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TMI Blog2020 (12) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... was transferred to the account of the Registrar General of the Calcutta High Court. 2. BAS has been defined under section 65 (19) of the Finance Act 1994 [The Finance Act] to mean inter-alia, any 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. This service is taxable under section 65(105) (zzb) of the Finance Act which defines "taxable service" to mean any service provided or to be provided to a client by any person in relation to BAS. 3. Section 65(104c) of the Finance Act defines BSS to mean services provided in relation to business or commerce. It is taxable under section 65 (105)(zzzq) of the Finance Act. 4. It needs to be noted that w.e.f. July 1, 2010, any service provided or to be provided to any person, by any other person, through a business entity or otherwise, under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a logo of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;"The difference between the services classifiable under "BUSINESS AUXILIARY SERVICE"(effective from 1-7-2003 & 10-92004) i.e., BAS and newly introduced service of "PROMOTION OF 'BRAND' OF GOODS, SERVICES, EVENTS, BUSINESS ENTITY ETC SERVICES" (effective from 01-7-2010) is that the latter has a wide coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/ corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/ marketing/ sale of goods, provision of services, holding of events, undertaking social activities etc. If the brand name/ house mark etc is promoted by a celebrity without reference to any specific product or services etc, it is difficult to classify it under BAS. Such activities like mere establishing goodwill or adding value to a brand would fall under this newly introduced service as above." 9. In regard to BSS relating to IPL, the show cause notice mentions that prior to the Finance Act 2010, sponsorship service did not include "services" in relation to spon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd that the Shri Ganguly (the Noticee) obtained service tax registration only on 03-8-2010 relating to the service of 'Promotion of 'Brand' of Goods, Services, Events, Business Entity etc Services'- but did not discharge his service tax liabilities before that under the "BAS" (Business Auxiliary Services) that appears to be lawfully due from him with appropriate interest as detailed herein above. Similarly, Shri Ganguly did not obtain service tax registration under BSS (Business Support Services) relating to service charges received from M/s Knight Riders Sports Pvt. Ltd and thus did not discharge his service tax liabilities that appears to be lawfully due also with appropriate interest. In view of the fact that Shri Ganguly (the notice) had rendered two taxable services namely, 'Business Auxiliary services' (ref: Table-I) and 'Business Support services' (Ref: Table-II), it appears Shri Sourav Ganguly (the noticee) stands liable to pay the service tax due in respect of service charges received from 1.5.2006 (09-5-2006) to 30-6-2010 (20-3-2010). But the same was not discharged by the Noticee as per the prevalent position of service tax law till the date of issuance of this Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1994 as amended. (ii) Interest at the appropriate rate as applicable during the material period should not be charged/demanded and recovered from him under section 75 of chapter V of the Finance Act, 1994, as amended for the delayed payment of Service Tax including Education Cess and S&H Edu. Cess as in [i] above; (iii) Penalty should not be imposed upon the Noticee in terms of Section 76, 77 and 78 of Finance Act, 1994 as amended for willful non-payment of the amount of Service Tax including Education Cesses and for contravention of the provisions of Sec. 68,69 and 70 of Chapter V of the Finance Act, 1994." 13. The receipt from the various activities performed by the appellant, on which service tax has been computed in Tables I and II attached to the show cause notice, are as follows:- Sl No. Nature of Receipts Gross Amount received in Rs. Service tax demand in Rs. (01.05.2006 to 30.06.2010) Category/Section 1. Brand Promotion 2,62,61,782 29,99,066 Business Auxiliary Service 65(105)(zzb) 2. Fee for Article Writing 23,05,000 2,43,595 Business Auxiliary Service 65(105)(zzb) 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that the appellant as an 'entity' had only allowed the 'brand Sourav Ganguly' to be the 'content' for purpose of brand endorsement or like purpose. 17. In regard to BAS, the appellant stated: "The basic nature of the entity as discussed in paras-10 and 11 can never be said to be any "Auxiliary" to any main business activity- what actually the entity could do only to become a 'content' (as Sourav Ganguly) for the purpose endorsement of any 'brand'- and nothing else. One has to be actively engaged with a normal and reasonable degree of regularity for the provision of any auxiliary service to any main business services (function) of promotion or marketing or sale and there has to have a direct link to the business process involved in promotion or marketing or sale (of goods or service). Therefore, it is clear that Mr. Sourav Ganguly had not performed any Business Auxiliary Service during the instant period from 01.05.2006 to 30.06.2010 and in generic terms it was not possible for him to do that also. All agreements mentioned there in the Show Cause-cum-Demand notice were very much out of the purview of Business Auxiliary Service in so far as the basic nature of the entity M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the show cause notice regarding the amount received for anchoring the TV show on Zee Bengla, therefore, service tax on the same has been wrongly computed, and in any case not taxable under business auxiliary service. It was also submitted that so far the amount received for the brand promotion activity is concerned, same is taxable w.e.f 01.07.2010, same is taxable w.e.f 01.07.2010 , under separate category, under which the Appellant already registered and paying service tax, and demand in the present case, only upto 30.06.2010." 