IPL PLAYERS AND RCM ON AUCTION MONEY PAID TO THEM, Goods and Services Tax - GST

[Sadanand Bulbule]

My deepest condolences to those who died in yesterday’s stampede in Bengaluru during celebrations of RCB victory. My heart and thoughts are with the bereaved families. May their souls rest in peace. 🙏🙏

It is admitted fact that cricketers supply services as an individual to a body corporate (IPL franchise) and their services are sold and bought in the corporate auction held glittering ceremony in five star ambience.

My question here is: Are these IPL Corporate Clubs liable to GST under RCM on the bid amount individually paid to such cricketers?

Experts to throw light on this matter.

Therefore:

• The IPL franchise (company) is liable to pay GST under RCM on the auction money paid to the cricketer if:
  • The cricketer is providing services in their individual capacity, and
  • The franchise is a body corporate (which it typically is).

Posts / Replies

[YAGAY andSUN]

In terms of the provisions of the Central Goods and Services Tax Act, 2017, and the Notification No. 13/2017 – Central Tax (Rate) dated 28th June 2017, services supplied by an individual as a performing artist or sportsperson to a body corporate fall under the ambit of reverse charge mechanism (RCM), subject to specific conditions.

As per Entry No. 6 of the aforementioned notification (as amended), where services are provided by an individual sportsperson (including a cricketer) by way of participation in a sporting event organized by a recognized body or franchise, and such services are received by a body corporate (e.g., IPL franchise), the recipient is liable to discharge GST under RCM. The consideration paid to the cricketer, including the auction amount (retainer or match fees), constitutes taxable supply of services under the heading “services by an individual as a sportsperson.”

Further, the sportsperson is considered to be providing services in their individual capacity and not as a body corporate or through a business entity. The IPL franchise, being a body corporate registered under the Companies Act, 2013, is treated as the recipient of such services and is therefore liable to pay GST under Section 9(3) of the CGST Act, 2017, read with the aforementioned notification.

Thus, it is legally tenable that the IPL franchise shall be liable to pay GST under reverse charge on the auction or bid amount paid to cricketers, provided the cricketer is not himself registered under a corporate entity or supplying through a third-party business. The nature of the auction and the venue of its conduct have no bearing on the applicability of tax; the liability is determined based on the nature of the service, the status of the supplier, and the recipient under law.

[Sadanand Bulbule]

Dear Sir

Thanks for your validation.

[KASTURI SETHI]

Dear Sir Ji,

                  Also read the following case law :-

2020 (34) G.S.T.L. 456 (Tri. - Chan.)

IN THE CESTAT, REGIONAL BENCH, CHANDIGARH

[COURT NO. I]

S/Shri Ashok Jindal, Member (J) and Bijay Kumar, Member (T)

KPH DREAM CRICKET PVT. LTD.

Versus

COMMR. OF C. EX. & S.T., CHANDIGARH-I

Final Order Nos. 60532-60536/2019, dated 21-5-2019 in Appeal Nos. ST/354/2011, 604/2012, 51089/2014 & 50086/2015 and ST/597/2012

IPL Tournament - Franchise service - Central right income - Contract entered by assessee, a cricket team with BCCI to set up, operate and maintain team for participating in IPL Tournament - Said contract being on revenue sharing basis and parties thereto being co-venturers, activities carried thereunder not to be considered as service and share of revenue/central right income earned by assessee not liable to Service Tax under Business Support Service - Sections 65(104c) and 65(105)(zzzq) of Finance Act, 1994. [paras 6, 7]

BCCI-IPL only organizing cricket tournament and not being commercial organization, any services provided to it are not liable to Service Tax. [para 8]

IPL Tournament - Business Support Service - Fee paid by a cricket team to overseas players for playing cricket and also participating in promotional events of IPL - Only 10% of such fee retained by the said player in case he does not play any match - Promotional activities being ancillary in nature to the main activity of playing cricket, the aforesaid fee paid by assessee not liable to Service Tax under Business Support Service - Sections 65(104c) and 65(105)(zzzq) of Finance Act, 1994. [paras 13, 14, 15]

