TMI Blog2016 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... ot maintainable at all and should not be entertained for adjudication. - the preliminary issue of maintainability of the writ petition is decided in favour of the petitioner. Invocation of extended period of limitation in the SCN - Held that:- the petitioner was prompt and diligent in responding to all the notices issued by the Department and in his replies, the petitioner clearly explained the nature and scope of his activities. Subsequently, copies of contracts entered into by the petitioner with the corporate entities were also made available to the Department. In my view, there was full and sufficient disclosure of the nature of the petitioner’s activities to the Department and it cannot be said that the petitioner suppressed material facts to deceive the Department with intent to evade payment of service tax. It is also be noted that it is stated in the last paragraph of the impugned show cause notice that the same is ‘based on records made available’. On a plain reading this means that the notice was issued on the basis of records and materials submitted by the petitioner. Hence, there does not seem to be any basis in the Department’s contention that the petitioner sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Validity of circular / clarifications issued by the CBEC - Held that:- if such circulars/instructions/clarifications are contrary to or inconsistent with the statutory provision in question or seek to create a liability which the statute does not contemplate, such circular/instruction is liable to be struck down. A misconceived and legally untenable interpretation of a statutory provision and/or an erroneous understanding thereof, which if applied by the quasi-judicial authorities will unduly prejudice the citizens of the country, cannot be allowed to stand. The remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service. The show cause notice impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t defines Business Auxiliary Service as follows:- S. 65(19). Business auxiliary service means any service in relation to, - (i) Promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services, which are inputs for the client; or Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, inputs means all goods or services intended for use by the client. (v) Production or processing of goods for, or on behalf of, the client; (vi) Provision of service on behalf of the client; or (vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, And includes services as a commission agent, but does not include any act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of this sub-section shall have effect, as if, for the words one year , the words five years had been substituted. Explanation._ Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be. 2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. (6) For the purpose of this section, relevant date means, (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid. (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event. The explanation to sub-Clause (zzzzq) provided that for the purposes of the said sub-Clause, brand includes symbol, monogram, label, signature or invented words which indicate connection with the concerned goods, service, event or business entity. (8) The Dept. of Central Board of Excise and Customs issued an instruction/circular dated 26 July, 2010 relating to service tax issues in respect of Indian Premier League. The material portion of the said Circular is extracted hereinunder:- (1) It is felt that sponsorship of IPL is not sponsorship of any sports event, since IPL in itself is not a sports event but an entity of franchisee teams and therefore it is taxable. On the same analogy the sponsorship received by a player or a Team would be independent of sport event and hence taxable. (2) The activity of the franchisee subserves the business of BCCI IPL and would fall within the scope of Business support services which is a taxable service under the service tax law. (3) The players provide taxable service when they wear apparel provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner. By letter dated 20 August, 2011 the petitioner supplied the information sought for. (10) The respondent no. 4 issued a show cause-cum-demand notice dated 26 September, 2011 to the petitioner demanding service tax (including cess) of ₹ 1,51,66,500/- on the amount received by the petitioner during the period 1 May, 2006 till 30 June, 2010 by invoking the extended period of limitation of five years under the proviso to Section 73 of the Finance Act, 1994 on the ground of suppression of facts with the intent to evade payment of service tax by the petitioner. (11) The petitioner filed his reply dated 27 November, 2011 to the said show cause notice and appeared before the respondent no. 3 in compliance with the hearing notice. The petitioner filed additional submission before the authority vide his letter dated 8 October, 2012. (12) The Commissioner of Service Tax (respondent no. 3) by his order dated 12 November, 2012 confirmed the demand of service tax along with the interest and penalty on the petitioner. Being aggrieved, the petitioner has approached this Court for quashing of the show cause notice and the