TaxTMI 
TaxTMI 
2016 (7) TMI 237
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....a member of the Kolkata Knight Rider Team. At all material times he acted and still acts as brand ambassador for various products. He also acted as anchor in television shows and particularly on Zee Bangla Channel. The petitioner is also engaged in writing articles for Sports Magazines. (3) Service tax was introduced in India for the first time in the year 1994 under Chapter V of the Finance Act, 1994 which has been amended from time to time. More and more categories of service have been brought within the purview of the service tax net by successive amendments to the Finance Act. Section 65 (105) of the Finance Act defines and/or enumerates the types of services which attract service tax. (4) Finance Act, 1994 was amended by the Finance Act, 2003 and with effect from 1 July, 2003 a new service, namely 'Business Auxiliary Service' was made taxable under sub Clause (zzb) of Clause 105 read with Clause 19 of Section 65 of Chapter V of the Finance Act, 1994, vide notification No. 7/2003 dated 20 June, 2003. After this amendment, 'taxable service' came to include any service provided or to be provided to a client by any person in relation to business auxiliary service. Section 65....
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....er, 2004 providing a limitation period of one year for recovery of service tax which would stand extended to five years in case of any fraudulent or similar act on the part of the assesse. Section 73 of the Act is set out hereunder:- "S. 73. Recovery of service tax not levied or paid or short- levied or short-paid or erroneously refunded 1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any service tax has not been levied or paid or has been short-paid or short-levied or erroneously refunded by reason of- (a) Fraud; or (b) Collusion; or (c) Willful mis-statement; or (d) Suppression of facts; or (e) Contravention of any of the provisions of this Chapter or of the rules mad....
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....n by any other person in relation to support services of business or commerce, in any manner. Section 65 (104c) of the Act defines 'Support Services of Business or Commerce' as follows:- "S. 65 (104c). "Support service of business or commerce' means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customers relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation or customer service and pricing policies, infrastructural support services and other transaction processing." (7) By notification No. 24/2010-ST dated 22 June, 2010, the Finance Act, 1994 was once again amended with effect from 1 July, 2010 by bringing within the service tax net, 'Services of promotion of brand of goods/services etc.' under sub-Clause (zzzzq) of Clause 105 of Section 65 of the Act. After such amendment 'taxable service' came to include any services provided or to be provided to any person, by any other....
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....ee under the reverse charge mechanism." (9) The office of the Additional Director General, Directorate General of Central Excise Intelligence, Calcutta Zonal (respondent no. 4) initiated investigation against the petitioner on 5 November, 2009 by calling upon the petitioner to produce various records and documents relating to the activities of the petitioner. By a letter dated 24 November, 2009, the petitioner contended that he was not rendering any business auxiliary services and had earned income by playing the game of cricket for the country. Under cover of letters dated 14 December, 2009 and 15 March, 2010, the petitioner submitted all documents sought for by the office of the respondent no. 4 including the copies of agreements entered into with various companies and corporate entities. The petitioner received a summon dated 12 January, 2011 from the office of the respondent no. 4 to appear on 19 April, 2011 for making statements and producing documents about the details of income received by the petitioner during the period 1 January, 2010 till 30 September, 2010 as also to produce the balance sheet for the year 2009-10. The petitioner appeared through his authorised repres....
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....ade on account of business support service under Section 65 (105)(zzzq) of the Finance Act, 1994. The amount of Rs. 8,70,87,857/- includes Rs. 4,37,00,000/- received for playing IPL in South Africa the tax effect on which is Rs. 51,50,442/-. (14) Ld. Counsel submitted that brand endorsement/brand promotion was made taxable with effect from 1 July, 2010. Undisputedly, the petitioner was granted registration on 3 August, 2010 for such activities and from 1 July, 2010 the petitioner has undisputedly paid service tax for the services of brand endorsement/brand promotion. The CBEC by its circular/instruction dated 26 February, 2010 has clarified that promotion of brand or celebrity acting as a brand ambassador will be covered under the newly added service under Section 65 (105)(zzzzq) of the Finance Act, 1994. It was submitted that the petitioner by letter dated 24 November, 2009 clearly disclosed his activities and sources of receipts and denied that his activities are covered under business auxiliary services. Further, under cover of letter dated 14 December, 2009 the petitioner submitted copies of agreements and audited accounts for five years. On 28 January, 2011 a statement of t....