IPL Tournament - Manpower Recruitment or Supply Agency service - Player Transfer Fee received by assessee, a cricket team for transfer of a player to another team not taxable under Manpower Recruitment or Supply Agency service - Sections 65(68) and 65(105)(k) of Finance Act, 1994. [paras 17, 18]

IPL Tournament - Sponsorship service provided by a foreign entity to assessee, an IPL cricket team - Such service involved displaying of sponsorship mark on shirts of team players, signs at the game to be played at home stadium and mark branding in corporate hospitality area - Sponsorship of sports events having been excluded from definition of taxable service and IPL being a sport event, sponsorship of IPL team not taxable under Sponsorship service prior to 26-2-2010 - Sections 65(99a) and 65(105)(zzzn) of Finance Act, 1994. [paras 22, 23, 24]

IPL Tournament - Manpower Recruitment or Supply Agency service - Player Release Fee paid by assessee, a cricket team to overseas Cricket Control Boards for release of players to enable them to play matches other than those conducted by their respective Cricket Boards, not liable to Service Tax - Sections 65(68) and 65(105)(k) of Finance Act, 1994. [paras 25, 26]

IPL Tournament - Business Auxiliary Service - Amount paid by assessee, a cricket team to overseas agencies for holding negotiations with overseas players in respect of IPL matches to be conducted outside India, being not a commission for promotion/marketing/sale of goods but a predetermined fee for securing players, not taxable particularly when organizing sport event neither a service nor any goods - Sections 65(19) and 65(105)(zzb) of Finance Act, 1994. [para 28]

IPL Tournament - Business Support Service - Amount paid by assessee, a cricket team to an overseas entity for providing team logistical liaison, PR and marketing media services for organizing IPL Cricket Tournament, not liable to Service Tax under Business Support Service as such cricket tournaments are not in the nature of business - Sections 65(104c) and 65(105)(zzzq) of Finance Act, 1994. [para 32]

IPL Tournament - Cenvat credit not required to be reversed in respect of sale of tickets for cricket tournament which is not a service - Rule 6(3) of Cenvat Credit Rules, 2004. [para 34]

Assessee’s appeals allowed/Revenue’s appeal dismissed

CASES CITED

ACL Mobile Ltd. v. Commissioner — 2019 (20) G.S.T.L. 362 (Tribunal) — Referred........... [Para 5]

Citibank NA v. Commissioner — 2015 (38) S.T.R. 520 (Tribunal) — Referred.................... [Para 21]

Commissioner v. Arvind Mills Ltd. — 2014 (35) S.T.R. 496 (Guj.) — Relied on.... [Paras 16, 17, 26]

Commissioner v. Citi Bank N.A. — 2015 (38) S.T.R. J427 (S.C.) — Referred...................... [Para 21]

Commissioner v. Hero Motocorp Ltd. — 2016 (44) S.T.R. J59 (S.C.) — Referred................ [Para 20]

Commissioner v. Mormugao Port Trust — 2018 (19) G.S.T.L. J118 (S.C.) — Relied on. [Paras 5, 6]

Commissioner v. Piyush Chawla — 2018 (7) TMI 1009-CESTAT-Delhi — Referred.......... [Para 12]

Commissioner v. Rajasthan Cricket Association — 2018-TIOL-1345-CESTAT-DEL — Relied on [Paras 5, 8]

DLF Ltd. v. Commissioner — 2012 (27) S.T.R. 512 (Tribunal) — Referred.................. [Paras 21, 23]

Doypack Systems Pvt. Ltd. v. Union of India — 1988 (36) E.L.T. 201 (S.C.) — Referred.. [Para 20]

Gujarat State Fertilizers and Chemicals Limited v. Commissioner — 2016 (45) S.T.R. 489 (S.C.) — Referred  [Para 5]

Hero Motocorp Ltd. v. Commissioner — 2013 (32) S.T.R. 371 (Tribunal) — Referred........ [Para 20]

Karn Sharma v. Commissioner — 2018 (4) TMI 111-CESTAT-Allahabad — Referred....... [Para 12]

