TaxTMI 
TaxTMI 
2018 (12) TMI 872
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.... and Seventy Four only) in respect of the service tax liability which is to be paid by the noticees in terms of proviso to sub-section 1) if Sec 73 of Finance Act, 1994. ii. I order recovery of interest at the appropriate rate against the above confirmed demand, under Sec 75 of the Finance Act, 1994. iii. I impose a penalty of Rs. 25,96,08,402/- (Rs. Twenty Five Crores Ninety Six Lakhs Eight Thousand Four Hundred and Two Only) under Section 78 of the Act. iv. I impose a penalty of Rs. 87,82,39,421/- (Rupees Eighty Seven Crores Eighty Two Lakhs Thirty Nine Thousand Four Hundred Twenty Nine Only) under Section 76 of the Act. v. I impose penalty of Rs. 5,000/- (Rupees Five Thousand Only) each for SCNs art Sr Nos 1,2,3 above and Rs. 10,000/- (Rupees Ten Thousand Only) for SCN at Sr No 4 above (Total Rs. 25,000/- 9Rupees Twenty Five Thousand Only) under Section 77 of the Act. vi. This order is issue without prejudice to any other action that may be initiated against The Board of Control for Cricket in India under the provision of Finance Act, 1994 or the Rules made thereunder or under the provision of any law for time being in force." 2.1 Appellant is a society registe....
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....tion 77 in respect of all four show cause notices and has demanded the interest in respect of the demands confirmed. 2.5 Aggrieved by the order appellant have filed these appeals. 2.6 Revenue has filed the appeal challenging the part of order whereby benefit of cum tax value has been granted by the Commissioner. 3.0 Appellants have in their appeal assailed the order of Commissioner on various grounds which were again pressed during the argument of the appeal. 4.1 We have heard Shri V. Sridharan Ld Counsel for the appellants and Shri Roopam Kapoor, Commissioner Authorized Representative, for the revenue. On conclusion of the arguments both the parties were asked to make written submissions stating various points argued by them. Both the party's have filed the written submissions. 4.2 Arguing for the appellant learned counsel submitted- a. The appellants had entered into agreement dated 21st January 2008 with M/s MSM Satellite, Singapore and M/s World Sport Group (I) Private Limited for sale of Media Rights for telecast of Indian Premier League (IPL) matches. Both the agreements are identical except for the territory of operation. While M/s MSM was given telecast ri....
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....income for matches under than IPL under the category of Intellectual Property Right Services (IPR Services) e. Grant of Media Right is not a provision of "Franchise Service" as no right to represent the appellant has been granted. The service recipient is not performing any service, which is being provided by the service provider. f. The definition of franchisee requires satisfaction of following two conditions cumulatively i. The agreement must grant representational right to the service recipient; ii. The rights granted should be in relation to either- a) Sale of goods identified with Franchisor; b) Manufacture of goods identified with Franchisor; c) Provide service identified with Franchisor; d) Undertake any process identified with franchisor. Since these conditions are not satisfied in the present case the services cannot be classified under franchisee service. g. Appellants have not given any representational rights to MSM & WSG i. Representational right shall be given to undertake any process identified with franchisor whether or not a trade mark, service mark, trade name or logo or any such sym....
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....nt" under section 65 (105) (zzzzr) of the Finance Act, 1994 with effect from 01.07.2010. Appellant has taken registration under the aforesaid category and started discharging service tax on media rights income on services within India. CESTAT has in case of M/s Royal Western India Turf Club Ltd. [2015 (38) STR 811 (T-Mum). l. Commissioner himself in para 22 of O-I-O has accepted that the correct classification of the service rendered will be "Commercial Use or Exploitation of an Event." In para 34, Commissioner has while confirming the demand under IPR/ Franchise services held that after 01.07.2010, these services will be classified under the category of "Commercial Use or Exploitation of an Event." In case of M/s Indian National Shipowners Association [2009 (14) STR 299 (Bom)] it has been held that "Introduction of new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services." m. They have rightly claimed the benefit of Export of Service Rules, 2005 and the amounts received from M/s MSM and sub licensees of WSG qualifies for Export. The services provided by them either under category "franchise service"....