20. The Commissioner, however, did not accept the submissions made by the appellant in the reply filed to the show cause notice and, as noted above, confirmed the demand of service tax. 21. The relevant portion of the order passed by the Commissioner in regard to BAS is reproduced below:- "The perusal of the statute vis-à-vis the activity undertaken by Sri Sourav Ganguly for a consideration as indicated in the various contracts appended above clearly shows that the noticee provided business auxiliary service. I find that one of those contracts (case of BMA Stainless Ltd) clearly mentioned the aspect and presenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 839/- made in this regard is proper." (emphasis supplied) 23. The Commissioner also imposed penalty under section 78 of the Finance Act and the relevant portion of the order dealing with this aspect is reproduced below:- "I find that the show cause notice has proposed penal action in terms of section 76, 77 and 78. In his submission made after the personal hearing the notice himself asserted that he had obtained registration under service tax legislation for the provision of Brand Promotion Services only with effect from 01.07.2010. It is also very much evident from the facts of the case that the noticee failed to comply with the formalities like getting themselves registered in accordance with the provisions of section 69 and paying due service tax. Thus, the noticee is liable to be penalized in terms of section 77. This admitted position and the findings above shows that the noticee is liable to be penalized under section 77. The reference of the contract between BMA stainless Ltd. and the noticee has been made in the discussions related to 'Business Auxiliary Services'. It clearly shows that the noticee was well aware of the taxability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleges that the said service prior to July 1, 2010 was taxable under BAS and w.e.f July 1, 2010, the said service was separately placed under section 65(105)(zzzzq) of the Finance Act. The Commissioner has given a finding that the appellant accepted that he had received 'brand endorsement fees', but service tax on brand promotion was levied w.e.f July 01, 2010, when section 65(105)(zzzzq) was incorporated in the Finance Act. Thus, the alleged service was not taxable prior to July 01, 2010. In this connection reliance has been placed on the decisions of the Tribunal in Commissioner of Service Tax, Delhi vs. Shriya Saran , [2014 (36) STR 641 (Tri. Del)] Indian National Shipowners' Association vs. Union of India , [2009 (14) STR 289 (Tri. Bom.)] Hanuman Coal Company vs. Commissioner of Central Excise, Kanpur [2011 (22) STR 350 (Tri. Del.)] and R.K. Paliwal vs. Commissioner of Central Excise, Kanpar[2012 (26) STR 567 (Tri. Del.)]. Cricket Playing Fee (iv) The show cause notice alleges that the appellant had received remuneration from the IPL franchisee (KKR), in addition to playing skill for promotional activities to market logos/brands/marks of franchisee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BSS services during the period May 1, 2006 to June 30, 2010; (ii) The Commissioner was justified in imposing penalty under section 78 of the Finance Act for the reason that all that ingredients mentioned in the section for imposing penalty were satisfied; (iii) The Commissioner (Service Tax) CBEC, New Delhi by a letter dated July 26, 2010 clarified that remuneration paid to players for promoting or marketing of logo/brands/marks of the franchisee/ sponsorers would fall under BSS and would be chargeable to service tax and that in case it was not possible to segregate the fee paid for playing matches and for participating in promotional activities, service tax should be levied on the composite amount that was received; and (iv) There is a difference between the 'onus of proof' and 'burden of proof' as was observed by the Calcutta High Court in Commissioner of Cus. (Prev.) West Bengal, Kolkata vs. Ritu Kumar [2006(202) E.L.T. 754 (Cal.)] 27. The submissions advanced by learned counsel for the appellant and the learned authorized representative of the Department have been considered. 28. Broadly, the following issues arise for consideration in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and the appellant sought registration for the above mentioned activity which was granted on August 3, 2010, where after the appellant paid service tax from July 1, 2010 for the services relating to brand endorsement/brand promotion. The contention, therefore, is that no demand could have been made or confirmed for this service for the period May 1, 2006 to June 30, 2010 under BAS. 32. This submission of learned counsel for the appellant deserves to be accepted. 