2016 (7) TMI 237 - HC - Service Tax

Challenge to the Show Cause Notice (SCN) - Maintainability of writ petition - Business Auxiliary services (BAS) - The petitioner is a cricketer and is a former captain of the Indian Cricket Team - Amount received for brand endorsement/brand promotion - amounts received for writing articles in sports magazines as well as fee received for anchoring TV shows on Zee Bangla. - extended period of limitation - allegation of suppression of facts - Held that - if it is finally decided that the extended period of limitation was wrongly invoked by the authority in issuing the impugned show cause notice, the logical conclusion that would follow is that the show cause notice was issued without jurisdiction. Since the petitioner has challenged the jurisdiction of the authority to issue the impugned show cause notice, in my view, the writ petition cannot be rejected at the threshold. 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. - 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 suppressed material facts with intent to evade payment of service tax. Suppression of fact in the context of this case can only mean non-disclosure of correct information deliberately to evade payment of service tax. The impugned show cause notice is hopelessly barred by limitation. There was no ground or justification whatsoever for issuing such notice by invoking the extended period of limitation. Demand of service tax under Business Auxiliary Services (BAS) - Held that - 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. Writing articles for newspapers or sports magazines or for any other form of media cannot by any stretch of imagination be said to be amounting to rendering business auxiliary service within the meaning of Sec. 65(19) or business support service under Sec. 65(104c) of the Finance Act, 1994. For similar reasons, the remuneration received by the petitioner for anchoring TV shows cannot be brought within the service tax net. Television shows are meant for entertainment of the viewers. In contemporary world watching television is a primary form of recreation. It would be absurd to say that anchoring TV shows amounts to rendering business auxiliary service or business support service. Regarding, brand endorsement - Held that - by amendment of the Finance, Act, 1994, a new taxable service category of Brand Promotion was introduced with effect from 1 July, 2010 - 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. As regards the remuneration received by the petitioner for playing IPL cricket, in my opinion, the service tax demand raised on such amount under the head of Business Support Service , is also not legally tenable. - 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. 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 impugned in this petition is without jurisdiction as being time barred. The demand made in the show cause notice is barred by limitation. - Show cause notice quashed - Decided in favor of assessee / petitioner.

Summary

Issues Involved:
1. Validity of the instruction/circular dated 26 July 2010 issued by the Central Board of Excise and Customs.
2. Validity of the show cause notice dated 26 September 2011.
3. Validity of the order dated 12 November 2012 passed by the Commissioner, Service Tax, Calcutta.
4. Applicability of service tax on various activities undertaken by the petitioner.
5. Invocation of the extended period of limitation for issuing the show cause notice.
6. Classification of activities under 'Business Auxiliary Service' and 'Business Support Service'.
7. Jurisdiction of the authority to issue the show cause notice.
8. Maintainability of the writ petition in light of alternative statutory remedies.

Detailed Analysis:

1. Validity of the Instruction/Circular Dated 26 July 2010:
The petitioner challenged the instruction/circular issued by the Central Board of Excise and Customs, which stated that if players are paid composite fees for playing matches and promotional activities, and if segregation is not possible, service tax should be levied on the total composite amount. The court held that the Board, in its administrative capacity, cannot impose its views on quasi-judicial authorities. A circular cannot create tax liability beyond the statute. The statutory provisions do not provide for levying service tax on fees received for playing matches. Therefore, the instruction/circular was quashed to the extent it stated that service tax should be levied on the total composite amount if segregation is not possible.

2. Validity of the Show Cause Notice Dated 26 September 2011:
The show cause notice was issued beyond the period of 12 months. The court held that the invocation of the extended period of limitation was erroneous and without jurisdiction. The notice must contain particulars of facts and circumstances in support of the allegation of suppression of material facts. The court found that the petitioner had promptly and diligently responded to all notices and disclosed the nature of his activities. There was no suppression of material facts with intent to evade payment of service tax. Therefore, the show cause notice was held to be time-barred and without jurisdiction.

3. Validity of the Order Dated 12 November 2012:
The order dated 12 November 2012, which confirmed the demand of service tax along with interest and penalty, was quashed. The court held that the demand was based on an erroneous interpretation of the statutory provisions and was without jurisdiction. The court also found that the petitioner was not liable to pay service tax on the amounts received for writing articles, anchoring TV shows, brand endorsement, and playing cricket in IPL.

4. Applicability of Service Tax on Various Activities:
- Writing Articles in Magazines: The court held that writing articles for publication does not amount to rendering business auxiliary service or business support service. The remuneration received for writing articles would not attract service tax.
- Anchoring TV Shows: Anchoring TV shows is meant for entertainment and does not amount to rendering business auxiliary service or business support service. The remuneration received for anchoring TV shows does not attract service tax.
- Brand Endorsement: The court held that 'Brand Endorsement' was brought within the service tax net with effect from 1 July 2010. The demand raised for the period 1 May 2006 to 30 June 2010 under the head of 'Business Auxiliary Service' was illegal and without jurisdiction.
- Playing Cricket in IPL: The court held that the remuneration received for playing IPL cricket does not amount to rendering business support service. The petitioner was engaged as a professional cricketer and was under the control of the franchisee, and his status was that of an employee rather than an independent worker.

5. Invocation of the Extended Period of Limitation:
The court held that the extended period of limitation could not be invoked without specific particulars of facts and circumstances in support of the allegation of suppression of material facts. The petitioner had disclosed all relevant information, and there was no suppression of material facts with intent to evade payment of service tax. Therefore, the invocation of the extended period of limitation was erroneous and without jurisdiction.

6. Classification of Activities Under 'Business Auxiliary Service' and 'Business Support Service':
The court held that writing articles, anchoring TV shows, and playing cricket in IPL do not fall under 'Business Auxiliary Service' or 'Business Support Service'. Brand endorsement was a separate category introduced with effect from 1 July 2010 and could not be taxed under 'Business Auxiliary Service' for the period prior to that date.

7. Jurisdiction of the Authority to Issue the Show Cause Notice:
The court held that the authority did not have jurisdiction to issue the show cause notice as it was time-barred and based on an erroneous interpretation of the statutory provisions. The authority cannot confer on itself jurisdiction by wrongfully invoking the extended period of limitation.

8. Maintainability of the Writ Petition:
The court held that the writ petition was maintainable despite the availability of an alternative statutory remedy. The court found that the issue of limitation goes to the jurisdiction of the authority, and the writ petition could not be rejected at the threshold. The court also noted that once a writ petition is admitted and affidavits are filed, it would be unjust to dismiss the petition on the ground of availability of an alternative remedy.

Conclusion:
The court allowed the writ petition, quashed the show cause notice and the order dated 12 November 2012, and set aside the instruction/circular dated 26 July 2010 to the extent it stated that service tax should be levied on the total composite amount if segregation is not possible. The petitioner was entitled to a refund of the amounts deposited along with interest.