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TMI Blog2020 (12) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... D THAT:- W hen a product is advertised by using a celebrity, the intention is to create an impression in the minds of customers or users that the product and services of the brand have the level of excellence comparable to that of the celebrity. It is only promotion or marketing or sale of goods produced, provided or belonging to a client and promotion of marketing of services provided by the client that are covered under BAS and they would continue to be covered under BAS. The Instructions further notes that many important companies were associated with a range of activities including production, marketing, sale of goods, provision of services, holding of events, undertaking social activities and if the brand name/house mark is promoted by a celebrity, without reference to any specific product or services, the service would not be classified under BAS, but would be classifiable under the newly added service under section 65(105)(zzzzq) of the Finance Act - there is no manner of doubt that the activity carried out by the appellant would be classifiable under the new taxable service contemplated under section 65(105((zzzzq) of the Finance Act. This issue has been settled by the Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f no machinery exists to exclude non-taxable service, a composite contract is not taxable since law must provide a measure or value of the rate to be applied and any vagueness in the legislative scheme makes the levy fatal. Whether the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could have been invoked in the facts of the present case and whether penalty under section 78 of the Finance Act could have been imposed? - HELD THAT:- The show cause notice was issued to the appellant on September 26, 2011 in regard to the demand covering the period from May 1, 2006 to June 30, 2010 by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act as the limitation contemplated under section 73(1) Finance Act was one year from the relevant date. The allegation made in the show cause notice regarding the applicability of the extended period of time limit - The Commissioner has not dealt with the issue of limitation and only a statement has been made, while dealing with the imposition of penalty under section 78 of the Finance Act, that the issue of limitation was dealt earlier. It would be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport services of business or commerce" [BAS] with interest and penalty, are for setting aside the aforesaid order passed by the Commissioner and for granting interest to the appellant on the amount of ₹ 1,51,66,500/- deposited with the Department on February 26, 2014 towards the demand of service tax as also ₹ 50 lacs deposited on March 26, 2014 towards penalty, from the date of deposit till the date the amount was transferred to the account of the Registrar General of the Calcutta High Court. 2. BAS has been defined under section 65 (19) of the Finance Act 1994 [The Finance Act] to mean inter-alia, any service in relation to promotion or marketing or sale of goods produced or provided by or belonging to the client; or any service in relation to promotion or marketing of service provided by the client. This service is taxable under section 65(105) (zzb) of the Finance Act which defines "taxable service" to mean any service provided or to be provided to a client by any person in relation to BAS. 3. Section 65(104c) of the Finance Act defines BSS to mean services provided in relation to business or commerce. It is taxable under section 65 (105)(zzzq) of the Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... celebrity. Thus, a "brand ambassador" works under a contract for a reasonably long period and promotion or marketing of sale of goods or services are covered under BAS. The show cause notice thereafter distinguishes BAS and the newly introduced service of "promotion of brand of goods and services" w.e.f. July 1, 2010 in the following terms: "The difference between the services classifiable under "BUSINESS AUXILIARY SERVICE"(effective from 1-7-2003 & 10-92004) i.e., BAS and newly introduced service of "PROMOTION OF 'BRAND' OF GOODS, SERVICES, EVENTS, BUSINESS ENTITY ETC SERVICES" (effective from 01-7-2010) is that the latter has a wide coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/ corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/ marketing/ sale of goods, provision of services, holding of events, undertaking social activities etc. If the brand name/ house mark etc is promoted by a celebrity without reference to any specific product or services etc, it is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to his playing skills and thus the services rendered by the notice in this regard in this regard is squarely classifiable under the taxable service head of "Business Support Service" as per the provisions of Section 65(104c) read with Section 65(105)(zzzq) of the Finance Act 1994. ******** 5.2. It is admitted position on record that the Shri Ganguly (the Noticee) obtained service tax registration only on 03-8-2010 relating to the service of 'Promotion of 'Brand' of Goods, Services, Events, Business Entity etc Services'- but did not discharge his service tax liabilities before that under the "BAS" (Business Auxiliary Services) that appears to be lawfully due from him with appropriate interest as detailed herein above. Similarly, Shri Ganguly did not obtain service tax registration under BSS (Business Support Services) relating to service charges received from M/s Knight Riders Sports Pvt. Ltd