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TMI Blog2016 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... all material times he acted and still acts as brand ambassador for various products. He also acted as anchor in television shows and particularly on Zee Bangla Channel. The petitioner is also engaged in writing articles for Sports Magazines. (3) Service tax was introduced in India for the first time in the year 1994 under Chapter V of the Finance Act, 1994 which has been amended from time to time. More and more categories of service have been brought within the purview of the service tax net by successive amendments to the Finance Act. Section 65 (105) of the Finance Act defines and/or enumerates the types of services which attract service tax. (4) Finance Act, 1994 was amended by the Finance Act, 2003 and with effect from 1 July, 2003 a new service, namely 'Business Auxiliary Service' was made taxable under sub Clause (zzb) of Clause 105 read with Clause 19 of Section 65 of Chapter V of the Finance Act, 1994, vide notification No. 7/2003 dated 20 June, 2003. After this amendment, 'taxable service' came to include any service provided or to be provided to a client by any person in relation to business auxiliary service. Section 65 (19) of the said Act defines 'Business Auxiliary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assesse. Section 73 of the Act is set out hereunder:- "S. 73. Recovery of service tax not levied or paid or short- levied or short-paid or erroneously refunded 1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any service tax has not been levied or paid or has been short-paid or short-levied or erroneously refunded by reason of- (a) Fraud; or (b) Collusion; or (c) Willful mis-statement; or (d) Suppression of facts; or (e) Contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, By the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words 'one year', the words 'five years' had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customers relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation or customer service and pricing policies, infrastructural support services and other transaction processing." (7) By notification No. 24/2010-ST dated 22 June, 2010, the Finance Act, 1994 was once again amended with effect from 1 July, 2010 by bringing within the service tax net, 'Services of promotion of brand of goods/services etc.' under sub-Clause (zzzzq) of Clause 105 of Section 65 of the Act. After such amendment 'taxable service' came to include any services provided or to be provided to any person, by any other person, through a business entity or otherwise, under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a trade name, logo or house mark of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner. By a letter dated 24 November, 2009, the petitioner contended that he was not rendering any business auxiliary services and had earned income by playing the game of cricket for the country. Under cover of letters dated 14 December, 2009 and 15 March, 2010, the petitioner submitted all documents sought for by the office of the respondent no. 4 including the copies of agreements entered into with various companies and corporate entities. The petitioner received a summon dated 12 January, 2011 from the office of the respondent no. 4 to appear on 19 April, 2011 for making statements and producing documents about the details of income received by the petitioner during the period 1 January, 2010 till 30 September, 2010 as also to produce the balance sheet for the year 2009-10. The petitioner appeared through his authorised representative being his chartered accountant and submitted all documents called for. The petitioner again received a letter dated 4 August, 2011 seeking details of TDS amount deducted in respect of the payments received by the petitioner. By letter dated 20 August, 2011 the petitioner supplied the information sought for. (10) The respondent no. 4 issued a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly, the petitioner was granted registration on 3 August, 2010 for such activities and from 1 July, 2010 the petitioner has undisputedly paid service tax for the services of brand endorsement/brand promotion. The CBEC by its circular/instruction dated 26 February, 2010 has clarified that promotion of brand or celebrity acting as a brand ambassador will be covered under the newly added service under Section 65 (105)(zzzzq) of the Finance Act, 1994. It was submitted that the petitioner by letter dated 24 November, 2009 clearly disclosed his activities and sources of receipts and denied that his activities are covered under business auxiliary services. Further, under cover of letter dated 14 December, 2009 the petitioner submitted copies of agreements and audited accounts for five years. On 28 January, 2011 a statement of the petitioner's representative was recorded by the Department. Further, by letter dated 20 August, 2011 the petitioner submitted the complete date wise details for all receipts for the period from 1 May, 2006 to 30 June, 2010 by specifying the entry of each receipts and this is not disputed by the Department. (15) Mr. Mittal submitted that the respondent no. 2, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench, New Delhi in the case of Commissioner of Service Tax, Delhi-vs.-Shriya Saran, 2014 (36) STR 641, where on similar facts the Tribunal held that the services provided by the assessee for brand promotion were covered by Section 65 (105)(zzzzq) of the Finance Act, 1994 which had come into force with effect from 1 July, 2010 and hence, during the period prior to 1 July, 2010 the assessee's activities in terms of her contracts could not be taxable under Section 65(105)(zzb) of the said Act. (17) Ld. Counsel also relied on a Division Bench judgment of the Bombay High Court in the case of Indian National Shipowners' Association-vs.