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....ent to introduce a new category called 'brand endorsement' by way of amendment. Ld. Counsel submitted that it is a settled principle of law that when by making a substantive amendment to the statute, a new levy is imposed, it implies that there was no such levy in existence prior thereto. In this connection Ld. Counsel referred to a decision of the CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi-vs.-Shriya Saran, 2014 (36) STR 641, where on similar facts the Tribunal held that the services provided by the assessee for brand promotion were covered by Section 65 (105)(zzzzq) of the Finance Act, 1994 which had come into force with effect from 1 July, 2010 and hence, during the period prior to 1 July, 2010 the assessee's activities in terms of her contracts could not be taxable under Section 65(105)(zzb) of the said Act. (17) Ld. Counsel also relied on a Division Bench judgment of the Bombay High Court in the case of Indian National Shipowners' Association-vs.-Union of India, 2009 (14) STR 289, wherein at paragraph 38 of the judgment, the Bombay High Court held in the context of the Finance Act, 1994 that introduction of a new entry and inclusion....
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....the Central Govt. and/or the State Govt. are not concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statutes says, and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." Ld. Counsel also relied on another decision of the Hon'ble Apex Court in the case of Jhunjhunwala-vs.-State of Uttar Pradesh, 2006 (206) ELT 3. In that case what fell for determination was whether the appellant was a 'manufacturer' within the meaning of S. 2 (cc) of the Uttar Pradesh Trade Tax Act, 1948. The High Court relied on a circular issued by the Commissioner of Trade Tax and held that the appellant was a 'manufacturer' and was thus liable to pay trade tax. While setting aside the order of the High Court, the Hon'ble Apex Court held that the Commissioner's circular could not have created a liability by drawing inference that the purchasers from farmers who have grown, cut or sawn timbers, ballis, bamboos will bring them within the umbrella of the expression 'manufacturer'. There i....
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....suance thereof without independent application of mind was illegal and without jurisdiction. Ld. Counsel also referred to a judgment of the Hon'ble Apex Court in the same case reported in 2003 (154) ELT A240 wherein the aforesaid judgment of the Delhi High Court was affirmed. Mr. Mittal also referred to a decision of the Delhi High Court in the case of Indian Aluminium Co. Ltd.-vs.-UOI, 1983 (12) ELT 349, wherein it was held that it is not open to the Board of Central Excise and Customs in its administrative capacity to issue directives to various subordinate authorities exercising quasi-judicial functions to interpret excise notifications in a particular manner and to restrict relief thereunder. Since the impugned levy or imposition of excise duty or demands in show cause notices gives effect to the direction of the Board, the same is illegal and void. (23) Ld. Counsel then submitted that the entire proceeding with regard to demand of service tax on IPL fee received by the petitioner from KKR as 'business support service' under Section 65(105)(zzzq) of the Finance Act, 1994, is without jurisdiction, illegal and non-est as the levy itself was not in existence during the re....
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....said to be providing service which may attract service tax. It was observed that the terms and conditions of the agreement made the appellant totally servile to Chennai Super Kings (CSK). The appellant played for CSK as a team player having no independent entity. Whatever output/goals were achieved were by the team as a whole and there could not be any quantification of any work done or services provided by the appellant. He was simply a purchased member of a team working under CSK and thus could not provide any service to CSK as an individual. (24) Ld. Counsel then submitted that the total fee of Rs. 8,70,87,857/- received from KKR includes an amount of Rs. 4,37,00,000/- for playing IPL outside India (South Africa) on which tax effect is Rs. 51,50,443/-. He submitted that the provisions of Finance Act, 1994 are not applicable for services rendered outside India as Section 64 of the Act specifies that the Act applies to the services rendered within the territory of India except the State of Jammu and Kashmir. Hence, on that ground also, service tax demand is illegal to the extent of Rs. 51,50,442/-. (25) Ld. Counsel next submitted that in paragraph 6 of the impugned not....
