.

+ Thus the demand for Service Tax in respect of membership fees/subscription is set aside.

Penalties: - Out of assessed demand of about 16.5 crores, only about Rs.36 lacs remain payable, pursuant to this order. The appellant is an association run by an elected body the office bearers work on honorary basis and keep changing periodically. Further it is not the case of the Revenue that any receipts, etc. were not found duly accounted for in the books of account, regularly maintained. As regards the major head of demand being receipts from sale of space / advertising, they have appointed contractor by way of bulk sale of right, and the contractors have discharged the Service Tax liability. Further it is noticed that there is no case of contumacious conduct on the part of the appellant, and the dispute(s) had arisen, as a matter of interpretation of the tax provisions. Further the penalty is found to be imposed in a mechanical manner. Thus, the penalty imposed under Section 76, 77 & 78 of the Finance Act, 1994 are set aside.

In view of the difference of opinion, the matter is placed before the President for reference to the Third Member.

In passing: It may be pertinent to note that the amounts received from BCCI by the appellant by way of subsidies were also sought to be subject to Service Tax under the head ‘Business Support Services' but the Member(T) has set aside the same on the ground that the service, if at all any, rendered by the appellant is not in relation to any business or commerce and, therefore, there is no service tax liability on the said activity under section 65 (104c) read with 65(105)(zzzq) of the Finance Act, 1994. It appears from the order that the Member (Judicial) is not averse with this portion of the order. Incidentally, out of the total demand of more than Rs.21 crores, bulk of the demand is under the category of 'Business Support Services' and the amount under other categories is approximately Rs. 1.80crores against which the appellant has already made a pre-deposit of Rs. 1.63 crores.

(See 2013-TIOL-1404-CESTAT-MUM)