and thus did not discharge his service tax liabilities that appears to be lawfully due also with appropriate interest. In view of the fact that Shri Ganguly (the notice) had rendered two taxable services namely, 'Business Auxiliary services' (ref: Table-I) and 'Business Support services' ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation Cess of ₹ 2,94,589/- plus S&H Education Cess of ₹ 1,42,454/- [Grand Total of ₹ 1,51,66,500/-] should not be demanded and recovered from Shri Sourav Ganguly invoking the extended period of time limit as envisaged under first proviso to the Sub-Section (1) of Sec. 73 of the Finance Act, 1994 as amended. (ii) Interest at the appropriate rate as applicable during the material period should not be charged/demanded and recovered from him under section 75 of chapter V of the Finance Act, 1994, as amended for the delayed payment of Service Tax including Education Cess and S&H Edu. Cess as in [i] above; (iii) Penalty should not be imposed upon the Noticee in terms of Section 76, 77 and 78 of Finance Act, 1994 as amended for willful non-payment of the amount of Service Tax including Education Cesses and for contravention of the provisions of Sec. 68,69 and 70 of Chapter V of the Finance Act, 1994." 13. The receipt from the various activities performed by the appellant, on which service tax has been computed in Tables I and II attached to the show cause notice, are as follows:- Sl No. Nature of Receipts Gross Amount received in Rs. Service tax deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... organization or infrastructure for doing any business or offering any business services." 16. It was, accordingly, stated in the reply that the appellant as an 'entity' had only allowed the 'brand Sourav Ganguly' to be the 'content' for purpose of brand endorsement or like purpose. 17. In regard to BAS, the appellant stated: "The basic nature of the entity as discussed in paras-10 and 11 can never be said to be any "Auxiliary" to any main business activity- what actually the entity could do only to become a 'content' (as Sourav Ganguly) for the purpose endorsement of any 'brand'- and nothing else. One has to be actively engaged with a normal and reasonable degree of regularity for the provision of any auxiliary service to any main business services (function) of promotion or marketing or sale and there has to have a direct link to the business process involved in promotion or marketing or sale (of goods or service). Therefore, it is clear that Mr. Sourav Ganguly had not performed any Business Auxiliary Service during the instant period from 01.05.2006 to 30.06.2010 and in generic terms it was not possible for him to do that also. All agreements mentioned there in the Show Caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice regarding amount received for writing article on sports and also no allegation have been made in the show cause notice regarding the amount received for anchoring the TV show on Zee Bengla, therefore, service tax on the same has been wrongly computed, and in any case not taxable under business auxiliary service. It was also submitted that so far the amount received for the brand promotion activity is concerned, same is taxable w.e.f 01.07.2010, same is taxable w.e.f 01.07.2010 , under separate category, under which the Appellant already registered and paying service tax, and demand in the present case, only upto 30.06.2010." 20. The Commissioner, however, did not accept the submissions made by the appellant in the reply filed to the show cause notice and, as noted above, confirmed the demand of service tax. 21. The relevant portion of the order passed by the Commissioner in regard to BAS is reproduced below:- "The perusal of the statute vis-à-vis the activity undertaken by Sri Sourav Ganguly for a consideration as indicated in the various contracts appended above clearly shows that the noticee provided business auxiliary service. I find that one of tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also imposed penalty under section 78 of the Finance Act and the relevant portion of the order dealing with this aspect is reproduced below:- "I find that the show cause notice has proposed penal action in terms of section 76, 77 and 78. In his submission made after the personal hearing the notice himself asserted that he had obtained registration under service tax legislation for the provision of Brand Promotion Services only with effect from 01.07.2010. It is also very much evident from the facts of the case that the noticee failed to comply with the formalities like getting themselves registered in accordance with the provisions of section 69 and paying due service tax. Thus, the noticee is liable to be penalized in terms of section 77. This admitted position and the findings above shows that the noticee is liable to be penalized under section 77. The reference of the contract between BMA stainless Ltd. and the noticee has been made in the discussions related to 'Business Auxiliary Services'. It clearly shows that the noticee was well aware of the taxability of the transactions made by him while providing taxable services. His reply to the show cause notice is full of inventi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act. The Commissioner has given a finding that the appellant accepted that he had received 'brand endorsement fees', but service tax on brand promotion was levied w.e.f July 01, 2010, when section 65(105)(zzzzq) was incorporated in the Finance Act. Thus, the alleged service was not taxable prior to July 01, 2010. In this connection reliance has been placed on the decisions of the Tribunal in Commissioner of Service Tax, Delhi vs. Shriya Saran , [2014 (36) STR 641 (Tri. Del)] Indian National Shipowners' Association vs. Union of India , [2009 (14) STR 289 (Tri. Bom.)] Hanuman Coal Company vs. Commissioner of Central Excise, Kanpur [2011 (22) STR 350 (Tri. Del.)] and R.K. Paliwal vs. Commissioner of Central Excise, Kanpar[2012 (26) STR 567 (Tri. Del.)]