Appeal allowed: Brand endorsement fees fall under section 65(105)(zzzzq) and not BAS taxable before 1 July 2010

CESTAT KOLKATA - AT allowed the appeal and set aside the Commissioner's order. Brand endorsement fees were held classifiable under the newly inserted service (sec. 65(105)(zzzzq)) and not taxable under BAS prior to 1 July 2010. Demands for anchoring and writing articles were not maintainable as they were not alleged in the SCN. Fees for playing cricket/composite receipts were not wholly leviable under BAS. The extended limitation and penalty were not properly recorded and could not be invoked. The appellant is entitled to interest at 10% p.a. on Rs. 1,51,66,500 and Rs. 50,00,000 from deposit until transfer to the HC Registrar; appeal allowed.

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Issues Involved:
1. Classification of "Brand Endorsement" fees under Business Auxiliary Service (BAS) or section 65(105)(zzzzq) of the Finance Act.
2. Taxability of fees received for anchoring TV shows under BAS.
3. Taxability of fees received for writing articles under BAS.
4. Classification of remuneration received from IPL franchisee under Business Support Service (BSS).
5. Applicability of the extended period of limitation under section 73(1) of the Finance Act.
6. Entitlement to interest on the amount deposited by the appellant.

Detailed Analysis:

First Issue: Classification of "Brand Endorsement" Fees
The appellant argued that brand endorsement services were made taxable only from July 1, 2010, under section 65(105)(zzzzq) of the Finance Act, and thus, no demand could be made for the period before this date under BAS. The Tribunal accepted this argument, noting that the activities performed by the appellant, such as acting as a brand ambassador and promoting brands, were indeed taxable only from July 1, 2010, under the new provision. The Tribunal referred to the Bombay High Court's decision in Indian National Shipowners’ Association and the Tribunal's decision in Shriya Saran, which clarified that the introduction of a new taxable service presupposes that the service was not covered under any earlier entry.

Second Issue: Taxability of Fees for Anchoring TV Shows
The Commissioner had held that anchoring TV shows was a promotional activity taxable under BAS. However, the Tribunal found that the show cause notice did not contain any allegations regarding this aspect. Citing the Supreme Court's decision in Precision Rubber Industries, the Tribunal concluded that the demand could not be confirmed as it was beyond the scope of the show cause notice.

Third Issue: Taxability of Fees for Writing Articles
Similarly, the Commissioner had confirmed the demand for fees received for writing articles under BAS. The Tribunal found that the show cause notice did not mention this aspect, and thus, the demand could not be confirmed for the same reasons as in the second issue.

Fourth Issue: Classification of Remuneration from IPL Franchisee
The show cause notice alleged that the appellant received remuneration from the IPL franchisee (KKR) for promotional activities in addition to playing cricket, classifiable under BSS. The Tribunal noted that the appellant had categorically stated that the amount received was only for playing cricket. Even otherwise, the Tribunal found that the service would be taxable under section 65(105)(zzzzq) from July 1, 2010, and not under BAS or BSS before this date. The Tribunal also rejected the Commissioner's reliance on the CBEC Instructions dated July 26, 2010, which assumed the amount received was a composite fee.

Fifth Issue: Applicability of the Extended Period of Limitation
The show cause notice invoked the extended period of limitation under the proviso to section 73(1) of the Finance Act, alleging suppression of facts. The Tribunal found that the show cause notice merely reproduced statutory language without providing specific factual details. The Tribunal referred to several Supreme Court decisions, including Pushpam Pharmaceutical Co., Anand Nishikawa Company Ltd., and Uniworth Textile Limited, which held that suppression of facts must be deliberate and with intent to evade payment of duty. The Tribunal concluded that the extended period of limitation could not be invoked in this case.

Sixth Issue: Entitlement to Interest on Deposited Amount
The appellant claimed interest on the amount deposited with the Government from the date of deposit until the date it was transferred to the Registrar General of the Calcutta High Court. The Tribunal noted that the appellant had deposited the amount in compliance with an interim order of the Calcutta High Court and that the High Court had directed the amount to be refunded with interest. Since the appeal was allowed and the demand set aside, the Tribunal held that the appellant was entitled to interest on the deposited amount from the date of deposit to the date of transfer to the Registrar General.

Conclusion:
The Tribunal set aside the impugned order dated November 12, 2012, passed by the Commissioner and allowed the appeal. The appellant was also entitled to interest on the deposited amounts at the rate of ten percent per annum from the date of deposit until the date of transfer to the Registrar General of the Calcutta High Court.

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