2012 (5) TMI 404 - AT - Service Tax

Activity of sponsoring the IPL - sponsorship service - section 65 (99a) of Finance Act, 1994 read with sub-clause (zzzn) of section 65(105) - sponsorship is in relation to sports events - Circular Letter D.O.F. No. 334/1/2010-TRU, dt. 26.2.2010 - held that - admittedly, sponsorship of sports event, is not covered by the definition of sponsorship appearing in the relevant provisions of the Finance Act. The adjudicating authority for arriving at finding against the appellant has simpliciter followed the Board s circular. - IPL was considered a cricket tournament, as is clearly shown in the official website of IPL and as such, has to be considered as sport event. The Commissioner, as independent quasi-judicial authority was under legal obligation, independently was required to examine the issue before him instead of following the Board s circulars. It is only in respect of those circulars which are in favour of the assessee that the departmental officer cannot take view against the same and are required to follow the said circulars in favour of the assessee. Prima facie, the existing provisions of Finance Act provide an exclusion of said cricket match etc. from ambit of service tax and legislative intent is there to amend the same so as to bring the same into service tax net. - Stay granted unconditionally.

Summary

Issues:
Prayer to dispense with pre-deposit of service tax and education cess, confirmation of demand against the appellant for sponsoring IPL matches, interpretation of sponsorship service under the Finance Act, applicability of exclusion clause for sponsorship of sports events, reliance on circulars and legislative intent.

Analysis:
The appellant sought to dispense with the pre-deposit of service tax and education cess totaling Rs. 4.94 crores and penalties imposed under the Finance Act. The dispute arose from the confirmation of demand against the appellant for sponsoring IPL matches, deemed liable for service tax under the category of "sponsorship service." The appellant contended that their sponsorship of sports events fell outside the taxable service definition under section 65 (105) (zzzn). The Commissioner, however, concluded that the sponsorship agreement with BCCI-IPL qualified as sponsorship service for service tax levy.

The appellant argued that the circulars issued by the Board did not bind quasi-judicial powers of assessing officers and that their sponsorship pertained to sports events, not IPL specifically. They highlighted the wide connotation of the expression "in relation to" in the exclusion clause for sports events sponsorship. The Revenue, on the other hand, supported the Commissioner's findings, citing the legislative intent expressed in the circulars.

The Tribunal found that the Commissioner had merely followed the Board's circular without independent examination, contrary to judicial dicta emphasizing the independence of quasi-judicial authorities. They referenced precedents to support the notion that circulars conflicting with statutory provisions hold no legal standing. The Tribunal agreed with the appellant that the sponsorship related to the sport event of IPL matches, falling outside the taxable service definition. They noted the broad interpretation of the expression "in relation to" in the exclusion clause.

Additionally, the TRU Circular of 2010 indicated an amendment to remove the exclusion for sports sponsorship from service tax, signaling legislative intent to bring such activities under the tax net. Considering the appellant's prima facie case and the legislative trend, the Tribunal allowed the stay petition unconditionally, ruling in favor of the appellant.

This detailed analysis of the judgment showcases the interpretation of statutory provisions, the significance of circulars, and the legislative intent in determining the tax liability concerning sponsorship of sports events under the Finance Act.