Mormugao Port Trust v. Commissioner — 2017 (48) S.T.R. 69 (Tribunal) — Relied on. [Paras 5, 6]

Ruchi Infrastructure Limited v. Commissioner — 2018-TIOL-90-CESTAT-DEL — Referred [Para 5]

Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal — 1995 (2) SCC 161 — Referred [Para 5]

Sir Ganga Ram Hospital v. Commissioner — 2018 (11) G.S.T.L. 427 (Tribunal) — Relied on [Paras 5, 7]

Sourav Ganguly v. Union of India — 2016 (43) S.T.R. 482 (Cal.) — Relied on............ [Paras 12, 13]

Umesh Yadav v. Commissioner — 2018 (2) TMI 136-CESTAT-Mumbai — Relied on....... [Para 14]

Vidarbha Cricket Association v. Commissioner — 2015 (38) S.T.R. 99 (Tribunal) — Referred [Para 5]

DEPARTMENTAL CLARIFICATIONS CITED

C.B.E. & C. Circular No. 96/7/2007-S.T., dated 23-8-2007............................................... [Para 25]

C.B.E. & C. Circular No. 334/1/2010-S.T., dated 26-2-2010..................................... [Paras 21, 24]

REPRESENTED BY :        Shri B.L. Narasimhan and Ms. Krati Singh, Advocates, for the Assessee.

Shri Atul Handa, AR, for the Department.

[Order per : Ashok Jindal, Member (J)]. - These appeals are directed against the impugned orders wherein the demands for the period 2009-10 were dropped against the appellant-assessee and for the remaining period, the demand of service tax were confirmed against the appellant-assessee. Therefore, these appeals.

2. The facts of the case are that the appellant-assessee is the owner of Kings XI Punjab, a cricket team, entered into an agreement with Board of Cricket Control of India - Indian Premier League (BCCI-IPL) to operate a franchise and set up, operate and maintain team which would participate in IPL tournament. An investigation was conducted and it revealed that the appellant-assessee has not paid service tax on the various services. Therefore, various show cause notices were issued to the appellant-assessee to demand service tax as under :-

(a)     Business Support Service for service provided to BCCI-IPL;

(b)     Business Auxiliary Services for service received from foreign agencies

(c)     Business Support Service for payment made to foreign players

(d)    Manpower Recruitment or Supply Agency Service for player transfer fees

(e)     Sponsorship services for amount received from Emirates, Dubai

(f)      Manpower Recruitment or Supply Agency Service for player release fees

(g)     Business Support Services for amount paid to African Earth Events with respect to PR. and logistics

(h)    Amount in respect of gate receipts under Rule 6(3)(i) of Cenvat Credit Rules, 2004.

3. All show cause notices were adjudicated but show cause notice dated 20-10-2010 was dropped by the adjudicating authority. Therefore, the Revenue is in appeal against the said order. For rest of the period, other show cause notices were confirmed and demand of service tax were raised against the appellant-assessee along with interest and penalties were also imposed. Against the said impugned orders, the appellant-assessee is in appeal.

4. As the show cause notices proposed to demands of service tax under various heads, therefore, each of heads is discussed separately as under :-

(a) the demand of service tax on Central Rights Income.

5. The case of the Revenue is that the appellant-assessee is having franchise relationship and by way of maintaining a team is supporting business of BCCI in IPL tournament.

