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2025 (6) TMI 1093 - AT - Service TaxLevy of service tax - Sponsorship Services - it is alleged that the appellant had made payments to various companies towards sponsorship in respect of Indian Premier League (IPL) T20 Tournament during the period 2010-11 and not paid service tax under the category of Sponsorship Services . Demands for the period prior to 01.07.2010 - HELD THAT - It is an admitted fact that the appellants are sponsoring IPL teams through the team owner companies for which agreements were entered between them. In view of the definition of Sponsorship Services the entire demand confirmed by the adjudicating authority against the appellant for the services rendered by M/s. Royal Challengers Sports Pvt. Ltd. are exempted since the activities are carried out prior to 01.07.2010. This Tribunal in the matter of Hero Motocorp Limited 2013 (6) TMI 447 - CESTAT NEW DELHI held that the sponsorship of IPL team would amount to sponsoring the sport event and it is fully covered by the exclusion provision of definition of Sponsorship Service . This decision was upheld by the Hon ble Supreme Court in 2015 (7) TMI 1163 - SC ORDER and their Lordships had observed that The appellate Tribunal in its impugned order had held that several rights accuring to appellant under sponsorship agreement with GMR owner of Delhi Daredevi team clearly indicates that sponsorship of team is in relation to participation in IPL T-20 Cricket Tournament. This agreement is a clear commercial transaction and is for sponsorship of T-20 sport event and not owner of Delhi Daredevils or BCCI-IPL. Accordingly agreement falls within exclusionary clause of Section 65(105)(zzzn) of Finance Act 1994 and appellants are not liable to pay Service Tax. Hence the demands for the period prior to 01.07.2010 are unsustainable. Demands raised for the services rendered prior to 01.07.2010 but payments received after 01.07.2010 - HELD THAT - With regard to demands raised for the services rendered prior to 01.07.2010 but payments received after 01.07.2010 are not taxable in terms of 2nd proviso to subrule (1) of Rule 6 Service Tax Rules 1994 - Hence the demands made under Sl.No.3 and 8 of Annexure 1 of show-cause notice with respect to (i) Bill No.KRSTL/2010-11/USL4 dated 12.07.2010 issued by IPL Team Knight Raiders to the appellant and (ii) Bill No.13/DCSVL/2010 dated 24.07.2010 issued by IPL Team Decan Chargers are set aside since the last match was concluded on 25.04.2010 i.e. services were rendered prior to 01.07.2010. Demand confirmed for the services rendered after 01.07.2010 - HELD THAT - It is evident that the appellant had discharged duty liability with interest before issue of show-cause notice and this fact has been reflected in their ST-3 returns. This demand is confirmed as the services were rendered after 01.07.2010. Levy of penalty - HELD THAT - Considering the fact that the appellant had paid the said amount before issuance of show-cause notice penalty imposed by the adjudicating authority is unsustainable. Conclusion - i) Demands for sponsorship services rendered prior to 01.07.2010 are set aside as unsustainable. ii) Demands relating to services rendered before 01.07.2010 but paid after that date are also set aside. iii) Demand for services rendered after 01.07.2010 was upheld since tax was payable; however penalty was quashed due to pre-show-cause payment. Appeal allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Taxability of Sponsorship Services for IPL Payments During 2010-11 Relevant Legal Framework and Precedents: The Tribunal examined the definition of 'Sponsorship Services' under Section 65(105)(zzzn) of the Finance Act, 1994, as it stood prior to and after 01.07.2010. Prior to 01.07.2010, the definition excluded "services in relation to sponsorship of sports events" from taxability. Post 01.07.2010, the definition was amended to include sponsorship services more broadly, including naming events, displaying logos, and sponsoring prizes, but excluding donations or gifts without reciprocal obligations. Key precedents relied upon included the Tribunal's decision in Hero Motocorp Limited vs. Commissioner of Service Tax, upheld by the Supreme Court, which held that sponsorship of IPL teams amounted to sponsorship of the sports event itself and thus fell within the exclusion clause prior to 01.07.2010. Other supporting decisions included rulings in Vodafone Cellular Ltd. and Godrej Consumer Products Ltd. Court's