order dated 12 November, 2012 as also the instruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all receipts for the period from 1 May, 2006 to 30 June, 2010 by specifying the entry of each receipts and this is not disputed by the Department. (15) Mr. Mittal submitted that the respondent no. 2, i.e. the Central Board of Excise and Customs issued the impugned instruction/letter dated 26 July, 2010 admitting that there were differences in views in respect of the service tax issue related to IPL. In paragraph 3 of the said letter it was stated that fee charged for playing matches will fall outside the purview of taxable service. However, it was stated that if the players are engaged in promotional activities as well as playing cricket and if there is no segregation, the service tax will be charged on the total composite amount. Relying on such instruction/letter which is illegal, the impugned demand has been raised on the petitioner. No levy exists on the activities of the petitioner during the relevant period of time and the entire proceeding against the petitioner including the demand is without jurisdiction. (16) Ld. Counsel submitted that the receipt of ₹ 4,85,66,782/- includes amounts received for writing articles in sports magazines as well as fee received fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry (zzzzj), the services rendered by the assessees were not taxable. Creation of new entry was not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by the assessees cannot be brought to tax under that entry. (18) As regards the receipt of amount of ₹ 23,05,000/- by the petitioner on account of writing articles in sports magazines, Ld. Counsel submitted that on a bare perusal of the provisions of the Finance Act, service tax is not leviable on such receipt under business auxiliary service or any other entry. However, the demand of ₹ 53,02,661/- on the amount of ₹ 4,85,66,782/- includes service tax of ₹ 2,43,595/- on the amount received for writing articles, although there is no allegation in the impugned show cause notice that remuneration received for writing articles attracts service tax. The demand on the amount received for writing articles is bad under the law. (19) As regards the amount of ₹ 2,00,00,000/- received as fee for anchoring TV show, the same also does not attract service tax under any entry. However, the service tax demanded on the said amount is ₹ 20,60,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability. The expression manufacturer cannot cover the types of transactions referred to in the Commissioner s circular. Whether an activity amounts to manufacture has to be factually determined. There cannot be a direction to treat a particular type of transaction to be a manufacturing activity without examining the factual scenario. (21) Ld. Counsel submitted that when the statutory provisions do not so prescribe, there was no basis or logic for the instruction dated 26 July, 2010 that if there is no bifurcation, the entire composite fee will be taxable. The allegation that the petitioner s agreement with KKR is both for playing cricket as well as for promoting and the fee received is a composite fee is influenced by the instruction dated 26 July, 2010 and is not the truth nor based on any material but has been made on the basis of surmise and conjecture. The agreement would reveal that the same was only for playing cricket and even assuming but not admitting that the agreement was for playing cricket and promotion, the circular could not direct that service tax be charged on the entire amount. Such an instruction is illegal. In any event, the claim made is for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly, 2010, the fee charged for playing matches will fall outside the purview of taxable service. Mr. Mittal then referred to the agreement between the petitioner and KKR and in particular Clause 2.1 thereof which provides that the petitioner was being engaged as a professional cricketer and the KKR shall provide fee to the player. He further referred to Clause 5.1 of the agreement which provides that the player has to wear and use only the team clothing and the player cannot disclose badge, mark, logo, trade name etc. He submitted that the amount received by the petitioner was only in respect of the cricketing skill as per the said agreement and the petitioner was not engaged in any promotional activity. Indeed, the agreement with KKR debarred the petitioner from engaging in any promotional activities. The allegation of the Department that the petitioner apart from playing cricket, also engaged in promotional activity is completely without basis and perverse. Thus, the amount of ₹ 8,70,87,857/- received as fee for playing cricket professionally in the IPL for KKR does not fall within the service tax net. As per the terms of the agreement with KKR the petitioner was unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extended period of limitation is invokable under the proviso to sub- Section (1) of S. 73 of the Finance Act, 1994. This allegation is completely without basis. All relevant information was furnished by the petitioner in the year 2009 regarding the activities of the petitioner along with copies of agreement and audited records. Even thereafter, as and when any other information was called for, the same was provided. In his letter dated 24 November, 2009, the petitioner clearly stated that his activities are not covered under the Finance Act, 1994. It is also significant that the respondent no. 2 in its impugned instruction/letter dated 26 July, 2010 admitted that there were difference in views in respect of the service tax issue relating to IPL. The Department has also not stated what has been suppressed not has adduced any evidence in support of such allegation. Hence, the Department acted without jurisdiction by demanding the service tax of ₹ 1,51,66,500/- beyond the normal period of one year. In this connection Ld. Counsel relied on two decisions of the Hon ble Supreme Court in the cases of Uniworth Textiles Ltd.