5(i). The submission of the Ld. Counsel for the appellant-assessee is that the appellant-assessee has entered into a contractual agreement with BCCI-IPL on the basis of a revenue sharing mechanism. As per the agreement, both the parties are co-venturers, each party is carrying on its obligation and the income is shared as the agreed terms. Income received by the appellant-assessee is its share of profit from the said co-ventures. It is his submission that in case the entity suffers any loss, the appellant-assessee will not receive any share either, which is against the essentials of a ‘service’. BCCI-IPL is the platform through which the activities are carried on and the appellant-assessee, being one of the team owners, is providing the team and managing the players. The two entities are functioning separately for their mutual benefits and are not providing any service to each other. He also relied on the decision of this Tribunal in the case of Mormugao Port Trust v. CCE - 2017 (48) S.T.R. 69 (Tri. - Mum.) to say that the arrangement between the appellant-assessee and BCCI is in the nature of a co-venture, the share of revenue earned by the appellant-assessee under the agreement cannot be subjected to service tax. The appeal against the said order has been dismissed by Hon’ble Apex Court reported in 2018 (19) G.S.T.L. J118 (S.C.). He also relied upon the decision of this Tribunal in the case of Sir Ganga Ram Hospital v. CCE - 2018-TIOL-352-CESTAT-DEL = 2018 (11) G.S.T.L. 427 (Tribunal), Ruchi Infrastructure Limited v. CCE - 2018-TIOL-90-CESTAT-DEL, Gujarat State Fertilizers and Chemicals Limited v. CCE - 2016-TIOL-198-SC-ST = 2016 (45) S.T.R. 489 (S.C.) and ACL Mobile Limited v. CCE - 2019 (20) G.S.T.L. 362 Tri. - Del.).

5(ii). Without prejudice to the above, it is the contention of the Ld. Counsel that the services cannot be classified under “Business support service”. As the definition of BSS includes all those activities which relate to the marketing, sales and distribution of goods and services, and the arrangement between the appellant-assessee and BCCI-IPL cannot fall either under the ‘means’ or ‘includes’ portion of definition as the nature of activities is very different. In alternate, it is his submission that BCCI is not engaged in business and commerce, therefore, the demand under the category of BSS is not sustainable. BCCI is engaged in the promotion and control of cricket and not engaged in the business or commerce to say that, he relied upon the decision of the Hon’ble Supreme Court in the case of Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal - 1995 (2) SCC 161 wherein it was held that BCCI is not a commercial organization. He relied upon the decision of this Tribunal in the case of CCE, Jaipur v. Rajasthan Cricket Association and vice versa - 2018-TIOL-1345-CESTAT-DEL and Vidarbha Cricket Association v. CCE - 2015 (38) S.T.R. 99 (Tri. - Mum.).

6. We have gone through the agreement and find that the agreement is in nature of revenue sharing and the said issue has been examined by this Tribunal in the case of Mormugao Port Trust (supra) wherein this Tribunal has observed as under :-

“17. The question that arises for consideration is whether the activity undertaken by a co-venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor-contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent.

18. In our view, in order to render a transaction liable for service tax, the nexus between the consideration agreed and the service activity to be undertaken should be direct and clear. Unless it can be established that a specific amount has been agreed upon as a quid pro quo for undertaking any particular activity by a partner, it cannot be assumed that there was a consideration agreed upon for any specific activity so as to constitute a service. In Cricket Club of India v. Commissioner of Service Tax, reported in 2015 (40) S.T.R. 973 it was held that mere money flow from one person to another cannot be considered as a consideration for a service. The relevant observations of the Tribunal in this regard are extracted below :

“11. ...Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. ... The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient.

12. ... Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transaction will not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make the contribution in return for the benefit so derived.

13. ... Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "club or association" is the recipient of that contribution.

14. ... To the extent that any of these collections are directly attributable to an identified activity, such fees or charges will conform to the charging section for taxability and, to the extent that they are not so attributable, provision of a taxable service cannot be imagined or presumed. Recovery of service tax should hang on that very nail. Each category of fee or charge, therefore, needs to be examined severally to determine whether the payments are indeed recompense for a service before ascertaining whether that identified service is taxable.”

19. We are accordingly of the view that activities undertaken by a partner/co-venturer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed.”

“23. We are accordingly of the view that there is no service that has been rendered by the Appellant, much less the taxable service of renting of immoveable property. The money flow to the Assessee from SWPL, under the nomenclature of Royalty, is not a consideration for rendition of any services but in fact represents the Appellant's share of revenue arising out of the Joint Venture being carried on by the Assessee and SWPL.”

The said decision has been affirmed by the Hon’ble Apex Court (supra).

7. Further in the case of Sir Ganga Ram Hospital (supra), wherein it was held that if there is Revenue sharing by the doctors wherein some part of fees retained by the hospital and some is given to the doctor, the same cannot be taxed under Business Support services. Therefore, we hold that the appellant-assessee is not providing any Business Support Service.