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....e facts of this case do not by any stretch of imagination attract the provisions of S. 78. Once it is held that the extended period of limitation cannot be invoked in the present case, the levy of penalty becomes unsustainable. In this connection, Ld. Counsel relied on a decision of the Hon'ble Supreme Court in the case of Commissioner of Sales Tax, UP-vs.-Sanjiv Fabrics, 2010 (258) ELT 465, in support of his submission that in taxing statutes mens rea is an essential element required to be examined by the authority while imposing penalty. Ld. Counsel also relied on another decision of the Hon'ble Apex Court in the case of UOI-vs.-Rajasthan Spinning & Weaving Mills, 2009 (238) ELT 3, in support of his submission that penalty is a punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting a fraudulent means. If it be held that the extended period of limitation is not invokable as there was no suppression of facts or other fraudulent act on the part of the assessee, the normal period of limitation of one year would not stand extended and the question of penalty would not arise. (27) Mr. Mittal finally submitted that during the pendency ....
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....ly to the notice, the High Court should not entertain the writ petition. (29) Ld. Counsel then submitted that during the period 1 May, 2006 till 30 June, 2010 the petitioner had failed and neglected to pay service tax on account of charges/remuneration received for rendering business auxiliary services under Section 65(19) of the Finance Act, 1994. (30) In addition, the petitioner received substantial remuneration from IPL franchisee for rendering promotional activities and the services rendered by the petitioner are classifiable under the taxable head of 'business support services' under Section 65(19)(zzzq) of the Finance Act, 1994. He submitted that prior to obtaining service tax registration on 3 August, 2010 in relation to the service of 'Promotion of Brand of Goods, Services, Events, Business Entity Services', the petitioner did not discharge his service tax liabilities for rendering business auxiliary service. Further, the petitioner did not obtain service tax registration under 'Business Support Service' in relation to charges received from KKR. (31) Ld. Counsel then submitted that the petitioner had exploited his celebrity image as 'Brand Ambassador' for the purpo....
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....vent, or endorsement of name, including a trade name, logo or house-mark of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event. The petitioner while representing KKR, besides playing cricket, also undertook promotional activity against which he received a sum of Rs. 8.7 crores approximately. Hence, the petitioner has provided taxable services which are classifiable under business auxiliary services. (34) Ld. Counsel finally submitted that there is nothing wrong with the clarificatory circular dated 26 July, 2010 or the show cause cum demand notice or the order dated 12 November, 2012 passed by the Commissioner of Service Tax, Calcutta. All the three were issued strictly in accordance with law and on a proper interpretation of relevant provisions of the Finance Act, 1994. Ld. Counsel prayed for dismissal of the writ petition. Court's View:- (35) Ld. Counsel for the respondents has taken a preliminary objection as to the maintainability of the writ petition in view of there being an alternative statutory remedy of appeal available to the petitioner. He has submitted that generally a ....
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.... period of five-years on the ground that there was no justification to do so. It is submitted that the invocation of extended period of limitation is erroneous and such error goes to the jurisdiction of the authority issuing the show cause notice. (38) Having considered the submissions of the Ld. Counsel, I am of the opinion that if it is finally decided that the extended period of limitation was wrongly invoked by the authority in issuing the impugned show cause notice, the logical conclusion that would follow is that the show cause notice was issued without jurisdiction. In that event, this court would be justified in interfering with the show cause notice and the order in which it culminated in the exercise of jurisdiction under Art. 226 of the Constitution of India. An authority cannot clothe itself with jurisdiction by erroneously deciding a point of fact or law. An authority cannot confer on itself jurisdiction to do a particular thing by wrongly assuming the existence of a factual matrix, existence whereof is a pre-condition for exercise of jurisdiction by such authority. (39) In the instant case, since the petitioner has challenged the jurisdiction of the authority to....