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....ughout aware of the services provided by the appellant, by way of granting media rights to various broadcasters for live telecast of the matches. Further the issue involved is one of interpretation of statue and cannot be alleged as a matter of suppression of facts. w. Since there has been no non-compliance on the part of appellants' penalties under Section 76, 77 & 78 of the Finance Act, 1994 are also not sustainable. Penalty under Section 78 can only be imposed in case of any fraud or suppression with an intention to evade payment of service tax which is not applicable in the present case. x. Interest under Section 75 is not demandable. 4.3 Arguing for the Revenue Learned Authorized Representative submitted a. Commissioner has, in his findings, gone through the terms of the contract and held that - i. Commercial right to each of the league matches and player auctions were owned and controlled by BCCI. ii. As per Para 2.1 of the agreement exclusive right to broadcast had been granted by BCCI. iii. Para 2.9 also grants to the licensee non exclusive royalty free license for exploitation of the league logos. iv. As per para 2.14 of the ....
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.... the rights covered under this service is only limited to the commercial exploitation of the event and does not give any representational rights. The grant of representational rights is totally different than those of commercial exploitation of an event, in so far as the latter does not have any grant equated to it or does not represent any grant. The commercial exploitation of the event services is thus totally different from the franchise services in so far as the former only provides for one time commercial exploitation without providing any rights to the person. d. A perusal of the conditions of the agreement dated 25.6.2010 made in supersession of Agreement dated 25.3.2009 between BCCI and various parties bring forth following : i. That BCCI controls the commercial right to each of the league. ii. That there is official league marks and there are licensor logos and licensor marks. (as detailed in the definitions and interpretation) which clearly gives a brand identity to the licensor. iii. That the right has been granted on exclusive basis and licensor will not enter into agreement with any other person except as qualified in the agreement (para 2....
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....the Agreement provides "Licensee agrees that it will not alter or add to the content of the Feed whether electronically or otherwise so as to remove, change or obscure any in-Venue advertising any Graphics Package or Live Feed Insertions incorporated into the Feed by or on behalf of Licensor in accordance with this Agreement, same and to the extent as may be required to comply with applicable Law." e. In the case of Subway, Hon'ble Bombay High Court had referred to the Franchise agreement and had looked into the definition of Franchise. Hon'ble High Court had referred to the Black's Law Dictionary to define the Franchisee in the context of a commercial transaction "as the sole right granted by the owner of a trademark or a trade name to engage in business or to sell goods or service in a certain area". In terms of the test laid down by the Hon'ble High Court, the transaction between BCCI and MSM fulfilled all the conditions of the definition, as the Team Logo and Marks are owned by the BCCI, the Feed of the cricket matches is also owned and produced by BCCI and MSM is given exclusive right to engage in the business of telecasting the same in the area specified in the contract. ....
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....he phrase outside India is to be interpreted to mean that the benefit of the service should be accrue outside India". Similarly, while further clarifying the above mentioned Circular, vide Circular No. 141/10/2011-TRU dtd 13th May 2011, the Board had clarified that in respect of Rule 3(i)(iii) had specifically stated that "it may be noted that the words 'accrual of benefit' are not restricted to mere impact on the bottom-line of the person who pays for the service". It was further, stated that "for example effective use of advertising services shall be place where the advertising material is disseminated to the audience though actually the benefit may finally accrue to the buyer who is located at another place". This situation is exactly the case decider. ii. The subscriptions in the form of advertisements also was collected by the subsidiary of MSM viz. Sony Television India in India itself, from which, they may have remitted the funds MSM to BCCI. Attention in this regard was invited to Paragraph 5 of the Show Cause Notice No. 747/Commr/2012- 13, wherein it was stated "97% of the payment received of Rs. 498,38,0,769/- payment received at Sr. No. 2 & 3 table below has bee....