-Union of India, 2009 (14) STR 289, wherein at paragraph 38 of the judgment, the Bombay High Court held in the context of the Finance Act, 1994 that introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services. Therefore, prior to introduction of entry (zzzzj), the services rendered by the assessees' were not taxable. Creation of new entry was not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in law." Ld. Counsel also relied on another decision of the Hon'ble Apex Court in the case of Jhunjhunwala-vs.-State of Uttar Pradesh, 2006 (206) ELT 3. In that case what fell for determination was whether the appellant was a 'manufacturer' within the meaning of S. 2 (cc) of the Uttar Pradesh Trade Tax Act, 1948. The High Court relied on a circular issued by the Commissioner of Trade Tax and held that the appellant was a 'manufacturer' and was thus liable to pay trade tax. While setting aside the order of the High Court, the Hon'ble Apex Court held that the Commissioner's circular could not have created a liability by drawing inference that the purchasers from farmers who have grown, cut or sawn timbers, ballis, bamboos will bring them within the umbrella of the expression 'manufacturer'. There is no logic for such a conclusion when the statutory definition does not say so. It needs no emphasis that a circular cannot create tax liability. The expression 'manufacturer' cannot cover the types of transactions referred to in the Commissioner's circular. Whether an activity amounts to manufacture has to be factually determined. There cannot be a direction to treat a particular typ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 983 (12) ELT 349, wherein it was held that it is not open to the Board of Central Excise and Customs in its administrative capacity to issue directives to various subordinate authorities exercising quasi-judicial functions to interpret excise notifications in a particular manner and to restrict relief thereunder. Since the impugned levy or imposition of excise duty or demands in show cause notices gives effect to the direction of the Board, the same is illegal and void. (23) Ld. Counsel then submitted that the entire proceeding with regard to demand of service tax on IPL fee received by the petitioner from KKR as 'business support service' under Section 65(105)(zzzq) of the Finance Act, 1994, is without jurisdiction, illegal and non-est as the levy itself was not in existence during the relevant period i.e. 1 May, 2006 to 30 June, 2010. He further submitted that in any event, even going by the impugned circular dated 26 July, 2010, the fee charged for playing matches will fall outside the purview of taxable service. Mr. Mittal then referred to the agreement between the petitioner and KKR and in particular Clause 2.1 thereof which provides that the petitioner was being engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided by the appellant. He was simply a purchased member of a team working under CSK and thus could not provide any service to CSK as an individual. (24) Ld. Counsel then submitted that the total fee of Rs. 8,70,87,857/- received from KKR includes an amount of Rs. 4,37,00,000/- for playing IPL outside India (South Africa) on which tax effect is Rs. 51,50,443/-. He submitted that the provisions of Finance Act, 1994 are not applicable for services rendered outside India as Section 64 of the Act specifies that the Act applies to the services rendered within the territory of India except the State of Jammu and Kashmir. Hence, on that ground also, service tax demand is illegal to the extent of Rs. 51,50,442/-. (25) Ld. Counsel next submitted that in paragraph 6 of the impugned notice dated 26 September, 2011 it has been alleged that there was suppression of material facts by the petitioner and, hence, the extended period of limitation is invokable under the proviso to sub- Section (1) of S. 73 of the Finance Act, 1994. This allegation is completely without basis. All relevant information was furnished by the petitioner in the year 2009 regarding the activities of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of his submission that in taxing statutes mens rea is an essential element required to be examined by the authority while imposing penalty. Ld. Counsel also relied on another decision of the Hon'ble Apex Court in the case of UOI-vs.-Rajasthan Spinning & Weaving Mills, 2009 (238) ELT 3, in support of his submission that penalty is a punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting a fraudulent means. If it be held that the extended period of limitation is not invokable as there was no suppression of facts or other fraudulent act on the part of the assessee, the normal period of limitation of one year would not stand extended and the question of penalty would not arise. (27) Mr. Mittal finally submitted that during the pendency of the writ petition, the petitioner has paid the entire demand of Rs. 1,51,66,500/- in terms of the court's order dated 12 February, 2013 and has deposited a further sum of Rs. 50 lacs in terms of the Division Bench order dated 10 March, 2014 passed in MAT 320 of 2014. The order dated 12 February, 2013 passed on the present petition provided that 'it goes without saying that if this writ petition succ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neration from IPL franchisee for rendering promotional activities and the services rendered by the petitioner are classifiable under the taxable head of 'business support services' under Section 65(19)(zzzq) of the Finance Act, 1994. He submitted that prior to obtaining service tax registration on 3 August, 2010 in relation to the service of 'Promotion of Brand of Goods, Services, Events, Business Entity Services', the petitioner did not discharge his service tax liabilities for rendering business auxiliary service. Further, the petitioner did not obtain service tax registration under 'Business Support Service' in relation to charges received from KKR. (31) Ld. Counsel then submitted that the petitioner had exploited his celebrity image as 'Brand Ambassador' for the purpose of promotion/marketing/sale of various products or appearing in the ad- media against which he had received service charges/remunerations as per the agreement