-vs.-Commission of Central Excise, Raipur, 2013 (288) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 12 February, 2013 and has deposited a further sum of ₹ 50 lacs in terms of the Division Bench order dated 10 March, 2014 passed in MAT 320 of 2014. The order dated 12 February, 2013 passed on the present petition provided that it goes without saying that if this writ petition succeeds, the petitioner shall be entitled to claim refund of the entire amount together with interest. Ld. Counsel submitted that in view of the submissions made by him, the writ petition should be allowed with costs and direction should be given to the respondent authorities to refund the sum of ₹ 1,51,66,500/- and ₹ 50 lakhs to the petitioner along with interest at the rate of 12 per cent per annum from the date of payment of the said sums till the date of refund. Contention of the respondents:- (28) Appearing on behalf of the respondent authorities, Mr. Bharadwaj, Ld. Counsel primarily urged the point of availability of an alternative remedy. He submitted that the order challenged in the present writ petition is an appealable order and the petitioner has adequate alternative remedy by way of a statutory appeal. Hence, the writ petition should not be entertained. In this conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived service charges/remunerations as per the agreement with various corporate clients and as per the provisions of S. 65 (19)(i) of the Finance Act, 1994, such activity of the petitioner is taxable under the category of Business Auxiliary Services . Some of the clauses of the agreement between the petitioner and the Corporate Houses categorically mentioned the term Brand Endorsement Fees . Anchoring in the TV show and writing articles by the petitioner was meant to promote the activity of the organizations with whom he had entered into contracts. The Dept. has rightly classified the petitioner s services under Business Auxiliary Services . (32) Ld. Counsel submitted that the petitioner has acknowledged that he had represented KKR for undertaking promotional activities for various sponsors of the KKR Cricket Team. He received promotional money of ₹ 8.7 crores approximately from Knight Riders Sports Pvt. Ltd. for endorsing logos/brand marks of the franchisee/sponsors. The terms and conditions of the agreement dated 21 August, 2008 between Knight Riders Sports Pvt. Ltd and the petitioner makes a categorical reference to this aspect. Against point no. 4 of the agreement u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution. It is only in a case where the authority issuing the show cause notice did not have jurisdiction to do so or on the face of it the show cause notice does not disclose commission of any offence, the Writ Court may interfere. (36) It is true that ordinarily this Court in the exercise of its high prerogative writ jurisdiction does not intervene when an efficacious alternative remedy is available to the aggrieved person. Where an order has been passed by a statutory authority and the statute provides for a procedure to challenge such order before a higher authority, the Writ Court normally requires the aggrieved party to exhaust such alternative remedy before the court entertains his grievance in the exercise of writ jurisdiction. This is, however, a rule developed by the courts themselves and has no bearing on the jurisdiction of the court to entertain a writ petition. It is settled law that existence of an alternative remedy in no way abrogates the power of the High Court to entertain a writ petition. It is a rule of self- imposed restraint that the courts have developed in the interest of judicial discipline. In appropriate cases courts are justified in interfering an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reshold. Whether or not the petitioner will ultimately succeed on merits is a different question altogether. However, in my opinion, it cannot be said that the writ petition is not maintainable at all and should not be entertained for adjudication. (40) In this connection one may refer to the decision of this Court in the case of Simplex Infrastructures Ltd.-vs.