IPL franchise wins service tax appeal - Central Rights Income and foreign player payments ruled non-taxable

CESTAT Mumbai-AT allowed the appellant's appeal in a service tax case involving IPL franchise operations. The Tribunal held that Central Rights Income from franchise agreements cannot be taxed as Business Support Services since joint venture partners lack contractual service relationships. Payments to foreign players for cricket were ruled non-taxable as playing cricket is the primary activity with promotional activities being ancillary. Service tax demands on reimbursable expenses to foreign entities were rejected due to absence of legal provisions during the disputed period (2008-2012). CENVAT credit reversal demands were unsustainable as legal requirements for such reversals were introduced only in 2016. Coaching services were specifically excluded from service tax liability. Total demands of approximately Rs. 22 crores were set aside.

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Issues Involved:
1. Taxability of Central Rights Income.
2. Taxability of 10% payments to foreign players under Reverse Charge Mechanism (RCM).
3. Taxability of payments to EM Sporting Holdings Limited for management consultancy services under RCM.
4. Taxability of costs incurred in marketing and PR activities outside India under RCM.
5. Reversal of common CENVAT Credit.
6. Taxability of 90% payments to foreign players under RCM.
7. Taxability of 100% payments to foreign coaches and support staff under RCM.

Summary:

1. Taxability of Central Rights Income:
The Tribunal referenced the case of *KPH Dream Cricket Pvt. Ltd. vs. CCE & ST, Chandigarh-I*, concluding that the Central Rights Income from the franchise agreement cannot be considered as provision of any service between the parties. The demand of Rs.19,15,11,610/- was set aside as there is no contractor-contractee or principal-client relationship in a joint venture agreement.

2. Taxability of 10% payments to foreign players under RCM:
The Tribunal found that the players were engaged primarily to play cricket, and the promotional activities were ancillary. Referring to *Sourav Ganguly vs. Commissioner of Service Tax, Kolkata*, the Tribunal held that the confirmation of demand for Rs.47,91,703/- for promotional activities under RCM is not sustainable.

3. Taxability of payments to EM Sporting Holdings Limited for management consultancy services under RCM:
The Tribunal referenced *Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd.*, noting that reimbursable expenses prior to the amendment of Section 67 effective from 14.05.2015 cannot be taxed. Thus, the demand of Rs.90,86,726/- was set aside.

4. Taxability of costs incurred in marketing and PR activities outside India under RCM:
Referring to *KPH Dream Cricket Pvt. Ltd. vs. CCE & ST, Chandigarh-I*, the Tribunal held that expenses for promoting cricket in India through IPL tournaments cannot be treated as Business Support Services. The demand of Rs.22,48,336/- was deemed unsustainable.

5. Reversal of common CENVAT Credit:
The Tribunal, citing *L Balaji and Others vs. CCE & ST, Chennai* and *KPH Dream Cricket Pvt. Ltd.*, held that no CENVAT credit reversal is required for revenue from stadium gate receipts and prize money. The demand of Rs.2,18,58,230/- was set aside.

6. Taxability of 90% payments to foreign players under RCM:
The Tribunal upheld the Principal Commissioner's decision, referencing *KPH Dream Cricket Pvt. Ltd.*, that players' fees for playing cricket are not taxable under RCM. The Revenue's appeal to tax 90% of the payments was dismissed.

7. Taxability of 100% payments to foreign coaches and support staff under RCM:
The Tribunal agreed with the Principal Commissioner that coaching services are distinct and exempt from service tax under the definition of 'commercial training or coaching centre.' The demand for service tax on coaching fees was not sustainable, and the Revenue's appeal was dismissed.

Conclusion:
The Tribunal set aside the Principal Commissioner's order confirming the adjudged demands on the appellants-assessee and dismissed the Revenue's appeal, deeming it lacking in merits. Both appeals were disposed of accordingly.

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