2012 (11) TMI 526 - AT - Service Tax

Chargeability to Service Tax - Held that - the different classifications have been adopted based on different modes of payment, for the same activity. The same confusion prevails in respect of the consideration received from the book makers. There is a total confusion in the minds of the adjudicating authorities as to the nature of the tax and the measure of the tax. On this ground alone the impugned orders deserve to be set aside. The appellant herein is involved in conducting the event of horse racing. The appellant has permitted other race clubs to commercially use or exploit this event. The appellant receives a royalty from these race clubs towards this right to commercial use or exploitation. Thus the activity undertaken by the appellant merits classification under the taxable category of services of permitting commercial use or exploitation of any event organized by a person or organization which was brought under the tax net with effect from 1-7-2010. Such providing of space should be along with other facilities specified therein. It is not the case of the department such facilities have been provided to the book makers or the caterer. Therefore, no merit in the argument that the renting of office space to the caterer/book maker is liable to be classified as business support service. - Decided in favor of assessee.

Issues Involved:
1. Classification of services provided by the Turf Club to bookies, caterers, and other race clubs.
2. Demand of service tax under various categories: Business Support Services, Broadcasting Services, and Intellectual Property Right Services.
3. Validity of service tax demands for different periods and under different service categories.
4. Interpretation of CBEC circulars and relevant legal provisions.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Turf Club:
The appellant, M/s. Royal Western India Turf Club Ltd., conducts horse racing events and provides stalls to licensed bookies who accept bets from the public. The Turf Club charges bookies a fixed amount (Stall fees) and a variable amount (Commission). The Turf Club also conducts live telecasts of races to other race clubs and receives royalty income from these clubs and caterers operating within its premises.

2. Demand of Service Tax Under Various Categories:
Four show-cause notices were issued demanding service tax on amounts received from bookies, caterers, and other race clubs for the period from 01.04.2002 to 31.03.2009. The service tax was demanded under categories such as Broadcasting Services, Business Support Services, and Intellectual Property Right Services. The Commissioner of Central Excise and the Commissioner of Service Tax confirmed the demands, imposed penalties, and demanded interest.

3. Validity of Service Tax Demands for Different Periods and Under Different Service Categories:
The appellant contested the classification of services and the validity of the service tax demands. The Tribunal noted inconsistencies in the department's classification of the same activity under different service categories based on the mode of payment. For example, live telecast of horse races was inconsistently classified as Broadcasting Services and Intellectual Property Right Services.

4. Interpretation of CBEC Circulars and Relevant Legal Provisions:
The appellant relied on CBEC circulars and legal judgments to argue against the service tax demands:
- Business Support Services: The Tribunal in Madras Race Club vs. CST had held that amounts received from bookies do not fall under Business Support Services. The CBEC circulars clarified that Business Support Services involve outsourced services and infrastructural support, which was not the case here.
- Intellectual Property Right Services: The CBEC circular clarified that Intellectual Property Right Services cover rights such as patents, copyrights, trademarks, and designs. The department failed to specify which intellectual property rights were involved in the transactions.
- Broadcasting Services: The broadcasting was done by M/s. Essel Shyam Communications Ltd., and the appellant paid service tax for these services. The Tribunal held that the appellant could not be treated as both the provider and recipient of the service. The activity of permitting other race clubs to use the telecast commercially was classified under a new taxable service category introduced on 1-7-2010, and hence, no tax liability arose for the period before this date.

Conclusion:
The Tribunal found that the department's orders lacked clarity and understanding of the nature of the services and the applicable tax laws. The demands for service tax under Intellectual Property Right Services and Broadcasting Services were inconsistent and unsupported by clear findings. The Tribunal also held that the renting of office space to bookies and caterers did not constitute Business Support Services as defined in the Finance Act, 1994. Consequently, the Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief to the appellant.

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