2020 (12) TMI 534 - CESTAT KOLKATA

Business Auxiliary Services - service in relation to promotion or marketing or sale of goods produced or provided by or belonging to the client or any service in relation to promotion or marketing of service provided by the client - taxable service or not - SCN mentions that the appellant had rendered his celebrity image as a ‘brand ambassador’ for promotion and marketing/sale of various products, for which he had received remuneration as per the agreements - Extended period of limitation - penalty.

Whether the ‘Brand Endorsement’ fees received by the appellant was for providing services relating to promotion or marketing or sale of goods produced or provided by or belonging to the client, so as to make the service taxable under BAS or was for promotion or marketing of a brand of goods for it to be taxable under section 65(105)(zzzzq) of the Finance Act? - HELD THAT:- W

hen a product is advertised by using a celebrity, the intention is to create an impression in the minds of customers or users that the product and services of the brand have the level of excellence comparable to that of the celebrity. It is only promotion or marketing or sale of goods produced, provided or belonging to a client and promotion of marketing of services provided by the client that are covered under BAS and they would continue to be covered under BAS. The Instructions further notes that many important companies were associated with a range of activities including production, marketing, sale of goods, provision of services, holding of events, undertaking social activities and if the brand name/house mark is promoted by a celebrity, without reference to any specific product or services, the service would not be classified under BAS, but would be classifiable under the newly added service under section 65(105)(zzzzq) of the Finance Act - there is no manner of doubt that the activity carried out by the appellant would be classifiable under the new taxable service contemplated under section 65(105((zzzzq) of the Finance Act.

This issue has been settled by the Bombay High Court in INDIAN NATIONAL SHIPOWNERS' ASSOCIATION VERSUS UNION OF INDIA [2009 (3) TMI 29 - BOMBAY HIGH COURT]. The High Court held that introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said service - thus, the activity carried out by the appellant could not have been subjected to levy of service tax under BAS prior to July 1, 2010 and would only be taxable w.e.f July 1, 2010 under section 65(105)(zzzzq) of the Finance Act.

Whether anchoring in TV show was a promotional activity for the promotion of service which the TV channel provided so as to make the service taxable under BAS? - HELD THAT:- This contention of learned counsel for the appellant deserves to be accepted for the simple reason that the show cause notice does not make any mention of this demand. It has been held by the Supreme Court in PRECISION RUBBER INDUSTRIES (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [2016 (4) TMI 841 - SUPREME COURT] that a show cause notice is the foundation in the matter of levy and recovery of duty. Thus, if the show cause notice has not called upon the appellant to submit any reply on this aspect of the demand, the said demand could not have been confirmed.

Whether the fees received by the appellant for writing articles was a promotional activity of the services provided by the Organizations with whom the appellant was under a contract, so as to make the service taxable under BAS? - HELD THAT:- The contention of leaned counsel for the appellant is that the demand could not have been confirmed in the absence of any charge relating to this aspect in the show cause notice - This contention of the learned counsel for the appellant also deserves to be accepted.

Whether the appellant, apart from playing for KKR, also promoted logos/brands/marks of franchisee/sponsors so as to make the services taxable under BSS? - HELD THAT:- The Commissioner has, in view of the Instructions dated July 26, 2010 issued by CBEC assumed that the amount received was a composite fee and the entire amount was leviable to service tax in terms of the Instructions dated July 26, 2010. The view taken by the Commissioner is not correct. In the first instance, as noted above, the appellant had received the fees for playing cricket only and even otherwise, it is a settled principle of law that if no machinery exists to exclude non-taxable service, a composite contract is not taxable since law must provide a measure or value of the rate to be applied and any vagueness in the legislative scheme makes the levy fatal.

Whether the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could have been invoked in the facts of the present case and whether penalty under section 78 of the Finance Act could have been imposed? - HELD THAT:- The show cause notice was issued to the appellant on September 26, 2011 in regard to the demand covering the period from May 1, 2006 to June 30, 2010 by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act as the limitation contemplated under section 73(1) Finance Act was one year from the relevant date. The allegation made in the show cause notice regarding the applicability of the extended period of time limit - The Commissioner has not dealt with the issue of limitation and only a statement has been made, while dealing with the imposition of penalty under section 78 of the Finance Act, that the issue of limitation was dealt earlier.

It would be seen from a perusal of section 73(1) of the Finance Act read with its proviso and section 78 of the Finance Act that the ingredients for applicability of the provision, namely fraud, collusion, wilful mis-statement, suppression of facts or contravention of any other provisions of the Act are similar - It was imperative for the Commissioner to have recorded a finding on the issue of limitation, for it is only where any service tax has not been paid that the Central Excise Officer can within one year from the relevant date serve notice on the person chargeable with the service tax which has not been paid. The proviso to section 73(1) of the Finance Act, however, permits the notice to be served within five years but the conditions stipulated therein have to be satisfied - even when an assessee has suppressed facts, the extended period of limitation can be invoked only when “suppression’ is wilful with an intent to evade payment of service tax.

Whether the appellant is entitled to interest on the amount deposited from the date of deposit to the date the amount was transferred to the account of the Registrar General of the Calcutta High Court? - HELD THAT:- As the appeal filed by the appellant is being allowed and the demand confirmed by the Commissioner is being set aside, there is no reason why the appellant should not be granted interest on the amount of (₹ 1,51,66,500 and 50,00,000) deposited with the Government from the date of deposit of the amount upto the date of transfer of the said amount to the Registrar General of the High Court.

The impugned order dated November 12, 2012 passed by the Commissioner is set aside and the appeal is allowed - The appellant shall also be entitled to interest on the amount of ₹ 1,51,66,500/- and ₹ 50,00,000/- from the date of deposit of the amount with the Government upto the date the amount was transferred to the Registrar General of the Calcutta High Court at the rate of ten percent per annum.