2013 (8) TMI 582 - AT - Service Tax

Sponsorship whether liable for service tax or not - whether sponsorship of the IPL matches by appellants falls within the exclusionary clause of Section 65 (105) (zzzn) department levied service tax in relation to sponsorship of IPL League matches Held that - Fundamental premises of the adjudication authority are misconceived and unsustainable - legislature has incorporated no restriction upon the exclusion by enacting that where a sports events has a commercial purpose, the exclusion was inapplicable - sponsorship of a sports event, which had a commercial element (the IPL events) was disentitled to the benefits of immunity to service tax, notwithstanding the clear phraseology of section 105(65)(zzzn). The provision in issue excludes from liability to service tax, service in relation to sponsorship of sports event - the exclusionary clause admits of no ambiguity, grammatical, syntactical or contextual - legislature in its wisdom has considered it appropriate to extend the benefit of immunity to service tax, to the service of sponsorship in relation to sports events In the absence of ambiguity, the golden rule of construction namely a construction whereby the literal meaning corresponds to the legal meaning, must be adopted appeal allowed in favour of assessee.

Summary

Issues Involved:
Challenge to adjudication orders on service tax levied for sponsorship of IPL League matches under Section 65 (105) (zzzn) of the Finance Act, 1994.

Analysis:

1. Issue of Exclusionary Clause Interpretation:
The central issue in this case is the interpretation of the exclusionary clause of Section 65 (105) (zzzn) of the Finance Act, 1994, regarding the liability to service tax on sponsorship of sports events. The Revenue contended that IPL matches sponsored by the appellants do not fall within the exclusionary clause as IPL is not considered a sports event due to commercial elements involved.

2. Reasoning by Adjudicating Authority:
The adjudicating authority based its decision on the premise that IPL matches are not sports events but commercial activities, citing a Circular by CBEC. However, the appellate tribunal found this reasoning flawed as the sponsorship agreements were related to T-20 Cricket League matches under BCCI's auspices, which are undeniably sports events.

3. Interpretation of 'Sport' and 'Sports Event':
The tribunal delved into the definition of 'sport' from dictionaries to establish that cricket, being a physical and skill-based activity with fixed rules, qualifies as a sport. It refuted the argument that league matches are not sports events, emphasizing that the essence of the sponsorship agreements was related to cricket tournaments, which are inherently sports events.

4. Fallacies in Adjudication Authority's Reasoning:
The tribunal identified two fundamental fallacies in the adjudication authority's reasoning. Firstly, the assumption that sponsorship of sports events with commercial elements is not exempt from service tax contradicts the clear language of the exclusionary clause. Secondly, the notion that sponsorship of league matches under BCCI/IPL is sponsorship of BCCI/IPL itself, rather than sports events, was deemed misconceived and unsustainable.

5. Conclusion and Decision:
Ultimately, the tribunal quashed the impugned adjudication orders, ruling in favor of the appellants. It concluded that the decisions were based on flawed reasoning and misinterpretation of the law, thereby allowing the appeals without costs.

In summary, the judgment revolved around the correct interpretation of the exclusionary clause in the Finance Act regarding service tax on IPL sponsorship, highlighting the fallacies in the adjudication authority's reasoning and emphasizing the essence of the sponsorship agreements being related to cricket tournaments, which are unequivocally sports events.