2018 (2) TMI 235 - AT - Service Tax

Liability of service tax - sponsorship agreement - consideration received for providing stands / boxes inside the stadium - Held that - appellants have not granted any right to the sponsors to display their products on the boxes / stands. So also there is no right given in the sponsorship agreement to display any advertisement. The sponsor has only right to display his name on the stand / box. Further, they are also given exclusive priority booking rights. The definition of sponsorship reveals that the activity carried out by the appellant by entering such sponsorship agreements are more akin to sponsorship service which are taxable only with effect from 1.5.2006. Further, these sponsorship services are in relation to sports events and are not taxable services as laid down under section 65(105)(zzzn) of the Finance Act, 1994 - the amount received as per sponsorship agreements for boxes and stands are not leviable to tax under Sale of Space for Advertisement and requires to be set aside. Penalty - Held that - the issue was interpretational and there was sufficient cause for not discharging the service tax liability - penalty set aside. The demand in respect of sponsorship services needs to be verified and segregated from the total demand confirmed by the adjudicating authority - appeal allowed by way of remand.

Issues:
1. Service tax liability on "Sale of Space & Time for Advertisement" and "Renting of Immovable Property" by the appellant.
2. Contesting the demand and penalties imposed by the original authority.
3. Interpretation of sponsorship agreements and categorization of services as sponsorship or advertisement.
4. Dispute regarding the levy of service tax on renting of immovable property.
5. Imposition of penalties under section 78 of the Finance Act, 1994.

Analysis:

Issue 1: Service Tax Liability
The appellant, a Member of the Board of Control for Cricket in India (BCCI), was found to be conducting cricket matches without registering with the Service Tax Department. The investigation revealed non-payment of service tax on services like "Sale of Space & Time for Advertisement" and "Renting of Immovable Property." The original authority confirmed the service tax demand for the mentioned services and imposed penalties under section 78 of the Finance Act, 1994.

Issue 2: Contesting Demands and Penalties
The appellant contended that the activities did not entirely fall under the categories of taxable services as alleged. The appellant argued that the services provided, especially in-stadia advertisements and sponsorship agreements, were not fully covered under the taxable categories. The appellant claimed a bona fide belief in non-coverage under the service tax regulations and requested the penalties to be set aside.

Issue 3: Interpretation of Sponsorship Agreements
The appellant entered into sponsorship agreements for stands and boxes in the stadium. The dispute arose regarding categorizing these agreements as sponsorship services or advertisement services. The appellant argued that the agreements were related to sponsorship of sports events and thus exempt from taxable services. The appellant's counsel emphasized the definition of sponsorship and the nature of agreements to support the contention that these services should not be taxed.

Issue 4: Dispute on Renting of Immovable Property
Regarding the demand for renting of immovable property, the appellant did not contest the demand on merits but challenged the penalty imposed. The contentious issue during the relevant period was whether renting of immovable property was subject to service tax. The Tribunal considered the interpretational nature of the issue and set aside the penalties while upholding the demand for service tax with interest.

Issue 5: Imposition of Penalties
The Tribunal reviewed the penalties imposed under section 78 of the Finance Act, 1994, and decided to set aside the penalties related to renting of immovable property services and the uncontested demand for "Sale of Space for Advertisement." The Tribunal remanded the matter to the adjudicating authority for verification and re-quantification of the tax demand based on the observations made during the proceedings.

This detailed analysis of the judgment highlights the key issues, arguments presented by the parties, and the Tribunal's decision on each aspect of the case.

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