with various corporate clients and as per the provisions of S. 65 (19)(i) of the Finance Act, 1994, such activity of the petitioner is taxable under the category of 'Business Auxiliary Services'. Some of the clauses of the agreement between the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable services which are classifiable under business auxiliary services. (34) Ld. Counsel finally submitted that there is nothing wrong with the clarificatory circular dated 26 July, 2010 or the show cause cum demand notice or the order dated 12 November, 2012 passed by the Commissioner of Service Tax, Calcutta. All the three were issued strictly in accordance with law and on a proper interpretation of relevant provisions of the Finance Act, 1994. Ld. Counsel prayed for dismissal of the writ petition. Court's View:- (35) Ld. Counsel for the respondents has taken a preliminary objection as to the maintainability of the writ petition in view of there being an alternative statutory remedy of appeal available to the petitioner. He has submitted that generally a show cause notice is not interfered with in the exercise of jurisdiction under Art. 226 of the Constitution. It is only in a case where the authority issuing the show cause notice did not have jurisdiction to do so or on the face of it the show cause notice does not disclose commission of any offence, the Writ Court may interfere. (36) It is true that ordinarily this Court in the exercise of its high prerogative writ juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in issuing the impugned show cause notice, the logical conclusion that would follow is that the show cause notice was issued without jurisdiction. In that event, this court would be justified in interfering with the show cause notice and the order in which it culminated in the exercise of jurisdiction under Art. 226 of the Constitution of India. An authority cannot clothe itself with jurisdiction by erroneously deciding a point of fact or law. An authority cannot confer on itself jurisdiction to do a particular thing by wrongly assuming the existence of a factual matrix, existence whereof is a pre-condition for exercise of jurisdiction by such authority. (39) In the instant case, 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. (40) In this connection one may refer to the decision of this Court in the case of Simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen a writ petition is admitted and the point of time when it comes up for final hearing. In the case of Hriday Narain-vs.-Income Tax Officer, Bareilly, AIR 1971 SC 33, the Hon'ble Supreme Court observed that the High Court was not justified in dismissing as not maintainable a petition which was entertained and heard on merits only because of an alternative remedy is available to the petitioner. (42) For the reasons aforesaid, the preliminary issue of maintainability of the writ petition is decided in favour of the petitioner. In my view, the petition cannot be dismissed in limine. (43) Coming to the merits of the case, the first point that has been urged on behalf of the petitioner is that the impugned show cause notice is barred by limitation and as such is without jurisdiction. The show cause-cum-demand notice is dated 26 September, 2011 and pertains to the period from 1 May, 2006 till 30 June, 2010. On a plain reading of Section 73 of the Finance Act, 1994, where any service tax has not been paid or has been short paid or erroneously refunded, the Department may serve a notice on the assessee requiring him to show cause why he should not pay the amounts specified in the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After all, the allegation of suppression of material facts to evade payment of tax amounts to ascribing a fraudulent motive to the assessee and is a serious allegation. Just as in judicial proceeding, when fraud is alleged against a person, such allegation would carry no weight unless particulars of fraud are furnished by the person alleging fraud, in my view, in a quasi-judicial proceeding also when an allegation of fraud or any allegation of similar nature is made against a person, particulars of the same must be furnished. The person against whom fraud is alleged must know with sufficient certainty of the case that he has to answer. A mere ipse dixit that fraud has been committed or something has been done or permitted to be done with fraudulent motive cannot be taken note of and cannot form the basis of any action on the part of the authorities. Even if, such particulars are not included in the notice, the Department should be in a position to justify and/or substantiate its allegation of suppression of material facts on the part of the noticee. (46) Coming to the facts of the present case, is there any suppression on the part of the petitioner as would entitle the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner suppressed nothing and maintained all throughout that he did not render any business auxiliary service or business support service and as such was not liable to pay service tax under those heads. Even if, such perception of the petitioner was found to be erroneous subsequently, still the same, would not, in my opinion, amount to suppression of facts. Unless a party deliberately conceals material facts with a dishonest motive of evading some liability or making unlawful gain he cannot be said to be guilty of suppression of facts. (49) As would appear from the impugned show cause notice, there is no allegation of any conscious act on the part of the petitioner that constitutes fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or any Rule made thereunder with intent to evade service tax. There is only a sweeping statement that the petitioner by his 'act of omission and wilful suppression of material facts with the intent to evade payment of service tax did not discharge the due service tax liability amounting to Rs. 1,51,66,500/- during the period from 1.05.2006 to 30.06.2010'. There is no whis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, is required before it can be saddled with any liability beyond the period of six months. (53) In Anand Nishikawa Co. Ltd.