► Date : Jan 28, 2023

Yusuf Khan M Pathan and Irfan Khan Pathan v. C.C.E. and S.T. [Final Order No. A/ 10086-10087 /2023 dated January 20, 2023] Set aside the order requiring Service Tax on cricketers' fees. Held that, the fees received by the international cricket players from cricket team owners, whereby, they were employed to play for the respective teams in terms of the contract in Indian Premium League ("IPL") seasons, would not come under the head of 'Business Support Services'. Furthermore, it was held that playing cricket is the primary reason for which the IPL was formed, and that promotional activities are incidental to the primary purpose of playing cricket.

Facts:

Yusuf Khan M Pathan and Irfan Khan Pathan ("the Appellants") are international cricket players who entered into a contract with the cricket team owners ("Franchisee") to play cricket for the respective teams during the IPL seasons.

The Revenue Department ("the Respondent") determined that the fees paid to the Appellants are subject to Service Tax under the service category of "Business Support Service," because the Appellants wear team clothing bearing the brands/marks of various sponsors and are required to participate in Franchisee promotional events. Following that, Show Cause Notices ("SCNs") were issued to the Appellants for the Service Tax demand, and the Respondent confirmed the Service Tax demand, along with interest, and imposed penalties on the Appellants.

Being aggrieved, the Appellants filed an appeal with the Commissioner (Appeals), who rejected the Appellants' appeal and upheld the Respondent's order in Orders-in-Appeal dated December 14, 2011 ("the Impugned Orders"). As a result, this appeal has been filed.

The Appellants contended that the agreement between the Appellants and the Franchisee is a "employment" agreement because the Appellants are employed by the Franchisee for a specific remuneration and benefit, and wearing the Franchisee's colours and design of cricket clothing, including marks and logos, is also part of the employment agreement and cannot be construed as promotional activities. Furthermore, the Appellants agree to grant the Franchisee all rights to use their identity, including his photographs; thus, the Appellants were not the ones endorsing/promoting any person/product/service, but only the Franchisee.

Issue:

Whether the activity carried out by the Appellants would be liable to Service Tax under “Business Support Service”?

Held:

The CESTAT, Ahmedabad in Final Order No. A/ 10086-10087 /2023 held as under:

• Noted that, though in the Impugned Order the Appellants were made liable to pay Service Tax under the ‘Business Support Services’ but, no specific entry has been shown to be applicable to levy service tax as mentioned in the definition of “Business Support service” under Section 65(104c) of the Finance Act, 1994 (“the Finance Act”).
• Further noted that, the Appellants undertakes to grant franchisee all rights to use the identity of the Appellants including photographs. Films and TV appearances and its identification and these right are given by a player to the Franchisee during the tenure of the contract and thereafter, the Appellants will not claim endorsement of any products or goods or services of any sponsors in its name.
• Observed that, the Appellants were not rendering any services which could be classified as ‘Business Support Services’, as they are not promoting any particular brand or product or service and also not taking part in any business activity of promoting the sale of any product or service of any entity.
• Opined that, playing cricket is the primary reason for which IPL was formed and promotional activities are ancillary to the main purpose that of playing cricket.
• Stated that, the entry for “Business Support Service” envisages taxing activities which are needed for doing business activities, almost in the nature of outsourcing of activities connected with business and it does not specifically cover the activity done by Appellants.
• Further stated that, the agreement is abundantly clear, that a person who has earned the reputation and recognition as a player, is employed by the franchisee and the Appellants have been appointed/ engaged by the respective Franchisee under the agreement of “employment”.
• Set aside the Impugned Order.
• Held that, the Appellants are not liable to service tax under the ‘Business Support Service’ and therefore, the demands of service tax are not sustainable against the Appellants.

Relevant Provisions:

Section 65(104c) of the Finance Act:

“support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

Explanation– For the purposes of this clause, the expression “infrastructural support services” includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security”