-Commissioner of Service Tax, Kolkata (WP 912 of 2013) wherein at paragraphs 44 to 48 it was observed as follows:- (44) There can be no dispute that the question of limitation is a question of jurisdiction and that the Commissioner has no authority and / or jurisdiction to issue notice after the period of limitation prescribed in the Finance Act, 1994. (45) In M/s Raza Textiles Ltd., Rampur Vs- The Income Tax Officer, Rampur reported in AIR 1973 SC 1362, the Supreme Court held that no authority, much less a quasi- judicial authority, could confer jurisdiction on itself by deciding the jurisdictional fact wrongly. The question of whether the jurisdictional fact had rightly been decided or not was a question open to examination by the High Court in an application under Article 226 of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2011 and pertains to the period from 1 May, 2006 till 30 June, 2010. On a plain reading of Section 73 of the Finance Act, 1994, where any service tax has not been paid or has been short paid or erroneously refunded, the Department may serve a notice on the assessee requiring him to show cause why he should not pay the amounts specified in the notice. Such notice has to be issued within 12 months (now 18 months) from date when such service tax was payable. Any notice issued beyond such period would be barred by limitation. However, the period of limitation stands extended to five-years if non-payment or short- payment or erroneous refund of the service tax is by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of Chapter 1 of the Finance Act, 1994, or the Rules made thereunder with intend to evade payment of service tax, by the person chargeable with such tax. (44) In the instant case, the impugned notice was issued admittedly beyond 12 months (or even 18 months) from the date when, according to the Department, the service tax was payable by the petitioner. However, the Department invoked the extende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action on the part of the authorities. Even if, such particulars are not included in the notice, the Department should be in a position to justify and/or substantiate its allegation of suppression of material facts on the part of the noticee. (46) Coming to the facts of the present case, is there any suppression on the part of the petitioner as would entitle the Department to take recourse to the extended period of limitation? In my opinion, the answer must be in the negative. The Department initiated the enquiry by issuing the letter dated 5 November, 2009. The petitioner duly responded to the said letter by his letter dated 24 November, 2009 wherein he categorically stated that he was not rendering any business auxiliary services and had earned income by playing cricket for the country. Thereafter, under cover of letters dated 14 December, 2009 and 15 March, 2010, the petitioner supplied all documents called for by the office of the respondent no. 4 including copies of agreements entered into with various companies and corporate entities. Thereafter, in compliance of summon dated 12 January, 2011, the petitioner through his authorised representative appeared before the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994 or any Rule made thereunder with intent to evade service tax. There is only a sweeping statement that the petitioner by his act of omission and wilful suppression of material facts with the intent to evade payment of service tax did not discharge the due service tax liability amounting to ₹ 1,51,66,500/- during the period from 1.05.2006 to 30.06.2010 . There is no whisper in the impugned notice of the facts which have been allegedly suppressed. Mr. Mittal has vociferously argued that the vague assertion that the petitioner had wilfully suppressed material facts with intent to evade payment of service tax was unfounded and I find considerable force in such argument. (50) The petitioner furnished all information that was called for by the Department from time to time. Once the information is supplied as per the requirement of the authority and information supplied has not been questioned, a belated demand has to be held to be barred by limitation. This proposition finds support from the judgment of the Hon ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh-vs.-Punjab Laminates Pvt. Ltd., 2006 (202) ELT 578. (51) In this connection it may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugs and Liniments, Hyderabad (supra) and Anand Nishikawa Co. Ltd. (supra) and held that it was settled that mere failure to declare would not amount to wilful suppression. There must be some conscious, deliberate act with a view to evade service tax. (55) The principle of law which emerges from the judgments of the Hon ble Supreme Court referred to above, is that mere failure to disclose a transaction or activity and pay tax thereon or a mere misstatement or mere contravention of the Central Excise Act or the Finance Act, 1994 as amended, or of any Rules framed thereunder, is not sufficient for invocation of the extended period of limitation. There has to be a positive, conscious and deliberate action on the part of the assessee intended to evade tax, for example, a deliberate misstatement or suppression pursuant to a query, in order to evade tax. A clear fraudulent motive or an element of mens rea on the part of the assessee has to be established before the Department can take recourse to the extended period of limitation. (56) On a reading of the impugned notice, I am of the view that the Addl. Director General (respondent No. 4) proceeded on the basis that there had been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld of trade