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.... (41) Additionally, I am of the view that once a writ petition is admitted, affidavits are invited from respondents, affidavits are filed and the matter comes up for final hearing before the Court, at that stage of final hearing it would be unjust and unfair to dismiss the writ petition only on the ground of availability of an alternative remedy. One cannot be oblivious of the fact that more often than not a considerable time period elapses between the point of time when a writ petition is admitted and the point of time when it comes up for final hearing. In the case of Hriday Narain-vs.-Income Tax Officer, Bareilly, AIR 1971 SC 33, the Hon'ble Supreme Court observed that the High Court was not justified in dismissing as not maintainable a petition which was entertained and heard on merits only because of an alternative remedy is available to the petitioner. (42) For the reasons aforesaid, the preliminary issue of maintainability of the writ petition is decided in favour of the petitioner. In my view, the petition cannot be dismissed in limine. (43) Coming to the merits of the case, the first point that has been urged on behalf of the petitioner is that the impugned show ca....
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....ation for the purpose of issuing the impugned show cause notice. I am of the opinion that a mechanical reproduction of the language of the proviso to Sec. 73 (1) of the Finance Act, 1994 would not per se justify invocation of the extended period of limitation. A mere bald assertion that the assessee wilfully suppressed the material facts with intent to evade payment of service tax, is not sufficient. The notice must contain particulars of facts and circumstances in support of such allegation. After all, the allegation of suppression of material facts to evade payment of tax amounts to ascribing a fraudulent motive to the assessee and is a serious allegation. Just as in judicial proceeding, when fraud is alleged against a person, such allegation would carry no weight unless particulars of fraud are furnished by the person alleging fraud, in my view, in a quasi-judicial proceeding also when an allegation of fraud or any allegation of similar nature is made against a person, particulars of the same must be furnished. The person against whom fraud is alleged must know with sufficient certainty of the case that he has to answer. A mere ipse dixit that fraud has been committed or somethi....
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....ials submitted by the petitioner. Hence, there does not seem to be any basis in the Department's contention that the petitioner suppressed material facts with intent to evade payment of service tax. Suppression of fact in the context of this case can only mean non-disclosure of correct information deliberately to evade payment of service tax. There must be an element of fraud and dishonest motive before a non-disclosure simpliciter can be called 'suppression of facts'. In the present case, the petitioner suppressed nothing and maintained all throughout that he did not render any business auxiliary service or business support service and as such was not liable to pay service tax under those heads. Even if, such perception of the petitioner was found to be erroneous subsequently, still the same, would not, in my opinion, amount to suppression of facts. Unless a party deliberately conceals material facts with a dishonest motive of evading some liability or making unlawful gain he cannot be said to be guilty of suppression of facts. (49) As would appear from the impugned show cause notice, there is no allegation of any conscious act on the part of the petitioner that constitutes fra....
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....it has to be established that the duty of excise was not levied or paid or short levied or short paid or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it can be saddled with any liability beyond the period of six months. (53) In Anand Nishikawa Co. Ltd.-vs.-Commissioner of Central Excise, Meerut, (supra), the Hon'ble Supreme Court observed as follows:- "............we find that 'suppression of facts' can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression." (54) In Commissioner of Central Excise, Aurangaba....
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.... compelled to quash the impugned show cause notice and the order dated 12 November, 2012 on other grounds which are indicated below. (60) The demand raised by the Department can be broken up and summarized as under: Nature of Activity Remuneration received (Rs.) Service Tax (Rs.) Writing Articles in Magazines 23,05,000/- 2,43,595/- Anchoring TV Shows 2,00,00,000/- 20,60,000/- Brand Endorsement 2,62,61,782/- 29,99,066/- Playing Cricket in IPL 8,70,87,857/- 98,63,839/- (61) The aforesaid amounts of service tax have been claimed by the Department under the heads of 'Business Auxiliary Service' or 'Business Support Service'. Business auxiliary service is defined in Sec. 65(19) of the Finance Act which has been set out earlier in this judgment. It is an exhaustive definition and not an inclusive one. Broadly speaking, it means any service in relation to promoting, marketing, or selling goods produced or provided by or belonging to a client or promoting or marketing service provided by the client. It must be a service rendered in the field of trade and commerce or any kind of business. It is a service render....
