2012 (7) TMI 504 - AT - Service Tax

Franchisees of BCCI-IPL T-20 Cricket Tournament liable for service tax on various activities

The Tribunal held that the franchisees of BCCI-IPL T-20 Cricket Tournament were liable for service tax on various activities and payments, including ... Revenue sharing arrangements not constituting taxable service - Business Support Services - classification as Business Auxiliary Service - liability as recipient of services under Section 66A - reversal of Cenvat credit under Rule 6 - pre-deposit for admission of appeal and grant of stayRevenue sharing arrangements not constituting taxable service - Business Support Services - Whether payments made by BCCI IPL to the appellant under the central revenue sharing arrangement amount to consideration for taxable business support services. - HELD THAT: - The Tribunal found prima facie that the payments received by the appellants are in essence a share of central receipts (media rights and other income) under a joint business venture and not payments for services rendered to BCCI IPL. Relying on the principle applied in the Board's Circular concerning revenue sharing arrangements between distributors and theatre owners, the Tribunal held that neither party prima facie provides a taxable service to the other in this revenue sharing context and therefore there is no case for calling for a pre deposit on this head at admission. [Paras 10]Payments under the revenue sharing arrangement are prima facie not taxable as business support services; no pre deposit required on this account for admission.Liability as recipient of services under Section 66A - classification as Business Auxiliary Service - Whether payments made to foreign players (and related agency commissions) are entirely consideration for taxable services, attracting liability on the appellants as recipients under Section 66A. - HELD THAT: - The Tribunal treated the question as arguable and observed that it is doubtful that the entire player fee represents taxable consideration. On the material before it, the Tribunal accepted the appellants' contention that only a portion (about 10%) of the player fees relates to business promotion/services, while the balance represents remuneration for playing and other non taxable elements. For the agency commission paid in Sri Lanka, classification as an input/business auxiliary service depends on whether players' services constitute input service to the appellant; this was held to be arguable. On the prima facie view the Tribunal called for limited pre deposits to cover the contested liability while permitting final adjudication on merits. [Paras 11, 12]Prima facie only about 10% of player payments is taxable as business promotion; limited pre deposits ordered (for player payments and the foreign agency commission) pending final adjudication.Classification as Business Auxiliary Service - Whether commission/brokerage paid to a foreign agency for contracting foreign players is taxable as a business auxiliary service and liable to service tax in appellants' hands. - HELD THAT: - The Tribunal observed that classification of the foreign agency commission as a taxable business auxiliary service requires a preliminary conclusion that the players' services are input services to the appellant, which is an arguable question. On the prima facie view the Tribunal considered only a small portion of the disputed amount warranted immediate security and directed a modest pre deposit in respect of this head. [Paras 11]Prima facie case is arguable; a limited pre deposit is to be made in respect of the foreign agency commission.Reversal of Cenvat credit under Rule 6 - Whether cenvat credit taken on input services used partly for organizing exempted activities (gate collections/match organization) must be reversed under Rule 6. - HELD THAT: - The Tribunal accepted the Revenue's prima facie position that organizing matches (partly funded by gate receipts) is an exempted activity and costs recovered through gate collections are not taxable; consequently, input service credits attributable to such exempted activities are not allowable and must be reversed under the Cenvat Credit Rules. On this basis the Tribunal found a prima facie case for recovery and directed a substantial pre deposit in respect of the reversal demand. [Paras 13]Revenue has a prima facie case for reversal of cenvat credit attributable to exempted match organizing activity; pre deposit directed.Final Conclusion: On an overall prima facie appraisal the Tribunal directed a consolidated pre deposit for admission of the appeal, allowed the balance of the duty to be waived for admission and granted stay on collection during pendency, the pre deposit to be made as ordered by the Tribunal. Issues:Service tax liability on business support services provided to BCCI-IPL, service tax on payments to foreign players, service tax on commission paid to agency, reversal of Cenvat credit for exempted services.Analysis:1. The appellants, franchisees of BCCI-IPL T-20 Cricket Tournament, were held liable for service tax on various activities and payments as per the agreement between the parties. The confirmed liabilities included service tax on business support services, payments to foreign players, commission paid to an agency, and reversal of Cenvat credit for exempted services.2. The Counsel argued that the demand for service tax on business support services was not maintainable as the activity was based on a profit-sharing agreement with no services provided to BCCI-IPL directly. The payments were considered as the appellants' share of receipts received centrally by BCCI.3. Regarding service tax on payments to foreign players, the Counsel contended that the payments were for playing cricket and not for services to the appellants. The adjudication order's argument that the entire payment should be liable to service tax was challenged based on the agreement clause indicating only 10% of the player fee for business promotion.4. The issue of commission paid to the agency in Sri Lanka for entering into contracts with foreign players was briefly discussed due to the small amount involved, with no detailed argument presented.5. The Counsel disputed the service tax liability on gate receipts received from selling tickets for matches, arguing that it did not qualify as payment for services. Therefore, taking Cenvat credit on input services for organizing matches did not necessitate the reversal of credit under Rule 6(3)(i) of the Cenvat Credit Rules.6. The Revenue contended that the activities organized by the appellants were for business promotion, making them liable for service tax. The services provided, such as recruiting players and staging matches, were seen as promoting the business of BCCI, irrespective of the appellants' current profit status.7. The Tribunal opined that not every payment made by BCCI-IPL to the appellants was for services rendered, as the parties were engaged in a joint business venture. Referring to a relevant circular, it was clarified that such revenue-sharing arrangements did not involve one party providing services to the other.8. The Tribunal found that a pre-deposit was necessary for certain items, such as payments to foreign players and commission paid to the agency, but waived the balance of duties for admission of appeal with a stay on collection during the appeal's pendency.In conclusion, the Tribunal required a pre-deposit for specific items, considering the arguments presented by both sides and the applicable legal provisions.