8. We also take note of the fact that BCCI is not commercial organization and only organizing game of cricket. Therefore any service rendered to BCCI-IPL is not in the nature of support of business of BCCI. Therefore, on that ground also; no service tax is payable by the appellant-assessee as held by this Tribunal in the case of Rajasthan Cricket Association (supra) wherein this Tribunal has observed as under :-

7. Regarding appeal by the Revenue, we note that irrespective of the status of BCCI as a charitable organization or otherwise, we note that BCCI is sole organization incharge of game of cricket officially, in India. Managing, controlling and organizing the game of cricket, its development and other allied activities cannot be considered as business or commerce for service tax purpose. Such activities are with reference to managing a recognized sports. BCCI being the sole authority to manage the sport of cricket in India cannot be considered as involved in business or commerce with reference to activity of developing infrastructure for such sport. We do not see any infirmity in the findings recorded by the Original Authority while dropping the demand under the category of support service of business or commerce.

9. Therefore, on central rights income, no service tax is payable by the appellant-assessee. Therefore, the demand on that ground is set aside and in Appeal No. ST/597/2012, the Commissioner has rightly dropped the demand against the appellant-assessee.

(b) fee paid to overseas players.

10. The Revenue sought to demand service tax from the appellant-assessee for the fee paid to overseas players under the category of Business Support Service.

11. The case of the appellant-assessee is that they are under the obligation to raise a team of 16 players for which the appellant-assessee entered into an agreement with various players including players of foreign origin. The agreement specified that the players were engaged as professional cricketers and will be provided with player fee. The players were given a consolidated consideration for fulfilling all their obligations under the agreement, which included playing cricket and participating in league activities relating to promotional events. The players spent majority of their time playing cricket which is not taxable service. If a player is unable to play matches for the team, then he is entitled to retain only 10% of the player fee which shows that the consideration received by a player was essentially towards playing matches only.

12. It is his submission that the promotional activities were ancillary to the main activity of playing cricket. Therefore, no service tax is payable. To support his contention, he relied upon the decision of Hon’ble Calcutta High Court in the case of Sourav Ganguly v. Union of India - 2016 (43) S.T.R. 482 (Cal.) and decision of this Tribunal in the case of Shri Karn Sharma v. CCE & ST - 2018 (4) TMI 111-CESTAT-Allahabad and C.E., C & CGT v. Piyush Chawla - 2018 (7) TMI 1009-CESTAT-Delhi.

13. We find that the main activity of the appellant-assessee is to play cricket apart from that, the appellant-assessee are engaged in the promotional activities which are ancillary to the main activity of playing cricket. In the case of Sourav Ganguly (supra), Hon’ble Calcutta High Court has observed as under :

“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 for which the franchisee was to provide fee to the petitioner. The petitioner was under full control of the franchisee and had to act in the manner instructed by the franchisee. The apparel that he had to wear was team clothing and the same could not exhibit any badge, logo, mark, trade name, etc. The petitioner was not providing any service as an independent individual worker. His status was that of an employee rather than an independent worker or contractor or consultant. In my opinion, it cannot be said that the petitioner was rendering any service which could be classified as business support service. He was simply a purchased member of a team serving and performing under KKR and was not providing any service to KKR as an individual.”

14. We further find that the issue has been examined by this Tribunal in the case of Umesh Yadav v. CCE - 2018 (2) TMI 136-CESTAT-Mumbai, wherein this Tribunal has observed as under :-

“6. After considering the submissions of both the parties and on perusal of the material on record, we find that the show cause notice was issued proposing to demand service tax under business support service and the original authority has confirmed the demand under the said category whereas at the appellate stage, the Commissioner (Appeals) has changed the classification from business support service to brand promotion service suo motu and unilaterally which is not permitted under law. Further, we find that this issue has been settled in favour of the assessee by various decisions relied upon by the appellant-assessee cited supra. Therefore, by following the ratio of the said decisions, we are of the considered opinion that the impugned order passed by the Commissioner (Appeals) going beyond the show cause notice is not sustainable in law and, therefore, we set aside the impugned order and allow the appeal of the appellant-assessee. We also find that the department is also holding the view that the appellant is not liable to tax under the category of brand promotion service. Consequently, we do not find any merit in the department’s appeal in view of the various decisions cited supra.”