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.... in terms of Export of Services Rules, 2005 as amended from time to time. iii. Whether the extended period of limitation can be invoked in the facts and circumstances of this case. iv. Whether penalties imposed under Section 76, 77 & 78 of Finance Act, 1994 justified in the facts and circumstances of this case. 6.1 The issue is in reference to the Franchise services which have been defined under Finance Act, 1994 as amended as following: "Section 65 (47): "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake process identified with franchisor, whether or not a trademark, service mark, trade name or logo or any such symbol, as the case may be is involved. Section 65 (48) "franchisor" means any person who enters into franchise with a franchisee & includes any associate of franchisor or a person designated by franchisor to enter into franchise on his behalf & the term franchisee shall be construed accordingly. Section 65 (105) (zze) the "taxable service" means any service provided or to be provided to a franchisee, by the franchisor in relation to franchise." 6.2 Hon....
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.... by Hon'ble Bombay High Court regarding Franchise is one where there is transfer of the right by the owner of a trade mark is temporary. 6.3 Delhi Bench of Tribunal has in case of Delhi Public School Society, has interpreted the said franchise service as following:- "4. Salient clauses of the agreement between the assessee and the Franchisee : The assessee entered into agreements with distinct entities which intended to establish schools in different areas (within India and overseas as well) in collaboration with the assessee. The assessee apparently has experience in establishing and managing schools that provide quality education and has a brand image in the said area. We are informed by learned counsel for the assessee; and this assertion is not disputed by Revenue, that the several agreements, insofar as are relevant for the purposes of these appeals, are substantially similar and have identical provisions, relevant to consideration of this lis. We therefore advert to relevant provisions of the agreement dated 20-1-2004 entered into between the assessee and Maharaja Hari Singh Social and Educational Foundation, Jammu (hereinafter referred to as Society). This agreement....
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....d the duty to appoint the Principal, teachers and staff of the school, to be selected by a Selection Committee constituted by the assessee which shall comprise one member of the Society. The clause sets out other powers and functions of the BOM which are of a house-keeping nature and incidental to management. (vi) Clause 7, enumerates the obligations of the Society under the agreement. The Society (not the assessee) has extensive and exclusive obligations, in respect of providing land, buildings, all infrastructural amenities for the school including residential accommodation for the Principal, teachers and staff; and the entire financial responsibility towards these provisions. The Society is also responsible for meeting the deficit in the revenue budgeted expenditure, to raise loans for all establishment and running expenditure and to meet the consequent financial liability. The assessee is specifically immunized any liability or responsibility in this area and the Society undertakes to indemnify the assessee from any claims in this regard. Sub-clause (p) enjoins the Society to ensure that the school will be in a single campus and that no other educational or other institution....
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....lar or deceptively similar name/logo/motto, even if it desires to run a school in the same premises or elsewhere. 20. Issues 'C' and 'D' With effect from 16-6-2005, 'franchise' is defined (to the extent relevant and material for the lis ), to mean an agreement where the other party is granted a representational right to provide service or undertake any process identified with the franchisor. Ingredients (2) and (4) of the earlier definition are omitted. In the light of our analysis on issues 'A' and 'B' and for reasons recorded therein the assessee must be considered as having provided the taxable "franchise" service subsequent to 16-6-2005 as well. The appellant has contended that w.e.f. 10-9-2004 a new taxable service was introduced vide Section 65(105)(zzr) which is enacted to be a service provided to any person by the holder of Intellectual Property Right (IPR) in relation to Intellectual Property Service (IPS). IPR is defined in Section 65(55a) and IPS in Section 65(55b). IPR is defined to mean any right to intangible property, namely, trademarks, designs, patents or any other similar intangible property, under any other law for the time being in force, but excluding ....
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....nsidered. According to Shri Sahu, the adjudicating authority had assessed the demand on the analysis of sample agreements between the assessee and other parties and concluded that the assessee is administering schools in collaboration with the others; is actively participating in management of the schools with a dominant role thereat vis-à-vis the other parties. The role of the CESTAT is therefore confined to the issue as to whether the conclusion by the adjudicating authority that the assessee had given representational rights to the other parties, in terms of the agreements, is valid and sustainable; this Tribunal cannot in the circumstances arrive at a conclusion as to the taxability of the assessee contrary to the conclusions recorded by the adjudicating authority. Shri Sahu referred to several decisions on this aspect including Hukum Chand Mills Ltd. v. CIT - (1967) 63 ITR 232 SC, Karnataka State Forest Industries Corporation Ltd. v. CIT - (1993) 201 ITR 674 (Karn.); Ciba of India Ltd. v. CIT - (1993) 202 ITR 18 (Bom.); CIT v. Indira Balkrishna - (1960) 39 ITR 546 (SC); Hindustan Ferodo Ltd. v. C.C.E. - (1997) 106 STC 214 (SC) = 1997 (89) E.L.T. 16 (S.C.); Saci Allied P....
