2018 (7) TMI 1388 - AT - Service Tax

Business Support Services - tripartite agreement - remuneration received by the respondent from the franchisee M/s KPH. Held that - An identical matter titled as Sourav Ganguly v. UOI & Ors. 2016 (7) TMI 237 - CALCUTTA HIGH COURT has been decided by the Hon ble Calcutta High Court in favour of cricketer. The Petitioner therein entered into an agreement with the franchisee under which he was obliged to participate in promotional activities apart from playing cricket for their franchisee and the department sought to tax the consideration received by the Petitioner from their franchisee under Business Support Service - The Hon ble High Court of Calcutta held that the Petitioner was engaged as a professional cricketer for which the franchisee was to provide fee to the petitioner. He was under full control of the franchisee and had to act in the manner instructed by the franchisee. The Hon ble High Court further held that the Petitioner therein was not providing any service as an independent individual worker and his status was that of an employee. Therefore it cannot be said that the Petitioner was rendering any service which could be classified as Business Support Service. The remuneration received by the respondent from the franchisee M/s KPH cannot be taxed as Business Support Service - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Classification of services provided by a cricketer to a franchisee under "Business Support Service" for service tax.
2. Liability of the cricketer to pay service tax on payments received for playing in IPL tournaments.
3. Imposition of penalties under various sections of the Finance Act, 1994.
4. Determination of whether the cricketer's activities qualify as taxable services under the contract agreement.
5. Analysis of the cricketer's employment status and the nature of services provided to the franchisee.

Issue 1: The main issue in this case was the classification of services provided by a cricketer to a franchisee under "Business Support Service" for service tax purposes. The Department contended that the cricketer's activities, including promotional activities, fell under this category and were subject to service tax.

Issue 2: The cricketer was alleged to have not paid service tax on payments received for playing in IPL tournaments during specific financial years. The Department issued a show cause notice demanding payment of service tax, Edu./SHE Cess, and interest, along with penalties under various sections of the Finance Act, 1994.

Issue 3: The Adjudicating Authority had initially dropped the proceedings against the cricketer based on the show cause notice. However, the Department appealed the decision, arguing that the cricketer had willfully suppressed the value of taxable services to evade service tax payment, and thus penalties should be imposed.

Issue 4: The cricketer's counsel argued that playing cricket was the primary purpose of the agreement, with promotional activities being ancillary to the main activity. The counsel highlighted clauses from the agreement to support the argument that the cricketer's main role was playing cricket, and any promotional activities were incidental and not the primary service provided.

Issue 5: The Tribunal analyzed the cricketer's employment status, emphasizing that he was an employee of the franchisee and not an independent worker. Citing a similar case decided by the Calcutta High Court, the Tribunal concluded that the cricketer's remuneration from the franchisee could not be taxed as "Business Support Service," aligning with previous decisions on similar cases.

In conclusion, the Tribunal rejected the Department's appeal, stating that the cricketer's remuneration from the franchisee could not be classified as "Business Support Service" for service tax purposes. The decision was supported by previous rulings and the analysis of the cricketer's employment status and the nature of services provided to the franchisee.