-vs.-Commissioner of Central Excise, Meerut, (supra), the Hon'ble Supreme Court observed as follows:- "............we find that 'suppression of facts' can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression." (54) In Commissioner of Central Excise, Aurangabad-vs.-Bajaj Auto Ltd., 2010 (260) ELT 17, the Hon'ble Supreme Court referred to its earlier judgments in the cases of Chemphar Drugs and Liniments, Hyderabad (supra) and Anand Nishikawa Co. Ltd. (supra) and held that it was settled that mere failure to declare would not amount to wilful suppression. There must be some conscious, deliberate act with a view to evade service tax. (55) The principle of law which emerges from the judgments of the Hon'ble Supreme Court referred to above, is that mere failure to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax have been claimed by the Department under the heads of 'Business Auxiliary Service' or 'Business Support Service'. Business auxiliary service is defined in Sec. 65(19) of the Finance Act which has been set out earlier in this judgment. It is an exhaustive definition and not an inclusive one. Broadly speaking, it means any service in relation to promoting, marketing, or selling goods produced or provided by or belonging to a client or promoting or marketing service provided by the client. It must be a service rendered in the field of trade and commerce or any kind of business. It is a service rendered by a person to popularize the product or service of a client and/or enhance the sale of such product or service. It also encompasses service provided on behalf of the client as also procurement of goods or service which are inputs for the client. Customer care service rendered on behalf of the client also comes within the purview of 'Business Auxiliary Service'. It also includes a service incidental or auxiliary to any of the aforesaid activities and includes services as a commission agent. Thus, what activities amount to business auxiliary service have been defined with precision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. By anchoring a TV show, a celebrity or for that matter any other person does not render service with the object of enhancing any business or commercial interest. No reasonable authority with proper application of mind could classify anchoring of TV show as business auxiliary service or business support service. Hence, in my view, the remuneration received by the petitioner for anchoring TV shows does not attract service tax. (65) As regards the claim of service tax to the tune of Rs. 20,60,000/- on the sum of Rs. 2,62,61,782/- received by the petitioner for brand endorsement, such claim has been made under the heading 'Business Auxiliary Service'. The Department's contention is that being a celebrity, the petitioner permitted the commercial use of his photographs, videos, speech and also appeared in person for promotion and marketing of products/services belonging to corporate entities engaged in business/commercial activities. For rendering such services, the petitioner received considerable amounts of service charges from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e categories. If brand endorsement was covered under business auxiliary service, it would not have been necessary for Parliament to introduce a new category of 'Brand Endorsement' by way of amendment. If by making a substantive amendment to a taxing statute, a new levy is imposed, it implies that there was no such levy in existence prior thereto. (67) I am inclined to agree with the submission of Ld. Counsel for the petitioner that since by amendment of the Finance, Act, 1994, a new taxable service category of 'Brand Promotion' was introduced with effect from 1 July, 2010, the logical corollary and inevitable inference is that such category of service was not taxable prior to 1 July, 2010. In this connection I am in agreement with the decision of the CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi-vs.-Shriya Saran (supra), and the decision of the Division Bench of the Bombay High Court in the case of Indian National Shipowners' Association-vs.-UOI, (supra). Business auxiliary service and brand promotion are distinct service heads as admitted by the Department in the show cause notice under challenge. It is also admitted in the order of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (zzzzq) pertains to brand promotion whereas Sec. 65(104c) pertains to business auxiliary services. They are two distinct and separate categories. As already indicated above, the taxable head of brand promotion was not in existence prior to 1 July, 2010, hence, reliance on that head for levying tax on the amount received by the petitioner from the IPL franchisee is misplaced and misconceived. This is sufficient to vitiate the order. (69) Further, I find from the contract entered into by the petitioner with the IPL franchisee that the petitioner was engaged as a professional cricketer for which the franchisee was to provide fee to the petitioner. 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 servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Customs cannot seek to legislate by issuing circulars/instructions. As observed by the Hon'ble Supreme Court in the case of Ratan Melting & Wire Industries (supra), the clarifications/circulars issued by the Central Govt. or the State Govt. represent merely their understanding of the statutory provisions. In my opinion, 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. Accordingly the impugned circular/instruction dated 26 July, 2010 is quashed to the extent it states that if composite fee received for playing matches and for participating in promotional activities cannot be segregated, then service tax should be levied on the total composite amount. (71) In view of the aforesaid, in my view, the remuneration received by the petitioner from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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