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....e use or enjoyment of IPR, as defined in Section 65(55a). There is a raft and bouquet of other services provided by the assessee [apart from a mere temporal transfer of intangible property, even assuming that permitting the other party to use the assessee's name (IPS), motto and logo, constitute transfer of intangible property]. Under the agreements, the assessee provides its established concepts of business; operational expertise in establishing and administering English Medium Schools; standards of academic quality and the assessee undertakes to supervise, evaluate and mandate academic and other activities of the School through periodic deputing of visiting teams, ensuring that reports of findings of such teams are considered and adopted by the school and the staff. The terms of the relevant agreements considered holistically bring the transactions more wholesomely within the fold of 'franchise' service rather than 'IPS'. The essential character of the services provided by the assessee fall overwhelmingly within 'franchise' service. We are compelled to the conclusion that the services provided by the assessee do not fall within IPS since except the temporal permitting of the use ....
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.... in the country. Telecasting/Broadcasting rights are leased out by the organizing body 2 i.e. Board of Control for Cricket in India (hereinafter referred as the "BCCI") through competitive bidding. ...... 3. BCCI is the "approved" national level body holding virtually monopoly rights to organize cricketing events in the country. Grant of telecasting rights of these events is, therefore, a major source of revenue for the BCCI. ......" 6.5 Hon'ble Supreme Court of India in Secretary, Ministry of Information and Broadcasting (MoI&B), Govt. of India (GoI) and Others Vs. Cricket Association of Bengal and Others [1995 2 SCC 161], held, "...It must further be remembered that sporting organizations such as BCCI/CAB in the present case, have not been established only to organize the sports events or to broadcast or telecast them. The organization of sports events is only a part of their various objects, as pointed out earlier and even when they organize the events, they are primarily to educate the sportsmen, to promote and popularize the sports and also to inform and entertain the viewers." Thus Appellants essentially organize matches so that the same can be viewed by people, either ....
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....that BCCI granted the media rights to their licensees on exclusive basis & undertook that they will not enter into agreements with any other persons for licensing of such media tights. (iii) As per para 2.9 of the Agreement the Licensor grants to the Licensee a non-exclusive royalty- free license to exploit during the rights period, the League Logos, League Marks & Team Logos (collectively called the Licensor's Marks) together with those materials provided to Licensee solely in connection with the Licensee's exploitation of the media rights. (iv) As per para 2.14 of the Agreement, the Licensee shall have the right to refer to itself & to authorize third parties to refer to it as the "Official Broadcaster of the Indian Premier League" & Licensor hereby confirms that it shall not authorize any third party to use any such designation in or in relation to the territory. (v) In the agreement under the major paras 2, 3, 4, 5, 6, 8 & 9 the franchisor inter alia laid down terms & conditions regarding grant of media rights, access & additional licensee production, over spilling of satellite transmissions, availability of live feeds, licensee's general obligations etc. ....
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....ll be entitled to retain all revenues that it derives from the graphics, advertising and/or sponsorship that it incorporates within its transmissions of Feed, footage and/or unilateral footage . Para 8.8 - Broadcast sponsors - Licensee shall be permitted to appoint & to permit its sub-licensee to appoint broadcast sponsors subject to the terms & conditions of this agreement & in particular the provisions of clause 8.9.... . Para 8.10 - Sponsored Title & Logos - In all transmissions, broadcasts & exhibitions of matches, Licensee shall: Ensure that the sponsored title & the relevant sponsored logo shall appear in the opening & closing titles, together with a verbal mention of the sponsored title immediately afterwards, Ensure that the sponsored title & the sponsored logo shall prominently appear on the screen display of any fixture/league table(s)or team lineup, all trailers & other on air and/or off air publicity and/or promotional material in relation to the league or any match, Licensee's broadcasts of any service (including news bulletins).... Ensure that whenever the sponsored title & the relevant logo so appear, they shall not be diluted by juxtaposition with....