33. Paragraph 4.1 of the show cause notice, which has been reproduced above, mentions that the appellant had rendered his celebrity image as a "Brand Ambassador" for promotion, marketing/sale of various products against which he received remuneration from May 1, 2006 upto June 30, 2010 and such services would appropriately be classifiable under BAS. The appellant claims that he had rendered his celebrity image as a 'Brand Ambassador" for promotion of brand of goods by appearing in advertisement, which service would be taxable only under section 65(105)(zzzzq) of the Finance Act w.e.f. July 1, 2010. 34. Section 65 (105)(zzzzq)of the Finance Act, which came into force w.e.f. July 1, 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the promotion of the products. The appellant, therefore, granted the right and license to use the "Player Identification" in connection with the advertisement and promotion of the business of the Company. The contract with BMA Stainless Ltd. indicates that BMA was desirous of engaging the services of the appellant and the appellant had agreed to provide services in connection with the advertisement, promotion, marketing and endorsement of the products under the trade mark "CAPTAIN" or "BMA". The contract also mentions that the appellant will act as a brand ambassador for BMS Stainless Ltd. 37. The terms of the aforesaid contracts clearly indicate that the appellant was required to provide services in connection with advertisement, promotion, marketing and endorsement of the products under the trade mark CHIRAG or "CAPTAIN"/BMA or advertise and promote the business of the Company 'Vibygor'. The contracts also indicate that the appellant was to act as an ambassador of CHIRAG/BMA Stainless Steel Ltd. and that the appellant had granted rights and license to Vibygor Gold to use the "player Identification" in connection with the advertisement and promotion of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brand or the brand holder or use such goods or services in public. The contractual amounts are substantial and it may not only involve an individual celebrity but a group of celebrities such as a cricket team or the actors of a successful film. 4.2 It is important to note that promotion or marketing sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under Business Auxiliary Services (BAS). Such activities would continue to remain classified under B.A.S. The difference between the services classifiable under B.A.S and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities, etc. If the brand name/house marks, etc. is promoted by a celebrity without reference to any specific pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or gas, services covered by entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfer of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1st petitioner, they supply offshore support vessels to carry out jobs like anchor handling, towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession in and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzzzj) and the services rendered by the members of the 1st petitioner have been specifically brought to the levy of Service Tax only upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is a form of brand promotion or advertising campaign that involves a well known person using his or her fame to help promote a product or a service. Examples of such brand endorsements are manufacturers of perfumes, cosmetics and clothing using the services of well known film actors or fashion models for promoting their brand by the appearance of such celebrities in advertisements in audio-visual media, product launch events. Such promotional activity for the goods produced or being traded by a person under a brand or services provided by a person under a brand by celebrity appearance in advertisements or promotional events for such goods or services against a contract is covered by the definition of brand promotion service under Section 65(105)(zzzzq), as such activity adds to the brand value and is more for promotion of brand of the goods or services and is not merely for promotion or marketing or sale of goods or services, which is covered by the definition of 'Business Auxiliary Service' under Section 65 (19). 10. The point of dispute is as to whether the activity of the respondent is Business Auxiliary Service covered by Section 65(105)(zzb) read with Section 65(19) or is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sements by the Celebrity in audio visual or print media, this activity becomes brand promotion. (d) The contracts of the respondent with her clients have all the features of the contracts for Celebrity endorsement, the purpose of which is promoting a brand and not merely marketing or promoting some particular goods or services. 12.1 Therefore, notwithstanding the language of the respondents contracts with her clients that she was to provide the services of endorsement/promotion of the clients services and products, on going through the details of the activities through which the service of endorsement/promotion of the clients product/services is to be provided, it is clear that the overall objective of these agreements is the brand promotion and not mere promotion or marketing of a particular product or service. Therefore, we hold that the services provided by the respondent are covered by Section 65(105)(zzzzq) which had come into force w.e.f. 1-7-2010 and, hence, during the period prior to 1-7-2010 the respondent's activity in terms of her contracts mentioned above could not be taxable under Section 65(105)(zzb), as, as held by Tribunal in the case of Jetlite (In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp;to market logos/brands/marks of franchisee/sponsors and the demand has been confirmed under BSS on the assumption that the amount received was a composite fee and, therefore, leviable to service tax in terms of the Instructions dated July 26, 2010 issued by CBEC. In this connection the Commissioner has also referred to the answers given by the appellant to question nos. 4 and 8. 