15. Therefore, we hold that on player’s fee, no service tax is payable by the appellant-assessee and in Appeal No. ST/597/2012, the Commissioner has rightly been dropped the demand of service tax on player’s fee.

(c) Demand of service tax on player transfer fees under the category of manpower recruitment or supply agency services.

16. The contention of the Ld. Counsel for the appellant is that the appellant-assessee received the amount on account of transfer of Mr. Dinesh Kartik to Mumbai Indians. The demand raised under the category of ‘Manpower Recruitment or Supply Agency Service’. It is his submission that the appellant-assessee merely owns a franchise and ensures that the players forming the team in the matches organized by BCCI-IPL. When the player is transferred to another team, the appellant-assessee retains no right over him and the said player is obliged to undertake the activities as required by the other team. In fact, the player is simply sold to another team and that player does not play for the appellant-assessee for the entire period specified in the agreement. It is further submitted that the appellant-assessee is not engaged in providing services in relation to recruitment or supply of manpower i.e. the same is not its principal business. The appellant-assessee had not control over the player once the same is transferred to another team. Therefore, the activity cannot be taxed under the ‘Manpower Recruitment or Supply Agency Service’. To support this, he relied upon the decision of Hon’ble Gujarat High Court in the case of CST v. Arvind Mills Limited - 2014 (35) S.T.R. 496 (Guj.).

17. We have heard the Ld. Counsel for the appellant-assessee. We find that the prime activity of the appellant is that they are engaged in the activity of organizing the cricket tournament and ‘manpower recruitment or supply agency service’ is not the principal business of the appellant-assessee. Therefore, the service tax cannot be demanded under the category of ‘manpower recruitment or supply agency service’ for transfer of player to another team as held by the Hon’ble Gujarat High Court in the case of Arvind Mills Limited (supra) wherein Hon’ble High Court observed as under :-

“6. We have to examine the definition of Manpower Supply Recruitment Agency in background of such undisputable facts. The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied. In the present case, facts are to the contrary.”

18. As the main activity of the appellant-assessee to play cricket, therefore, no service tax is payable by the appellant-assessee under the category of ‘Manpower Recruitment or Supply Agency service’ for transfer of player fee.

(d) Demand of service tax of Rs. 58,69,790/- on the amount received as sponsorship service.

19. Ld. Counsel for the appellant-assessee submits that the appellant-assessee entered into an agreement with Emirates, Dubai for granting the sponsorship rights of the cricket team of the appellant to Emirates. Under the agreement, Emirates had the right to display the sponsorship mark on all the shirts of the team players, signs at the game to be played at the home stadium, mark branding in the corporate hospitality area. The demand was confirmed on this account on the ground that the Emirates had invested money for the promotion of his own brand and not the sports event, that profit is being generated through this activity and that Emirates did not sponsor the sporting event and therefore, the exclusion under the sponsorship service is not available to them, therefore, they are not liable to pay service tax under Section 65(105)(zzn) of the Finance Act, 1994.

20. Ld. Counsel further submits that exclusion clause consists of the phrase ‘in relation to’ which has been interpreted to have very broad and wide expression in the light of the decision of Hon’ble Apex Court in the case of Doypack Systems Pvt. Ltd. v. Union of India - 1988 (36) E.L.T. 201 (S.C.) and the decision of this Tribunal in the case of Hero Motocorp Ltd. v. CST, Delhi - 2013 (32) S.T.R. 371 (Tri. - Del.) which has been affirmed by the Hon’ble Apex Court reported in 2016 (44) S.T.R. J59 (S.C.).