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.... own involvement while telecasting of the matches. It is thus clear that the IPL tournament is a product of BCCI & the broad cast or telecast of such product through the media would infer as marketing of the product. When the media rights are given to the licensees, it allows them to telecast the matches under the brand identities or licensor's marks' of the BCCI." 6.8 In our view accordingly the services as provided by the Appellants to the M/s MSM, Singapore and M/s WSG are squarely covered by the definition of franchise services as defined by the Section 65(47), 65(48) & 65 (105) (zze) of the Finance Act, 1994. 6.9 Appellants have in their submissions referred to the decision of Global Transgene, supra to argue that "5.4 ....... Admittedly, in a franchisee transaction the franchisee loses his individual identity and represent the identity of franchisor to the outside world, as in the case of 'McDonald' the customers are not concerned with who owns the 'McDonald's restaurant (franchisee). The customers identify it with 'McDonald (the franchisor)." The said argument needs to be considered in the light of observations made by the tribunal in case of Amway as follows: ....
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.... alia stipulate that the ABO is to be "truthful and accurate in offering Amway business opportunity or selling Amway products". In other words, an ABO does not merely sell Amway product but also offers Amway business opportunity. In terms of Code of Ethics of Amway distributors, the ABO inter alia agrees to. (i) present Amway products and Amway Sales and Marketing Plan to all prospective distributors. Amway Sales and Marketing Plan as defined in para 2.1.5 of Business Starter Guide means "the plan provided in the Amway Business Starter Guide detailing Amway's performance incentive systems, sponsoring procedures and guidelines, requirements, systems, procedures, and policies regarding the presentation of Amway products, the Amway business and the management of an Amway organization, as amended from time to time by Amway and of which these Rules are a part. (ii) be courteous and prompt in handling of any and all claims for exchange and return. (iii) conduct himself in such a manner as to reflect only the highest standards of integrity, frankness and responsibility because he recognizes that his conduct as an Amway Distributor has far reaching effects. As per para 4.1 of t....
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....se of contact, including introduction of the prospect to the Amway business. Thus it again becomes evident that the ABO has been given right to represent Amway business. Para 12.12 of the Guide also clearly states that "if the distributor makes a serious misrepresentation of Amway or the Amway business which in Amway's opinion, is not likely to be satisfactorily remedied by corrective actions", then Amway can terminate the authorization to operate as a distributor. Thus only serious misrepresentation of Amway or Amway business can lead to termination of distributorship. In other words, he can, indeed should/is expected to, represent Amway in accordance with and to the extent allowed as per the Amway's Business Starter Guide and Distributor Application and Terms and Conditions. In the Sections of the Starter Guide dealing with Social Media Policy, it is stated (referring to the ABOs) that "Remember, what you say reflects upon your and Amway's reputation". Now Amway's reputation can be affected by what the ABOs says only when he is taken to represent Amway in some (however limited) capacity. From the aforesaid analysis of the Amway "Business Starter Guide" and "Distributor Applica....
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....imum standards for the performance of registration function and recognize that the appellants are meeting those standards. Revenue has not been able to pinpoint to us either any service or any process for which ICANN is known and that process is being used or being provided by the appellants. In the absence of any such service or process we are unable to agree with the Revenue that the appellants are providing franchise service of ICANN. Even the agreement which permits the use of ICANN symbols clearly indicates that appellants are ICANN Accredited Registrar and nothing beyond that. We are in agreement with the appellant's submission that accreditation and representing the ICANN are two different things and the appellants are only accredited by ICANN and they are not representing ICANN. 39. We find that agreement between ICANN and Registry has not been produced either by Revenue or the appellant. We find that Revenue have not been able to bring on record any service or process identified with ICANN which is required to be provided by various registries accredited by ICANN. It appears that registries are also accredited like registrars. ICANN might have provided minimum standards....
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....the petitioners, the petitioners have been granted the exclusive right and authority to undertake some of the functions of the AAI being the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the respective Airports. 10. Article 2.1.1 of the OMDA reads as under: "AAI hereby grants to the JVC, the exclusive right and authority during the term to undertake some of the functions of the AAI being the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the Airport and to perform services and activities constituting Aeronautical Services, and Non-Aeronautical Services (but excluding Reserved Activities) at the Airport and the JVC hereby agrees to undertake the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the Airport and at all times keep in good repair and operating condition the Airport and to perform service and activities constituting Aeronautical Services and Non-Aeronautical Services (but excluding Reserved Activities) at the Airport in accordance wit....
