2024 (8) TMI 791 - AT - Service Tax

Cricket players wearing team logos during matches not liable for service tax under employment arrangement

CESTAT Chandigarh allowed the appeal regarding service tax liability on endorsement services and reality show participation. The Tribunal held that ... Non-payment of service tax - Business Support Service - Service tax liability on the appellant on endorsement services and participation in a reality show - principal and agent relationship. Non-payment of service tax - Business Support Service - remuneration received for a reality show - HELD THAT:- As far as the activity of the appellant in respect of playing in the IPL is concerned, the Tribunal has consistently held that the players showing Logos, Mascots, Insignia, Labels etc. of business houses as part of their attire are not promoting any business of the said companies. They are simply playing cricket and are wearing the attire as per the conditions described by the franchisers. Tribunal held the same in the case of SOURAV GANGULY VERSUS COMMISSIONER OF SERVICE TAX, KOLKATA (NOW COMMISSIONER OF CENTRAL GOODS & SERVICE TAX & CENTRAL EXCISE, KOLKATA SOUTH) [2020 (12) TMI 534 - CESTAT KOLKATA] and the same has been consistently followed by the Tribunal in PINAL ROHIT SHAH VERSUS C.C.E. & S.T. -VADODARA-II [2023 (6) TMI 956 - CESTAT AHMEDABAD] and RAHUL DRAVID VERSUS COMMISSIONER OF SERVICE TAX [2012 (12) TMI 114 - CESTAT, BANGALORE] where it was held that 'In the identical agreements, in respect of other players engaged by different teams, in all those cased, this Tribunal relying on the High Court in the case of SOURAV GANGULY VERSUS UNION OF INDIA & OTHERS [2016 (7) TMI 237 - CALCUTTA HIGH COURT] held that arrangement between the owner Company and the cricket player is of employment hence, players are not directly involved in brand promotion of a brand owner. Therefore, the activity of the cricket player does not fall under the category of Business Auxiliary Services.' Revenue argues that there is no principal and agent relationship between the appellant and M/s Rhiti as there is no agreement between them; therefore, the service tax paid by M/s Rhiti cannot obviate liability of the appellant. We find that the argument is not acceptable for two reasons. One being that there is no requirement of a formal agreement between the appellant and M/s Rhiti; the way things are arranged in course of the business indicate the nature of the principal and agent; it is not the Department’s case that M/s Rhiti were the go between M/s INX and the appellant; therefore, it cannot be said that there is no principal and agent relationship. The second reason being, assuming that there is no such relation, the appellant did not receive any remuneration from M/s INX and therefore, they are not liable to pay any service tax; therefore, the only logical conclusion is that the appellant acted through his agent, who on receipt of consideration from M/s INX has paid the requisite service tax. Understandably, on the same transaction, the appellants are not liable to pay service tax again. The appeal is allowed. Issues: Liability of service tax on consideration received for playing in IPL, liability of service tax on endorsement services, liability of service tax on remuneration for a reality show.Analysis:Issue 1: Liability of service tax on consideration received for playing in IPLThe appellant contested the service tax liability on consideration received from various entities for rendering services during IPL matches. The appellant argued that previous Tribunal decisions, such as the case of Sourav Ganguly, have established that players displaying logos and labels are not promoting the businesses of the companies but are merely complying with franchise requirements. The Tribunal cited multiple cases where this principle was upheld, emphasizing that the players' activities during matches do not constitute taxable services. Therefore, the Tribunal ruled in favor of the appellant on this issue.Issue 2: Liability of service tax on endorsement servicesRegarding the alleged endorsement services provided to M/s Ranbaxy Laboratories, the appellant's counsel argued that the service of brand promotion as part of 'Business Auxiliary Service' was introduced only from July 1, 2010. The appellant relied on legal precedents, including the case of Sourav Ganguly, to support the argument that services cannot be taxed under a different category before the specific service is notified. The Tribunal considered these arguments and found that the impugned order did not establish the liability of the appellant for service tax on endorsement services. The Tribunal ruled in favor of the appellant on this issue as well.Issue 3: Liability of service tax on remuneration for a reality showThe appellant was also accused of not paying service tax on remuneration received for participating in a reality show. The appellant's counsel contended that M/s Rhiti, acting as the appellant's agent, had already paid the applicable service tax on the consideration received from M/s INX Media. The appellant argued that since the agent had discharged the service tax liability, the appellant should not be held liable again. The Tribunal examined the facts and concluded that the appellant, through the agent, had fulfilled the service tax obligation, and therefore, the appellant was not liable to pay service tax on the same transaction. Citing the case of Katrina R. Turcotte, the Tribunal ruled in favor of the appellant on this issue as well.In conclusion, the Tribunal allowed the appeal, finding in favor of the appellant on all the issues raised. The impugned order was deemed unsustainable based on the arguments presented and the legal precedents cited. The appellant was granted consequential relief as per the law.