. Cricket Playing Fee (iv) The show cause notice alleges that the appellant had received remuneration from the IPL franchisee (KKR), in addition to playing skill for promotional activities to market logos/brands/marks of franchisee / sponsors. The Commissioner assumed that the amount received was a composite fee and the entire amount was leviable to service tax in terms of the Instructions dated July 26, 2010. The view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner (Service Tax) CBEC, New Delhi by a letter dated July 26, 2010 clarified that remuneration paid to players for promoting or marketing of logo/brands/marks of the franchisee/ sponsorers would fall under BSS and would be chargeable to service tax and that in case it was not possible to segregate the fee paid for playing matches and for participating in promotional activities, service tax should be levied on the composite amount that was received; and (iv) There is a difference between the 'onus of proof' and 'burden of proof' as was observed by the Calcutta High Court in Commissioner of Cus. (Prev.) West Bengal, Kolkata vs. Ritu Kumar [2006(202) E.L.T. 754 (Cal.)] 27. The submissions advanced by learned counsel for the appellant and the learned authorized representative of the Department have been considered. 28. Broadly, the following issues arise for consideration in this appeal: (i) Whether the 'Brand Endorsement' fees received by the appellant was for providing services relating to promotion or marketing or sale of goods produced or provided by or belonging to the client, so as to make the service taxable under BAS or was for promotion or marketing of a brand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the appellant deserves to be accepted. 33. Paragraph 4.1 of the show cause notice, which has been reproduced above, mentions that the appellant had rendered his celebrity image as a "Brand Ambassador" for promotion, marketing/sale of various products against which he received remuneration from May 1, 2006 upto June 30, 2010 and such services would appropriately be classifiable under BAS. The appellant claims that he had rendered his celebrity image as a 'Brand Ambassador" for promotion of brand of goods by appearing in advertisement, which service would be taxable only under section 65(105)(zzzzq) of the Finance Act w.e.f. July 1, 2010. 34. Section 65 (105)(zzzzq)of the Finance Act, which came into force w.e.f. July 1, 2010 is, therefore, reproduced below: "65(105)(zzzzq):-taxable service" means any service 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 ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts under the trade mark "CAPTAIN" or "BMA". The contract also mentions that the appellant will act as a brand ambassador for BMS Stainless Ltd. 37. The terms of the aforesaid contracts clearly indicate that the appellant was required to provide services in connection with advertisement, promotion, marketing and endorsement of the products under the trade mark CHIRAG or "CAPTAIN"/BMA or advertise and promote the business of the Company 'Vibygor'. The contracts also indicate that the appellant was to act as an ambassador of CHIRAG/BMA Stainless Steel Ltd. and that the appellant had granted rights and license to Vibygor Gold to use the "player Identification" in connection with the advertisement and promotion of the business of the said company. It, therefore, transpires that the services which the appellant was required to perform under the contracts was for promotion or marketing of brand of goods under a trade name. The show cause notice also takes note of the fact that the appellant had rendered his celebrity image as a "Brand Ambassador" for promotion, marketing/sale of various products by appearing in ad-media. This is a service which would fall under section 65(105)(zzzzq) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities would continue to remain classified under B.A.S. The difference between the services classifiable under B.A.S and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities, etc. If the brand name/house marks, etc. is promoted by a celebrity without reference to any specific product or services, etc., it is difficult to classify it under BAS. Such activities, like mere establishing goodwill or adding value to a brand would fall under this newly introduced service." (emphasis supplied) 39. It would, therefore, be seen from the aforesaid Instructions that when a product is advertised by using a celebrity, the intention is to create an impression in the minds of customers or users that the product and services of the brand have the level of excellence comparable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession in and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzzzj) and the services rendered by the members of the 1st petitioner have been specifically brought to the levy of Service Tax only upon the insertion of this new entry. 