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....f the revenue on which the petitioners have already paid Service Tax under the taxing entry 'Airport Services'. In the said case after examining terms of the agreement Hon'ble High Court reached to the conclusion that no representational rights granted by Airport Authority of India to Delhi International Airport P. Ltd. The facts are clearly distinguishable. There is no revenue sharing in the instant case. 5.3 Examination of terms of the contract reproduced in the para 60 of the said order clearly shows that DIAL was not required to prominently show the logo/mark to AAI anywhere while providing the said service. The perusal of the Article 2.1.1. of the Agreement in the said case (reproduced above) clearly shows that specified activities were sub-contracted to DIAL without any representational rights. However in the present case the appellant are receiving money from clients. The clients are required to place the machine provided by the appellant at prominent place in their premises. The clients are required to display the logo/mark/illuminated signs of the appellant prominently displayed. In view of the above it is seen that agreement in the impugned case is different than th....
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....ant is that before the amendment on 16-6-2005 or thereafter, one of the key requisitions for the transaction to quality as taxable franchise service was that the franchisee should have been granted 'representational right' to sell or manufacture goods or to provide service or undertake any process identified with franchisee, whether or not a trademark, service mark, trade name or logo or any such symbol. 3.4 The appellant produced sample of product-package labels from and contended that no logo or hallmark belonging to the appellant is put on the package. The package only contains a remark 'Fusion BT' which denotes that the seeds being sold contain Fusion BT genes, which is neither a logo, nor a trademark or hallmark of the appellant. It only indicates the technology contained in the seeds under sale. 3.5 The contention is that the said product-package label clearly indicates that the seeds are manufactured and marketed in by the sub-licensees in their own name. There is no representation on the package either of the Appellant or the Licensor (owner of the technology). The label on the package shows beyond reasonable doubt the sub-licensees do not claim to represent anybody b....
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....rtakes that it shall at all times; (a) Run and operate the said vending machine/s and sell beverages prepared from GPI "Raw Materials" mentioned in Annexure-A (attached herewith) or as modified by GP from time to time, (b) Franchisee shall not sell any other beverages from vending machine other than as specified by GPI from time to time and shall follow the operating instructions for the machine at all times for proper and consistent functioning. (c) Provide at its own expenses the entire infrastructure, facilities (including electricity, BMC water, etc.) and manpower necessary for the aforesaid activities/services. (d) Purchase the requisite quantities of the aforesaid "Raw Materials" from GPI/its authorized nominee and shall maintain adequate stock of the same at all times during the term of this agreement. (e) GPI/its nominee only shall have the right to refill/ reload the said Raw Materials in the said machine. (f) Under no circumstances and in no manner use the said Raw Materials for any other purpose than as agreed under this agreement (g) ------------------ (h) Store the said raw materials in perfectly sealed condition and shall not change the origina....
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....logo, mark (other than agreed and approved by the appellant). Agreement also prohibits the appellant's clients from moving or removing machine from its original place of installation without prior approval of the appellant. Clause in agreement shows that clients are required to keep illuminated signs on the machine, if any, illuminated all the times. The article 6 of the said agreement prescribed that franchisee shall not have any right, title or interest in the appellant's trade mark/trade name/logo. Aforesaid agreement also prohibits franchisee from selling any other beverages from the vending machines in terms of clause (b) of Article 3 of agreement. In fact as per clause (e) of Article 3, the appellant or its nominee only have right to refill, reload the raw material in the vending machine. In terms of above condition of the agreement itself apparent that the appellant have granted representational right to the franchisee. To any person wishing to have beverages, it would appear that he is buying beverages from the appellant and not from the franchisee as it is the appellant's name that appears on the machine and same is prominently displayed on the machine. The raw material us....
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....use (105) of section 65 of the Act, but excluding, - (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of this rule, when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service: Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India. (2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:- (a) such service is provided from India and used outside India; and (b) payment for such service provided outside India....
