2023 (12) TMI 567 - AT - Service Tax

Professional cricketer's IPL contract amounts not subject to service tax as employment-based, not service provision

CESTAT Chennai held that amounts received by a professional cricketer from India Cements Ltd. under IPL playing contract were not subject to service tax ... Levy of Service Tax - Brand Promotional Activities or not - amounts received from M/s.India Cements Ltd. under the IPL Playing Contract entered by the appellant with M/s.ICL as well as the BCCI - HELD THAT:- From the agreement, it can be seen that the appellant is under the control and supervision of the M/s.ICL during the period of agreement. The appellant is restricted from playing cricket match for any other team. So also, it is obligatory for the appellant to inform any medical condition which affects his ability to play. The appellant has to undergo medical examination as required by M/s.ICL. Again, the appellant is under obligation to attend training, coaching etc. These terms of the contract strongly indicate that the contract is in the nature of an employment contract. Though the appellant may be an independent professional player his services are taken up by M/s.ICL for playing IPL under the team ‘Chennai Super Kings’. So also, the remuneration paid to the appellant is fixed. If he is not able to play by reasons stated in the agreement, the appellant is to be compensated and thus is taken care of by M/s.ICL. Even though the appellant takes part in the promotional activities, the remuneration received remains fixed and is not based on the profit earned by M/s.ICL from such advertisements - The appellant is hired to play cricket and has not been hired to do only the promotional activities. The appellant being a professional cricketer, M/s.ICL has hired the appellant to play cricket which is the dominant activity of the contract. Merely because the appellant engages in some promotional activities of the employer, as part of playing cricket by way of wearing the shirt showcasing the logo and name of M/s. ICL etc., it cannot be said that the entire payment is for brand promotional activities. The Tribunal in the appellant’s own case 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] while disposing a batch of cases had perused the agreement and held that it is in the nature of an employment contract - So also, in the case of YUSUFKHAN M PATHAN AND IRFANKHAN PATHAN VERSUS C.C.E. & S.T. -VADODARA-II [2023 (1) TMI 938 - CESTAT AHMEDABAD] the issue was analysed. The Tribunal held that the relationship between the cricket player and the franchisee is that of an employer-employee relationship. The demand of service tax cannot sustain and requires to be set aside. The impugned order is set aside - appeal allowed. Issues Involved:1. Nature of the Contract between the appellant and M/s. India Cements Ltd (M/s. ICL)2. Applicability of Service Tax on amounts received by the appellant under the IPL Playing ContractSummary:1. Nature of the Contract between the appellant and M/s. India Cements Ltd (M/s. ICL):The appellant, a cricketer for the Chennai Super Kings, entered into an agreement with M/s. ICL and BCCI. The agreement included terms that indicated an employer-employee relationship, such as the appellant being under the control and supervision of M/s. ICL, being restricted from playing for other teams, and being required to undergo medical examinations and attend training. The remuneration was fixed and did not vary based on the number of promotional activities or advertisements. The Tribunal held that the contract was in the nature of an employment contract, with the appellant being hired primarily to play cricket, and the promotional activities being ancillary.2. Applicability of Service Tax on amounts received by the appellant under the IPL Playing Contract:The department argued that the amounts received by the appellant were for brand promotion services and thus subject to service tax under Section 65B (44) of the Finance Act, 1994. However, the Tribunal noted that the appellant's main obligation was to play cricket, and the promotional activities were secondary. The fixed remuneration and the control exercised by M/s. ICL over the appellant indicated an employer-employee relationship. Previous decisions in similar cases, such as those involving Yusufkhan Pathan and Irfankhan Pathan, supported this view. Consequently, the Tribunal concluded that the payments were not for brand promotion services but were part of the employment contract, and thus, the demand for service tax could not be sustained.Conclusion:The Tribunal set aside the impugned order demanding service tax, ruling that the contract was an employment contract and the amounts received were not for brand promotion services. The appeal was allowed with consequential relief, if any.