Interpretation and Reasoning: The Tribunal held that since the sponsorship agreements were with IPL team owners for participation in the IPL T20 Tournament, the services rendered were in relation to sponsorship of sports events. Therefore, under the pre-01.07.2010 definition, these services were excluded from taxability. The Tribunal emphasized that the agreements were commercial transactions for sponsoring the sport event, not merely the team owners. Application of Law to Facts: The appellant's payments to IPL franchise companies for sponsorship services rendered prior to 01.07.2010 were not liable to service tax, as these fell within the exclusionary clause. The demand confirmed by the adjudicating authority for these services was thus unsustainable. Treatment of Competing Arguments: The Revenue conceded that the taxability of activities prior to 01.07.2010 was covered by the cited precedents and did not contest this point vigorously. Conclusion: Sponsorship services rendered prior to 01.07.2010 in relation to IPL teams were not taxable under the Finance Act, 1994, and demands for such periods were set aside. Issue 2: Taxability of Sponsorship Services Rendered Prior to 01.07.2010 but Paid After 01.07.2010 Relevant Legal Framework: Rule 6(1) of the Service Tax Rules, 1994, specifically the second proviso, provides that "notwithstanding the time of receipt of payment towards value of services, no service tax shall be payable for the part or whole of value of services, which is attributable to service provided during the period when such service was not taxable." Court's Interpretation and Reasoning: The Tribunal noted that certain invoices related to IPL teams were issued after 01.07.2010, but the services had been rendered prior to that date (last IPL match concluded on 25.04.2010). Applying Rule 6(1), the Tribunal held that the timing of payment or invoice issuance after 01.07.2010 does not attract service tax if the service itself was rendered before the taxability date. Application of Law to Facts: Payments related to invoices dated 12.07.2010 and 24.07.2010 for services rendered before 01.07.2010 were not taxable. The demand in respect of these payments was therefore set aside. Treatment of Competing Arguments: The appellant's contention was accepted without opposition from the Revenue on this point. Conclusion: Service tax is not payable on sponsorship services rendered prior to 01.07.2010 even if payment was made after that date. Issue 3: Taxability and Penalty on Sponsorship Services Rendered After 01.07.2010 Relevant Legal Framework: Post 01.07.2010, sponsorship services became taxable under the Finance Act, 1994. The appellant's liability to pay service tax on sponsorship services rendered after this date was not disputed. Court's Interpretation and Reasoning: The Tribunal observed that for the services rendered by M/s. Royal Challengers Sports Pvt. Ltd. after 01.07.2010, the appellant had discharged the service tax liability along with interest before issuance of the show-cause notice, as reflected in their ST-3 returns. Application of Law to Facts: The demand for service tax on services rendered after 01.07.2010 was confirmed as valid. However, since the appellant had paid the tax and interest prior to the show-cause notice, the penalty imposed by the adjudicating authority was held to be unsustainable. Treatment of Competing Arguments: The Revenue did not dispute the appellant's payment before the show-cause notice but maintained the demand itself. The Tribunal balanced this by confirming the demand but setting aside the penalty. Conclusion: Service tax demand for post-01.07.2010 sponsorship services was upheld; penalty was quashed due to pre-show-cause payment of tax and interest. 3. SIGNIFICANT HOLDINGS "The appellate Tribunal in its impugned order had held that several rights accruing to appellant under sponsorship agreement with GMR owner of Delhi Daredevils team clearly indicates that sponsorship of team is in relation to participation in IPL T-20 Cricket Tournament. This agreement, is a clear commercial transaction and is for sponsorship of T-20 sport event and not owner of Delhi Daredevils or BCCI-IPL. Accordingly, agreement falls within exclusionary clause of Section 65(105)(zzzn) of Finance Act, 1994 and appellants are not liable to pay Service Tax. Demand and penalty was set aside." Core principles established include:
Final determinations on each issue are:
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