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....k setup processes and encrypts this audio video signal and uplinks it to designated transponder in a designated satellite. d) The signals are then received by the earth stations or through antenna direct to home. e) Signals are then transmitted through cable or through network of TV channels to individual viewers. A.20 The appellants does not carry out any of the process mentioned above. The appellants are engaged in conducting matches and providing signals to the broadcasters." 7.3 From the above submissions made by the appellant, it is undisputedly admitted that appellants have provided the program feed to the M/s MSM Singapore at the venue of match which is in India and not outside. The programme feed as provided by the appellant, is encrypted and then uplinked by the said M/s MSM/ WSG to the designated transponder in designated satellite. The satellite beams back the uplinked signal, for transmission through cable or network of TV Channels to the individual viewers. In the entire process at no stage the feed, provided by the appellant is routed through any place outside India. Thus service provided by the appellants are provided in India and used i....
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....ax on 'visibles', are susceptible to. The reviewing authority appears to have ignored the fundamental aspect that the proceedings were initiated under Finance Act, 1994 and that the tax was sought to be levied on taxable services and any adjudication thereon shall necessarily be circumscribed by such. The findings cannot go beyond the services that are taxable under Section 65(105) to focus on the manifest form of the service for determination of the usage. Prima facie, we do not find any merit in this line of appeal. We, however, do not fail to consider this in detail." Thus the said case is distinguishable on facts. For the same reason the decision of the E P W Da Costa vs UOI [1980 (121) ITR 751 (Delhi)] is distinguishable. In para 5 & 6 the Hon'ble High Court has held- "(1) Where the gross total income of an assessed, being an Indian company, includes any income by way of royalty, commission, fees or any similar payment received by the assessed from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning indu....
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....h reliance for the period prior to 27.02.2010 and the said decisions are clearly distinguishable. i. In case of Paul Merchants, the tribunal was considering the case of money transfer from foreign land to the recipient in India. Paul Merchants were acting as agent for the Western Union, who was approached by the person intending to transfer money to recipient in India. Paul Merchants were responsible for delivery of the said money to the Indian recipient. For rendering this service Paul Merchants received certain commission from the Western Union. Demand was made in respect of the service provided by the Paul Merchants for delivery of to Indian recipient. In the said Paul Merchant provided the service to the Western Union, which has been held to be Export of Service. In this case the service has been provided by the Paul Merchants to entity located outside India for delivery of money to Indian recipient. Since the service has been provided by Paul Merchant for use outside India the same has been held to be Export of Service. In the present case the appellants have provided the feed to the recipient in India and the service has been provided in India and also used in India hence ....
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....necessary. The Export of Services Rules, 2005 were notified by Notification No. 9/2005S.T., dated 3-3-2005. Rule 3 defines what is export of taxable service. The definition was substituted with effect from 19-4-2006. The export of taxable service in relation to taxable services which have been referred to in clause (i) of sub-rule (1) of Rule 3 is in relation to an immovable property situated outside India. 59. Then comes Rule 3(1)(ii) and which relates to taxable service specified in sub-clauses of clause (105) of Section 65 of the Finance Act, 1994. However, the services referred therein are those which are performed outside India. The first proviso below this was stating that if such taxable service is partly performed outside India it shall be considered to be performed outside India. Then, there is a further proviso of this sub-rule wherein it was stated that any taxable service provided shall be treated as export of service only if such service is delivered outside India and used in the business or any other purposes outside India and payment for such service provided is received by the service provider in convertible foreign exchange. [see Rule 3(2)]. 60. Rule 3(1)(iii....
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....ded and used other than in or in relation to commerce or industry, if the recipient of taxable services is located outside India at the time when such services are received. 61. There is substitution as we have said above and what we find is that below Rule 3(1) and it's clauses, Rule 3(2) has been substituted with effect from 1-3-2007 by Notification No. 2/2007ST, dated 1-3-2007. Rule 3(2)(a) has been omitted with effect from 27-2-2010. The words "such service is provided from India and used outside India; and" were omitted with effect from 27-2- 2010 by Notification No. 6/2010ST, dated 27-2-2010. Thereafter, the only condition remained to be satisfied and for the purpose of being qualified or termed as export of taxable service is that any taxable service specified in sub-rule (1) of Rule 3 shall be treated as such when the payment for such service is received by the service provider in convertible foreign exchange. We are concerned with the situation prior to this omission. We are of the view that if Mr. Sridharan's submissions have to be accepted, then, we must ignore this omission." 7.8 With effect from 27.02.2010, when the condition relating to receipt place of provisio....