52. The contention of learned counsel for the appellant is that the findings recorded by the Commissioner that the appellant did not deny that he had promoted logo/ brands/ marks of franchisee/ sponsors is factually incorrect and even otherwise the said activity would not be covered under BAS. 53. It would, therefore, the appropriate to reproduce question numbers 4 and 8 and the answers given by the appellant and they are as follows: "Question No. 4 : It is noted on perusal of Shri Sourav Ganguly's income details submitted on 15.3.2010 that, Shri Sourav Ganguly has received considerable amounts from M/s Knight Riders Sports Pvt. Ltd., Mumbai in control of Kolkata Knight Riders Team (subsidiary of M/s Red Chillies Entertainment Pvt. Ltd., Mumbai) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BSS for the reason that there is a separate classification of service under "Brand Ambassador for promoting brands of goods/ services" and the appellant had obtained service tax registration as a service provider under this category. 55. The appellant had, therefore, categorically stated that the amount received from KKR was only for playing cricket, yet an inference had been drawn by the Commissioner that the appellant had not denied this fact. 56. Even otherwise, for the reasons stated in the First Issue, the confirmation of demand under this head is bad. 57. The Commissioner has also placed reliance on the Instructions dated July 26, 2010 issued by CBEC. They are reproduced below: "Government of India Ministry of Finance Department of Revenue (Central Board of Excise & Customs) **** New Delhi the July 26, 2010 Sir, Subject: Service Tax, issues in respect of the Indian Premier League (IPL) - regarding. ********** 3. Remuneration paid to the players: Some Commissionerates have issued Show Cause Notices demanding service tax on the remuneration that has been paid to the players. Perusal of the contracts that players have signe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso is reproduced below. "73(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year', the words "five years" had been substituted." 61. For the purposes of section 73 of the Finance Act, 'relevant date' has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice regarding the applicability of the extended period of time limit is as follows: "Shri Sourav Ganguly by way of his act of omission and failure, suppression of material facts with the intend to evade payment of service tax, did not discharge the due service tax liability". 64. 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. 65. It will, therefore, be necessary to reproduce section 78 of the Finance Act, which deals with penalty for suppressing value of taxable services. It is reproduced below: 78 Penalty for suppressing value of taxable service Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, the person, liable to pay s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) [2018 (12) GSTL 368 (Del.)] had examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Act and the following observation was made: "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word 'suppression' in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. xxxxx Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention." xxxxx The Revenue has not been able to prove an int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it suppression." (emphasis supplied) 73. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [16] and the observations are as follows: "26........... This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :- "In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade payment of service tax. 77. It also needs to be noted that the show cause notice was issued after about two years from the date the enquiry was initiated against the appellant. This fact assumes importance as section 73 (1) of the Finance Act requires that a show cause notice should be issued within one year from the relevant date. No explanation has been given by the Department for this inordinate delay. It also needs to be noted that though information was supplied by the appellant to the Department, but letters were written by the Department to the appellant in a routine manner seeking information and even the date for personal appearance was fixed after a long gap of ten months. 78. Thus, for the reasons stated above it is not possible to hold that the extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act could have been invoked in the facts and circumstances of the case. SIXTH ISSUE 79. The appellant has also claimed interest from the date the amount was deposited by the appellant in pursuance of the impugned order till the date amount was transferred to the Registrar General of the Calcutta High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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