2025 (8) TMI 715 - AT - Service Tax

Fees for Playing Cricket Not Taxable Under Business Auxiliary Services Without Clear Contract Separation

Mithun Abhimanyu Gurjal Versus The Commissioner of Central Excise, Bangalore

Mithun Abhimanyu Gurjal Versus The Commissioner of Central Excise, Bangalore - TMI 1. ISSUES PRESENTED and CONSIDERED Whether the fees received by a cricket player from a franchisee for playing in Indian Premier League (IPL) matches constitute taxable services under the category of 'Business Auxiliary Services' (BAS) for service tax purposes. Whether the display of brand names/logos of sponsors on the player's clothing and the player's role as a brand ambassador/promoter attract liability to service tax under BAS. Whether the contractual terms and nature of payments made to the player reflect a composite service including promotional activities or solely remuneration for playing cricket. Whether existing precedents and legal principles support the classification of payments to players as BAS or exclude them from such categorization. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Taxability of fees received by a cricket player under 'Business Auxiliary Services' Relevant legal framework and precedents: The category of 'Business Auxiliary Services' under service tax law covers services that support or facilitate business activities, including promotion, marketing, or sale of goods or services. The Tribunal's earlier decisions in cases involving cricket players (Devraj Patil, Bharat Chipli, Anil Kumble, Sourav Ganguly, Swapnil Asnodkar, B. Akhil) have addressed whether payments to players for participation in IPL matches attract service tax under BAS. Court's interpretation and reasoning: The Tribunal examined the nature of the contractual relationship and payments. The player's remuneration, termed 'player fee,' is explicitly for playing cricket, as evidenced by contract clauses reducing fees if the player is unavailable. This indicates the payment is consideration solely for participation in sport, not for promotional or marketing services. Key evidence and findings: The contract between the player and franchisee does not impose any obligation on the player to render marketing or promotional services. The player's role as a promoter or brand ambassador is not contractually recognized as a service rendered to the franchisee. The player's fees are distinct from any brand promotion activities. Application of law to facts: The Tribunal applied the principle that composite contracts involving both taxable and non-taxable components require clear segregation to levy service tax. Absent any machinery or method to apportion the value attributable to promotional services, the entire fee cannot be taxed under BAS. The player's remuneration for playing cricket is not a taxable service under BAS. Treatment of competing arguments: The Revenue argued that the display of brand names on players' clothes and their role as brand ambassadors constitute taxable BAS. However, the Tribunal rejected this, relying on prior rulings that distinguished between payments for playing and payments for brand promotion. The Tribunal noted that franchisees have separate agreements with corporate sponsors, and players cannot be doubly taxed for promotional services. Conclusions: The Tribunal concluded that fees paid to players for playing cricket in IPL matches do not fall under 'Business Auxiliary Services' and are not liable to service tax under this category. Issue 2: Liability for service tax due to brand promotion by players Relevant legal framework and precedents: Service tax liability arises if a player renders services as a brand ambassador promoting goods or services of a third party. The classification of such services is distinct from BAS and falls under 'Brand Ambassador' services, which require separate registration and tax compliance. Court's interpretation and reasoning: The Tribunal referred to the appellant's submission and prior case law (notably Sourav Ganguly's case) where it was clarified that players who act as brand ambassadors for goods/services must register and pay service tax under the 'Brand Ambassador' category. However, in IPL contexts, players do not have direct agreements with sponsors; such agreements are held by franchisees. Key evidence and findings: The appellant had obtained service tax registration under the 'Brand Ambassador' category for any such services rendered outside the IPL franchise context. No evidence was found that the player received separate consideration for brand promotion from the franchise or sponsors. Application of law to facts: Since the player's contract with the franchisee does not include brand promotion services and the player's remuneration is solely for playing, the display of brand logos on clothing does not automatically render the player liable to service tax under BAS. The franchisee's agreements with sponsors cover promotional activities, and the player's role is incidental. Treatment of competing arguments: The Revenue's contention that brand display equates to BAS was countered by the Tribunal's reliance on the principle against double taxation and the absence of contractual promotional obligations on players. Conclusions: The Tribunal held that brand promotion by players under IPL contracts does not attract service tax under BAS, and any brand ambassador services must be separately registered and taxed if applicable. Issue 3: Interpretation of composite contracts and taxability Relevant legal framework and precedents: The law requires clear identification and valuation of taxable components in composite contracts. If no method exists to segregate taxable and non-taxable services, the entire contract cannot be taxed. This principle was reiterated in the Tribunal's decisions and is a settled legal norm. Court's interpretation and reasoning: The Tribunal found that the player's contract is a composite contract for playing cricket, with no separate valuation or consideration for promotional services. The absence of machinery to exclude non-taxable services from the composite fee renders the levy of service tax invalid. Key evidence and findings: Contract clauses reducing player fees if unavailable for matches confirm that the fee is linked solely to playing services. No documentary evidence was produced to show separate payments for promotion or marketing. Application of law to facts: The Tribunal applied the principle that vagueness or absence of apportionment in composite contracts makes the service tax levy unsustainable. Treatment of competing arguments: The Revenue's assumption that the fee was composite and fully taxable was rejected due to lack of evidentiary support and legal precedent. Conclusions: The Tribunal concluded that the demand for service tax on the entire player fee under BAS is unsustainable and set aside the impugned order.