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....e treated as export of service. The said para of Show Cause Notice dated 13.03.2013 is reproduced below: "7. On scrutiny of ST-3 Returns for 2011-12 filed under 'Commercial use and Exploitation of events', it is observed that BCCI has claimed amount received against export of service of Rs. 416,98,88,398/- (i.e. Rs. 175,46,33,398/- plus Rs. 241,52,55,000/-). Under Franchisee Services BCCI has not claimed any amount received against export of service. Department has already issued various SCNs under 'franchisee services' on the issue as mentioned in Para-03 above which are pending for adjudication. BCCI has claimed export of service on media right income in ST-3 for 2011-12 for Rs. 416,98,88,398/-. The representative of BCCI has clarified that out of the said amount, the amount of Rs. 256,83,00,000/- pertains to ESPN Singapore and remaining amount of Rs. 160,15,88,396/- pertains to MSM Singapore. However, on going through the balance-sheet for 2011- 12, it was noticed that out of the total export income from media right of Rs. 533,92,51,537/-, the income of Rs. 498,38,10,769/- pertain to M/s. MSM Singapore, as mentioned in para 05 and 06 above. However, as against the export i....
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....x the said income from media rights, by classifying the income received under said agreements under various categories, i.e. Advertising services, Intellectual Property Right Service etc. The appellants entertained a bonafide belief that the services under the said media right agreement were not classifiable under the category of "franchise service." When the service tax was introduced under the category of "Commercial Use or exploitation of any event" they started discharging service tax liability under the said category. Thus the invocation of extended period of limitation cannot be justified, for the reason that there was no suppression of facts with intention to evade payment of tax. The issue involved in the matter was that of interpretation. 8.3 It is fact that appellants had not been declaring the income from media right agreements in the ST-3 return filed by them. Further appellants have not in any case brought out any reason for entertaining the bonafide belief to effect that the services rendered by them will not be classifiable under the category of "franchise service." 8.4 The tribunal has in case of L'OREAL India Pvt Ltd Vs Commissioner of Central Excise Pune [20....
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.... since the main contractor was discharging service tax. This claim of the appellant is quite hollow and misleading. The appellant had been discharging service tax on the services rendered by them prior to 1-3-2006 as a subcontractor. In their reply to the show cause notice dated 29-12-2010 vide reply dated 19th September, 2011, in para 4.1, the appellant has stated as follows :- "4.1 But, with effect from 1-3-2006, the said Notification 15/2004 has been replaced by Notification 1/2006, which also prohibited availment of Cenvat credit on input services. Hence with effect from 1-3-2006, we have stopped paying service tax and sought the benefit of various circulars and judicial pronouncements to the effect that no service tax is payable by the subcontractors, if the main contractor pays service tax." This averment of the appellant clearly shows that the reason for non-payment service tax was not because of any bona fide belief but because Notification 1/2006-S.T. which provided for abatement in value of taxable service stipulated a condition that no Cenvat credit of excise duty paid on inputs and capital goods and service tax paid on input services shall be availed. Since the ma....
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....l settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation. 18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term relevant date nugatory and such an interpretation is not permissible. 19. The language employed in the proviso to sub-section (1) of Section 11A, is clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has....
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.... also be liable to pay a penalty equal to the duty so determined : [Provided that where such duty as determined under subsection (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined : Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso : Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purpose of this section, the duty as reduced or increased, as the case may be, shall be taken into account : Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the fi....
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....ion 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. 19. From the aforesaid discussion it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. 20. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows : "2. A Division Bench of this Court has referred the controversy involved in these appea....
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....Shroff's case (supra) was not correctly decided but Chairman, SEBI's case (supra) has analysed the legal position in the correct perspectives. The reference is answered.........". 21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows : "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for in....
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.... cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(1)(a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure ....