2007 (5) TMI 24 - AT - Service Tax

Statutory cricket body under Section 12 IT Act not a commercial concern; services not taxable as advertising

Board of Control for Cricket in India (BCCI) Versus Commissioner of Service Tax, Mumbai

CESTAT, MUMBAI held that the appellant (a statutory cricket body exempt under s.12 of the IT Act) is not a 'commercial concern' and therefore does not ... Demand of service tax - Board of Cricket Control in India - Advertising Agency Or Not - statutory definition of advertising agency, as contained in section 65(2) of Finance Act, 1994 - Government body for control of cricket in India - exempted from payment of income- tax under section 12 - HELD THAT:- Advertising agency is the one which is a commercial concern' engaged in the various activities of the advertising. As already observed, the expression - commercial concern - does not stand defined in the act and as such, support can be derived from the above decision. The Hon'ble Supreme Court in case of Secretary, Ministry of Information & Broadcasting v. Cricket Association of Bengal [1995 (2) TMI 406 - SUPREME COURT] having held the same organization i.e. BCCI though, in a different context, being not a commercial concern, adopting of said finding from the above decision and applying the same to the definition of advertising agency would lead us to hold that BCCI is not a commercial concern. Having held that it has to be concluded that they do not fall under the definition of advertising agency and hence, any service provided by them would not be covered by the Service Tax in the area of advertisement. Further, the fact that it has been also lend to be charitable institution in terms of Income-tax Act, would also lend support to the appellants plea that the same is not an advertising agency. We have observed in the preceding paragraphs that BCCI cannot be held to be a commercial concern, the same would not be covered by definition of advertising agency. If that be so, any service provided by them would not be termed as a taxable service covered under the net of advertisement and on the short grounds itself, the appellant's liability to pay service tax on the activities undertaken by them cannot be upheld. Our above view also gets support from the fact that another head of 'sale of space or time for advertisement and sponsorship services' stands created for the purposes of service tax w.e.f. 1-5-2006. However, the taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. As such, we find that a subsequent entry having been enacted covering the activity without any change of the existing entry, has to be interpreted as if the earlier existing entry did not cover the subsequently created entry. If the subsequent entry was covered by the earlier entry, there was no reason or scope to create the present entry especially when the rate of tax in respect of both the entries remains unchanged. Certainly, creation of new entries was not by way of bifurcation of the earlier entry inasmuch as the earlier entry relating to advertisement remains unchanged without any change in the tax rate. As such, the introduction of new tariff entry do imply that the coverage in the new tariff for the purposes of tax was an area not covered by the earlier entry. It was so held in case of Glaxo Smithkline Pharmaceuticals Ltd v. CCE [2005 (7) TMI 25 - CESTAT, MUMBAI] as also in case of ZEE Telefilms Ltd. [2006 (2) TMI 50 - CESTAT, MUMBAI]. If it is held that the activity of sponsorship and sale of space were covered under the earlier heading of advertising agency, the same would lead to the redundancy of new legislation and would defeat the legislative intent. Thus, we set aside the orders of the authorities below, confirming the demand of service tax and imposition of penalty upon the appellant. We make it clear inasmuch as we have allowed the appeal on merits, the plea of limitation being raised by the appellant is not being adverted to. As a consequence of allowing appellant's appeal, the appeal filed by Revenue against the order of Commissioner dropping such demand has to be rejected. We order accordingly. Issues Involved:1. Whether the Board of Cricket Control in India (BCCI) qualifies as an 'advertising agency' under the Finance Act, 1994.2. Whether the activities of selling telecast rights, permitting advertisement space in stadiums, and allowing logos on players' clothing are taxable services under the category of advertising services.3. Interpretation of the term 'commercial concern' in the context of service tax liability.4. Applicability of service tax on the sale of television rights and sponsorship money.Issue-wise Detailed Analysis:1. Whether BCCI qualifies as an 'advertising agency' under the Finance Act, 1994:The appellant contended that BCCI does not satisfy the statutory definition of an advertising agency under Section 65(2) of the Finance Act, 1994, as it is a charitable institution focused on promoting cricket and not a commercial concern. The Supreme Court in the case of Secretary, Ministry of Information & Broadcasting v. Cricket Association of Bengal held that BCCI is not a commercial organization. Consequently, BCCI, being a charitable institution, cannot be classified as an advertising agency. The Tribunal concluded that BCCI is not a commercial concern and thus does not fall under the definition of an advertising agency. Therefore, services provided by BCCI would not be taxable under the category of advertising services.2. Whether the activities of selling telecast rights, permitting advertisement space in stadiums, and allowing logos on players' clothing are taxable services under the category of advertising services:The Tribunal examined the scope of individual services provided by BCCI. Selling telecast rights to broadcasters does not involve any advertisement or service rendered by BCCI to the broadcasters. The sale of performance rights does not constitute a service in relation to advertisement. Regarding sponsorship and logo money, BCCI does not engage in conceptualizing, designing, or preparing advertising material. Providing space for advertisements without involvement in the creation of the advertisement does not qualify as an advertising service. The Tribunal cited previous decisions and circulars clarifying that mere provision of space does not constitute an advertising service.3. Interpretation of the term 'commercial concern' in the context of service tax liability:The term 'commercial concern' is not defined in the Act. The Supreme Court's decision in the Cricket Association of Bengal case was used to interpret the term, concluding that BCCI is not a commercial concern. This interpretation was pivotal in determining that BCCI does not qualify as an advertising agency and, therefore, its activities are not subject to service tax under the category of advertising services.4. Applicability of service tax on the sale of television rights and sponsorship money:The Tribunal found that selling television rights does not involve providing any service in relation to advertisement. The contractual obligations between BCCI and broadcasters do not transform the sale of telecast rights into an advertising service. Similarly, sponsorship and logo money do not involve BCCI in the creation or preparation of advertisements. The Tribunal noted that a new service tax entry for 'sale of space or time for advertisement and sponsorship services' was introduced on 1-5-2006, which excluded sports sponsorship, indicating that earlier entries did not cover these activities. This further supported the conclusion that BCCI's activities were not taxable under the advertising services category.Conclusion:The Tribunal set aside the orders confirming the demand of service tax and penalties on BCCI, holding that BCCI is not an advertising agency and its activities do not constitute taxable services under the category of advertising services. The appeal by the Revenue was also rejected, affirming that BCCI's activities are not subject to service tax under the disputed provisions.