21. He further submits that IPL was conceived as a cricket tournament and in common parlance also qualifies as a sport event. Further, the agreement between BCCI and the appellant-assessee also shows that IPL is a cricket tournament. As per the decision of this Tribunal in the case of DLF Ltd. v. CST - 2012 (27) S.T.R. 512 (Tri. - Del.), and Citi Bank NA v. CST - 2015 (38) S.T.R. 520 (Tribunal) which has been affirmed by Hon’ble Supreme Court reported in 2015 (38) S.T.R. J427 (S.C.), wherein it has been held that IPL is a cricket tournament. As per C.B.E. & C. Circular No. 334/1/2010, dated 26-2-2010, the exclusion clause is available for sponsorship services pertaining to sports events which was withdrawn w.e.f. 26-2-2010 and the period involved in this case is prior to that, therefore, no service tax is payable by the appellant-assessee.

22. We have gone through the arguments advanced by the Ld. Counsel for the appellant-assessee and find that the demand of service tax on account of sponsorship service by Emirates, Dubai, who did not sponsor sport event. But under the agreement, Emirates had the right to display the sponsorship mark on all the shirts of the team players, signs at the game to be played at the home stadium, mark branding in the corporate hospitality area. Although the said activity had incorporated in sponsorship service as per Section 65(105)(zzn) of the Finance Act, 1994 which is reproduced as under :-

“(105) taxable service means any service provided or to be provided, - (zzzn) to any body corporate or firm, by any firm receiving sponsorship, in relation to such sponsorship, in any manner, but does not include services in relation to sponsorship of sports events.”

23. We have gone through the definition of sponsorship service. As per definition, it does not include services in relation to sponsorship of sports events and IPL is a sport event as held by this Tribunal in the case of DLF Ltd. (supra), therefore sponsoring of IPL team is not covered under sponsorship of sport event.

24. We further take note of the fact that as per C.B.E. & C. Circular No. 334/1/2010, dated 26-2-2010, the exclusion clause is available for sponsorship services pertaining to sports events was withdrawn and the period involved in this case is prior to that, in that circumstance, we hold that the demand under the category of sponsorship service is not sustainable.

(e) Demand of service tax of Rs. 10,47,356/- on the player release fee paid to overseas cricket board under the category of ‘manpower recruitment or supply agency service’.

25. Ld. Counsel submits that the demand has been confirmed against the appellant-assessee on the fee paid to overseas cricket board for release of player under DLF IPL Player Regulations to enable those players to play matches other than the ones conducted by their respective Cricket Boards. The said player can enter into an agreement with the appellant-assessee only after seeking permission from its respective Board. The said has been reverse charge mechanism on the amounts paid to these cricket boards. The said demand is unsustainable for the reason that the overseas cricket boards are not engaged in providing services in relation to supply of manpower, which should be the essence of the agreement. Further, the players are not employees of these cricket boards and are only registered with them. He has also relied on the C.B.E. & C. Circular No. 96/7/2007-S.T., dated 23-8-2007 to say that manpower should be contractually employed by manpower recruitment agency. He prayed that no service tax is payable under the category of ‘Manpower Recruitment or Supply Agency Service’.

26. As discussed above, hereinabove, neither cricket board nor the appellant-assessee are engaged in providing Manpower Recruitment or Supply Agency Service’ of employees. Therefore, no service tax is payable by the appellant-assessee as held by the Hon’ble Gujarat High Court in the case of Arvind Mills Ltd. (supra).

(f) Demand of service tax on the amount paid to overseas agency.

27. The demand of service tax has been confirmed against the appellant-assessee under the category Business Auxiliary Service on the amount paid to overseas agencies for holding negotiations with overseas players as regards arrangement with IPL, which were undertaken outside India. Ld. Counsel for the appellant-assessee submits that the activities performed by the overseas agencies do not fall under the definition of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. In the impugned order, the demand sought to be confirmed on the ground that the overseas agencies are providing services in the form of commission agents. It is submitted that the services received by the appellant-assessee do not fall under the category of business auxiliary service or under any of the sub-clauses. The payment made to overseas agencies is not a commission but a predetermined fee for securing players for the appellant-assessee. Moreover, the overseas agencies are not causing any sale, purchase of goods or providing services on behalf of the appellant-assessee. Therefore, it cannot be said to be operating as a commission agent.

