2023 (1) TMI 938 - AT - Service Tax

Team apparel sponsorship displays and athlete promotional appearances-whether they are 'Business Support Service'; service tax demand set aside

Service tax demand on professional sportspersons was examined on whether wearing team apparel bearing sponsors' marks and attending promotional/public ... Levy of service tax - Business Support Service or not - Cirket Player - service tax levied under this head on the ground that Appellant wear the team clothing which bears the brands/ marks of various sponsors and they are also required to participate in promotional /public events of the franchisee thus they are providing Business Support Service - existence of employer – employee relationship or not - HELD THAT:- Though in the impugned order the appellants were made liable to pay service tax under the business support service but as, no specific entry as mention in the definition of “Business Support service” has been shown to be applicable to levy service tax. It is not appearing from the finding of the impugned order as how the activity of appellant covered under the above category of services. The apparel that they had to wear was team clothing, which bears the brand/marks of various sponsors. The Appellants was not providing any service as an independent individual. It cannot be said that the appellants was rendering any services which could be classified as business support services. Appellants are not promoting any particular brand or product or service and also not taking part in any business activity of promoting the sale of any product or service of any entity. The entry for “Business Support Service” envisages taxing activities which are needed for doing business activities almost in the nature of outsourcing of activities connected with business. The definition of “Business Support Service” does not specifically cover the activity done by Appellant. Further, on perusal of the agreement title “Indian Premiere League Playing Contract” it clearly emerges that it is the appellant who is recognized as player first. Clause -2 of this agreement even makes it all the more clear that the franchisee is engaging players as professional cricketer who shall be employed by the franchisee. From this, it is abundantly clear that a person who has earned the reputation and recognition as a player is employed by the franchisee and it is not the other way round - the employer – employee relationship cannot be disputed and therefore the decisions relied upon by the Learned Counsel are squarely applicable to the present case. Reliance can be placed in the case of CCE & ST, CHENNAI VERSUS L. BALAJI, S. BADRINATH, DINESH KARTHICK, MURALI VIJAY, VIDYUT SIVARAMAKRISHNAN, ANIRUDA SRIKKANTH, SURESH KUMAR, YO MAHESH, HEMANG BADANI, ASHWIN R,C. GANAPATHY, ARUN KARTHIK KB, KAUSHIK GANDHI, PALANI AMARNATH C, ABHINAV MUKUND (VICE-VERSA) [2019 (5) TMI 377 - CESTAT CHENNAI] where it was held that A set of services alleged to be falling under BSS by the Revenue is also held to be covered under another set of services namely Brand Promotion Services. Admittedly, the brand promotion service was introduced w.e.f. 01.07.2010 and as observed as having been argued by the Ld. DR in paragraph-6 above of this order, cannot be made use to fit into another service ie., the categorization of the same set of activities under two different services for two different periods is not permissible. Having taxed under BSS, the Revenue should not have changed its stands for a different period when there is no change in the nature of services alleged. Reliance also placed in the case of C.E,C & CGT-DELHI VERSUS PIYUSH CHAWLA [2018 (7) TMI 1009 - CESTAT NEW DELHI] where it was held that It is settled legal position that services provided by an employee, for the activities undertaken by the employer, for and under the instruction of the employer, cannot be termed as service provided by the employee. Reliance also placed in the case of SHRI KARN SHARMA VERSUS COMMISSIONER OF CENTRAL EXCISE & S.T., MEERUT-L [2018 (4) TMI 111 - CESTAT ALLAHABAD] where it was held that Hon’ble Calcutta High Court in the case of Shri Sourav Ganguly Vs Union of India and Others [2016 (7) TMI 237 - CALCUTTA HIGH COURT] has dealt with an identical issue and held that It was not the intention of the legislature that any and every kind of activity which can loosely be termed as ‘Business’ would attract service tax. It being a taxing provision, the same must be construed strictly and any benefit of doubt in the matter of interpretation of the provision must go in favor of the assessee. Thus, the Appellants are not liable to service tax under the Business Support Service - the demands of service tax are not sustainable against the appellants - appeal allowed. Issues Involved:1. Classification of services provided by appellants under 'Business Support Service.'2. Determination of employer-employee relationship.3. Applicability of service tax on fees received by appellants.4. Interpretation of contractual obligations and promotional activities.Issue-wise Detailed Analysis:1. Classification of Services Provided by Appellants under 'Business Support Service':The core issue was whether the activities carried out by the appellants could be classified as taxable services under 'Business Support Service' (BSS). The appellants were international cricket players contracted to play for IPL teams, and the fees paid to them were deemed liable to service tax under BSS. The adjudicating authority and the Commissioner (Appeals) upheld this view, asserting that the players' activities, such as wearing team clothing with sponsor logos and participating in promotional events, constituted BSS. However, the Tribunal found that the definition of BSS did not specifically cover the activities performed by the appellants. The Tribunal noted that the appellants were not providing any service as independent individuals and were not promoting any particular brand, product, or service. Therefore, it concluded that the activities did not fall under BSS.2. Determination of Employer-Employee Relationship:The appellants argued that their contracts with the franchisees established an employer-employee relationship, making them employees rather than independent service providers. The Tribunal examined the contractual clauses and found that the agreements indeed created an employer-employee relationship. The contracts explicitly stated that the franchisees engaged the players as professional cricketers, and the players were under the full control of the franchisees. The Tribunal referenced several precedents where similar agreements were interpreted to establish an employer-employee relationship, thus exempting the players from service tax liabilities.3. Applicability of Service Tax on Fees Received by Appellants:The Tribunal addressed whether the fees received by the appellants for playing cricket and participating in promotional activities were subject to service tax. The Tribunal found that the primary purpose of the contracts was for the players to play cricket, with promotional activities being ancillary. It emphasized that the appellants were employed to play cricket, and the promotional activities were incidental to their main role. The Tribunal cited numerous cases where it was held that no service tax was leviable on player fees received for participating in IPL, as the promotional events were merely incidental.4. Interpretation of Contractual Obligations and Promotional Activities:The Tribunal scrutinized the contractual obligations of the appellants, particularly the clauses related to wearing team clothing and participating in promotional events. It found that these obligations were part of the employment agreement and did not constitute independent promotional activities. The Tribunal noted that the right to use the players' identities for promotional purposes was granted to the franchisees, but this did not imply individual endorsement by the players. The Tribunal concluded that the primary activity was playing cricket, and the promotional activities were ancillary, reinforcing the employer-employee relationship.Conclusion:The Tribunal concluded that the demands for service tax under 'Business Support Service' were not sustainable. It held that the appellants were in an employer-employee relationship with the franchisees and were not independent service providers. Consequently, the fees received by the appellants were not subject to service tax under BSS. The Tribunal set aside the demands confirmed by the adjudicating authority and allowed the appeals filed by the appellants, providing consequential relief as per law.