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.... the author in writing the article or permitting publication thereof was to promote circulation of the concerned magazine. That might be an incidental effect but the same cannot foist service tax liability on the author of the article. Hence, in my view, the remuneration received by the petitioner for writing articles would not attract service tax. (64) For similar reasons, the remuneration received by the petitioner for anchoring TV shows cannot be brought within the service tax net. Television shows are meant for entertainment of the viewers. In contemporary world watching television is a primary form of recreation. It would be absurd to say that anchoring TV shows amounts to rendering business auxiliary service or business support service. By anchoring a TV show, a celebrity or for that matter any other person does not render service with the object of enhancing any business or commercial interest. No reasonable authority with proper application of mind could classify anchoring of TV show as business auxiliary service or business support service. Hence, in my view, the remuneration received by the petitioner for anchoring TV shows does not attract service tax. (65) As rega....
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....6 November, 2011 which is under challenge. (66) On this issue, Ld. Counsel for the petitioner submitted that 'Brand Endorsement' was brought within the service tax net with effect from 1 July, 2010. The demand raised for brand endorsement for the period 1 May, 2006 till 30 June, 2010 under the head of 'Business Auxiliary Service' is illegal and without jurisdiction. The respondent no. 3 in his letter dated 12 November, 2012 has admitted that the receipt of Rs. 2,62,61,782/- by the petitioner was towards 'Brand Endorsement Fees'. 'Brand Endorsement' and 'Business Auxiliary Service' are separate categories. If brand endorsement was covered under business auxiliary service, it would not have been necessary for Parliament to introduce a new category of 'Brand Endorsement' by way of amendment. If by making a substantive amendment to a taxing statute, a new levy is imposed, it implies that there was no such levy in existence prior thereto. (67) I am inclined to agree with the submission of Ld. Counsel for the petitioner that since by amendment of the Finance, Act, 1994, a new taxable service category of 'Brand Promotion' was introduced with effect from 1 July, 2010, the logical cor....
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....received substantial remuneration from IPL franchisee (Knight Riders Sports Pvt. Ltd.) for rendering of promotional activities to market logos/brands/marks of franchisee/sponsors. Such fees/remuneration have been paid to the petitioner by the franchisee in addition to his playing skills and thus the services rendered by the petitioner are classifiable under the taxable service head of 'Business Support Services' as per the provisions of Sec. 65(104c) read with Sec. 65(105)(zzzzq) of the Finance Act, 1994. There appears to be inherent inconsistency in such decision of the respondent no. 3. Sec. 65(105)(zzzzq) pertains to brand promotion whereas Sec. 65(104c) pertains to business auxiliary services. They are two distinct and separate categories. As already indicated above, the taxable head of brand promotion was not in existence prior to 1 July, 2010, hence, reliance on that head for levying tax on the amount received by the petitioner from the IPL franchisee is misplaced and misconceived. This is sufficient to vitiate the order. (69) Further, I find from the contract entered into by the petitioner with the IPL franchisee that the petitioner was engaged as a professional cricketer....
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....vice tax on fee received for playing matches, such a liability cannot be created by issuing a letter/instruction/circular. A circular cannot travel beyond the statute. The statute does not provide that if a player receives a composite amount for playing matches and promotional activities and the segregation of the two elements is not possible, then the composite entire amount may be taxed. Such an act on the part of the Department will be de hors the statute and without jurisdiction or authority of law. It will also be in contravention of Art. 265 of the Constitution of India. The Central Board of Excise and Customs cannot seek to legislate by issuing circulars/instructions. As observed by the Hon'ble Supreme Court in the case of Ratan Melting & Wire Industries (supra), the clarifications/circulars issued by the Central Govt. or the State Govt. represent merely their understanding of the statutory provisions. In my opinion, if such circulars/instructions/clarifications are contrary to or inconsistent with the statutory provision in question or seek to create a liability which the statute does not contemplate, such circular/instruction is liable to be struck down. A misconceived and....