28. We find that the appellant-assessee entered into agreement with the overseas agencies for holding negotiations with overseas players as regards arrangement with IPL, which were undertaken outside India and for that activity, the amount has been paid to the overseas agencies. Such amount has been paid by the appellant-assessee for arranging player, who has to play cricket in IPL tournament and as per Section 65(19) of Finance Act, 1994 definition of business auxiliary service, the service tax is required to be paid for promotion or marketing or sale of goods produced or provided by or belonging to the client or promotion or marketing of service provided by the client. Admittedly, organizing sport event is neither any service nor any goods, therefore, the said amount paid on account of negotiations cannot be qualified as Business Auxiliary Service under Section 65(19) of Finance Act, 1994. Therefore, we hold that no service tax is payable by the appellant-assessee.

(g) Demand of service tax of Rs. 4,85,834/- has been confirmed on the amount paid to African Earth Events under the category of Business Support Service.

29. Ld. Counsel for the appellant-assessee submits that the appellant-assessee has entered into an agreement with M/s. African Earth Events for the purpose of team logistical liaison, PR and marketing media services. The said demand has been confirmed under the category of Business Support Service on the amount paid to African Earth Events under reverse charge mechanism.

30. It is his submission that the services received by the appellant-assessee are in the nature of public relations management service and not business support service. Therefore, the foundation of the show cause notice is incorrect.

31. It is his submission that the cricket tournaments are not in the nature of business, which is the prime requirement for a demand to survive under the category of Business Support Service. Therefore, no service tax is payable by the appellant-assessee.

32. We find in this case, the main object of the appellant-assessee is to promote game of cricket in India through IPL tournaments. For obtaining service of organizing the said tournaments cannot be treated a service is in nature of Business Support Service. Therefore, no service tax is leviable under the category of Business Support Service as discussed hereinabove in the preceding paragraphs, hence the demand of service tax is not sustainable.

(h) Demand of service tax in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004.

33. The demand sought to be recovered on account of gate receipts collected by the appellant-assessee terming it that they have provided any exempted service, therefore, in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004, they are required to reverse the amount.

34. We find that the amount has been received by the appellant as the sale of ticket for cricket tournament which is not service, therefore, when it is not the service, it cannot be termed as service, no service tax is required to be reversed. Further, for the period 2010-12, the appellant-assessee has also reversed the said amount, therefore, no demand is sustainable on that account.

35. In view of the above discussion, we hold that the demands of service tax are not sustainable against the appellant-assessee. Therefore, the demands confirmed by way of impugned order are set aside.

36. In the result, the appeals filed by the appellant-assessee are allowed.

37. With regard to the appeal filed by the Revenue, we do not find any merit in this appeal and the same is dismissed.

(Pronounced in the open Court on 21-5-2019)

 

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[YAGAY andSUN]

Upon reviewing the provisions of the Central Goods and Services Tax Act, 2017, and Notification No. 13/2017–Central Tax (Rate) dated 28th June 2017, your assertion regarding the applicability of the Reverse Charge Mechanism (RCM) on services provided by individual sportspersons to a body corporate is substantially correct, with certain clarifications.

Analysis of Notification No. 13/2017–Central Tax (Rate), Entry No. 6

Entry No. 6 of Notification No. 13/2017–Central Tax (Rate) stipulates that:

“Services supplied by a director of a company or a body corporate to the said company or the body corporate”

This entry specifically addresses the services provided by directors to their respective companies or bodies corporate. It does not encompass services rendered by individual sportspersons to a body corporate.

Clarification on Applicability to Individual Sportspersons

The services provided by individual sportspersons, such as cricketers participating in events like the Indian Premier League (IPL), are not covered under Entry No. 6. Therefore, the Reverse Charge Mechanism under Section 9(3) of the CGST Act, 2017, as per this notification, does not apply to such services.

Conclusion

In light of the above, it is concluded that the IPL franchise, as a body corporate, is not liable to pay GST under the Reverse Charge Mechanism for services received from individual sportspersons, including cricketers, participating in the IPL.