2026 (1) TMI 513 - AT - Service Tax

IPL player match participation, team apparel and broadcast rights payments held not 'Business Support Service'; service tax demand set aside.

The dominant issue was whether consideration received by a professional cricketer from an IPL franchise for participating in league matches, while wearing ... Promotion or marketing of brand/logo/mark involving taxable services or not - activity of playing cricket by the appellant in the IPL league matches, wherein the appellant was obliged to wear the team clothing as supplied by the IPL franchise i.e., the Knight Riders, allowing them to photograph himself, film, televise etc - HELD THAT:- In the case of Commissioner of Central Excise, Customs & CGST, Delhi-III Vs. Piyush Chawla [2018 (7) TMI 1388 - CESTAT NEW DELHI], the Tribunal by relying on various case laws, held that remuneration received by the respondent cricket player from the IPL franchisee M/s KPH Dream Cricket Pvt. Ltd. is not liable to service tax levy under BSS. In another case of Sourav Ganguly v. Union of India & Ors.[2016 (7) TMI 237 - CALCUTTA HIGH COURT], the Hon'ble Calcutta High Court while deciding the issues in favour of cricketer have observed that the Petitioner therein entered into an agreement with the franchisee under which he was obliged to participate in promotional activities apart from playing cricket for their franchisee and the department sought to tax the consideration received by the Petitioner from their franchisee under 'Business Support Service'. The Hon'ble High Court of Calcutta held that the Petitioner was engaged as a professional cricketer for which the franchisee was to provide fee to the petitioner. He was under full control of the franchisee and had to act in the manner instructed by the franchisee. The Hon'ble High Court further held that the Petitioner therein was not providing any service as an independent individual worker and his status was that of an employee. Therefore it cannot be said that the Petitioner was rendering any service which could be classified as Business Support Service. The impugned order dated 31.10.2016 passed by the learned Commissioner (Appeals) does not stand the legal scrutiny - the impugned order is set aside - Appeal allowed. Issues: (i) Whether remuneration paid to a professional cricketer for playing in IPL matches and related obligations to wear team clothing, allow photography/telecast and similar activities amounts to a taxable service under Section 65(105)(zzzzq) (Brand Promotion Service) of the Finance Act, 1994 and whether the adjudged service tax demands are sustainable.Analysis: The issue requires examination of the definition of Brand Promotion Service under Section 65(105)(zzzzq) of the Finance Act, 1994 and whether the activities performed under the contracts are primarily for promotion/marketing of a brand under a contract or are essentially participation in matches. Relevant considerations include whether the contract creates an independent taxable promotional service component separable from the playing service, whether classification amended at appellate stage departs from the SCN, and applicable precedents on similar facts. Coordinate Tribunal and High Court authorities held that where a player is engaged to play under the control and direction of a franchise, the activity is primarily playing the sport and the player functions akin to an employee or a purchased team member rather than an independent service provider; consequently the original SCN classification cannot be altered at appeal to a different taxable category. Additionally, prior decisions emphasize that a composite fee cannot be taxed on an undeclared promotional component absent statutory machinery for segregation and that taxing beyond the scope of the SCN is not permissible.Conclusion: The activity of playing in the league and wearing team clothing with incidental display of marks does not fit the taxable definition of Brand Promotion Service as per Section 65(105)(zzzzq) for the purposes of the present demands; the appellate classification changing the category beyond the SCN is unsustainable; the impugned appellate order confirming tax under that category is set aside and the appeal is allowed in favour of the assessee.