and commerce or any kind of business. It is a service rendered by a person to popularize the product or service of a client and/or enhance the sale of such product or service. It also encompasses service provided on behalf of the client as also procurement of goods or service which are inputs for the client. Customer care service rendered on behalf of the client also comes within the purview of Business Auxiliary Service . It also includes a service incidental or auxiliary to any of the aforesaid activities and includes services as a commission agent. Thus, what activities amount to business auxiliary service have been defined with precision in the Finance Act, 1994. It was not the intention of the legislature that any and every kind of activity which can loosely be termed as Business would attract service tax. It being a taxing provision, the same must be construed strictly and any benefit of doubt in the matter of interpretation of the provision must go in favour of the assessee. (62) Similarly, Sec. 65 (104c) of the Finance Act which has been noted above defines Support Service of Business or Commerce . The said term or expression has been defined to mean cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner for anchoring TV shows does not attract service tax. (65) As regards the claim of service tax to the tune of ₹ 20,60,000/- on the sum of ₹ 2,62,61,782/- received by the petitioner for brand endorsement, such claim has been made under the heading Business Auxiliary Service . The Department s contention is that being a celebrity, the petitioner permitted the commercial use of his photographs, videos, speech and also appeared in person for promotion and marketing of products/services belonging to corporate entities engaged in business/commercial activities. For rendering such services, the petitioner received considerable amounts of service charges from corporate clients/service recipients. Such services provided by the petitioner were classifiable under the taxable service head of Business Auxiliary Services with effect from 1 May, 2006. Thereafter, with effect from 1 July, 2010 the said services were placed separately under the head of Promotion of Brands of Goods, Services, Events, Business Entity etc. Services , in terms of Sec. 65(105)(zzzzq) of the Finance Act, 1994 as amended. According to the Department, commercial advertisement has taken different sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brand Promotion was introduced with effect from 1 July, 2010, the logical corollary and inevitable inference is that such category of service was not taxable prior to 1 July, 2010. In this connection I am in agreement with the decision of the CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi-vs.-Shriya Saran (supra), and the decision of the Division Bench of the Bombay High Court in the case of Indian National Shipowners Association-vs.-UOI, (supra). Business auxiliary service and brand promotion are distinct service heads as admitted by the Department in the show cause notice under challenge. It is also admitted in the order of the respondent no. 3 that the amount of ₹ 2,62,61,782/- was received by the petitioner on account of brand endorsement. Since brand endorsement was not a taxable service during the period of time for which the tax demand has been raised, such demand cannot be sustained. Such service rendered by the petitioner could not be taxed under the head of business auxiliary service as has been sought to be done. (68) As regards the remuneration received by the petitioner for playing IPL cricket, in my opinion, the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In this regard, I fully endorse and agree with the order dated 6 June, 2014 passed by the Commissioner of Central Excise (Appeals) Delhi-III in Appeal No. 330- 332/SVS/RTK/2014, the facts of which case was similar to the facts of the instant case, excepting that the player concerned in that case was a member of the Chennai Super Kings. (70) In so far the letter/i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... template, such circular/instruction is liable to be struck down. A misconceived and legally untenable interpretation of a statutory provision and/or an erroneous understanding thereof, which if applied by the quasi-judicial authorities will unduly prejudice the citizens of the country, cannot be allowed to stand. Accordingly the impugned circular/instruction dated 26 July, 2010 is quashed to the extent it states that if composite fee received for playing matches and for participating in promotional activities cannot be segregated, then service tax should be levied on the total composite amount. (71) In view of the aforesaid, in my view, the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service. (72) It was not necessary for me to go into the merits of the case and express my view on whether the service tax demand raised on the petitioner is legally sustainable on merits. I am conscious of the fact that a Writ Court is not ordinarily concerned with the decision of an Authority but with the decision making process. However, if the order impugned is ex facie illegal and contrary to the provisions of the statute in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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