38. If the Department's contention is accepted that would mean that the activities of the members of the 1st petitioner are covered by entry (zzzy) and entry (zzzzj). Such a result is difficult to comprehend because entry (zzzzj) is not a species of what is covered by entry (zzzy). Introduction of new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services. Therefore, prior to introduction of entry (zzzzj), the services re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebrity appearance in advertisements or promotional events for such goods or services against a contract is covered by the definition of brand promotion service under Section 65(105)(zzzzq), as such activity adds to the brand value and is more for promotion of brand of the goods or services and is not merely for promotion or marketing or sale of goods or services, which is covered by the definition of 'Business Auxiliary Service' under Section 65 (19). 10. The point of dispute is as to whether the activity of the respondent is Business Auxiliary Service covered by Section 65(105)(zzb) read with Section 65(19) or is the service of brand promotion covered by Section 65(105)(zzzzq). ********** 12. We do not agree with the above contention of the Department, for the following reasons :- (a) While Business Auxiliary Service in terms of its definition in Section 65(19), covers among other activities, the services in relation to promotion or marketing or sale of the goods produced or provided by or belonging to the client or promotion or marketing of services provided by the client, Section 65(105)(zzzzq) covers the promotion or marketing of the brand name/trade name of the clien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orsement/promotion of the clients product/services is to be provided, it is clear that the overall objective of these agreements is the brand promotion and not mere promotion or marketing of a particular product or service. Therefore, we hold that the services provided by the respondent are covered by Section 65(105)(zzzzq) which had come into force w.e.f. 1-7-2010 and, hence, during the period prior to 1-7-2010 the respondent's activity in terms of her contracts mentioned above could not be taxable under Section 65(105)(zzb), as, as held by Tribunal in the case of Jetlite (India) Ltd. vs. CCE, New Delhi (supra), Gujarat State Petronet Ltd. vs. CST, Ahmadabad (supra) and Triveni Earthmovers Pvt. Ltd. vs. CCE, Salem (supra), an activity is not liable to service tax under a preexisting category when that activity had been brought under tax net from a certain date." (emphasis supplied) 44. In view of the aforesaid decisions of the Bombay High Court and the Tribunal it has to be held that the activity carried out by the appellant could not have been subjected to levy of service tax under BAS prior to July 1, 2010 and would only be taxable w.e.f July 1, 2010 under section 65(105)(zzzz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the appropriate to reproduce question numbers 4 and 8 and the answers given by the appellant and they are as follows: "Question No. 4 : It is noted on perusal of Shri Sourav Ganguly's income details submitted on 15.3.2010 that, Shri Sourav Ganguly has received considerable amounts from M/s Knight Riders Sports Pvt. Ltd., Mumbai in control of Kolkata Knight Riders Team (subsidiary of M/s Red Chillies Entertainment Pvt. Ltd., Mumbai) relating to the IPL events. In this regard, out of total amount received by Shri Sourav Ganguly from M/s Knight Riders Sports Pvt. Ltd., Mumbai-please confirm the amount received (i) as cricket playing fees and (ii) Business promotional service fees other than (i) above. Please submit documentary evidence in support of your confirmation in this regard. Ans:- Sourav Ganguly has received payments from M/s Knight Riders Sports Pvt. Ltd., Mumbai only for playing cricket in terms of the agreement entered into with them. This would be evident from the agreement - which will be submitted within seven days. Question No. 8 : Shri Mitra, do you agree that a service provided by a person-that includes a cricket player/celebrity also-for promotin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise & Customs) **** New Delhi the July 26, 2010 Sir, Subject: Service Tax, issues in respect of the Indian Premier League (IPL) - regarding. ********** 3. Remuneration paid to the players: Some Commissionerates have issued Show Cause Notices demanding service tax on the remuneration that has been paid to the players. Perusal of the contracts that players have signed with the teams reveals that the obligations of the players are not limited to displaying their cricketing skills in a cricket match. They have also to lend themselves to promotional activities. Thus the players provide taxable services when they wear apparel provided by the franchisee that is embossed with commercial endorsements or when they participate in endorsement events. The services provided by the players for promoting or marketing of the logos/brands/marks of the franchisee/ sponsorers would fall under "business support service" and chargeable to service tax. However that fee charged for playing the matches will fall outside the purview of taxable service. In case the players are paid composite free fee playing the matches and for participating in promotional activities the component of promotional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under 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 been substituted." 61. For the purposes of section 73 of the Finance Act, 'relevant date' has been defined in section 73 (6) of the Finance Act to mean as follows: "73 (6) For the purposes of this section, "relevant date" means,- (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement; 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, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or shortpaid or erroneously refunded: 66. It would be seen from a perusal of section 73(1) of the Finance Act read with its proviso and section 78 of the Finance Act that the ingredients for applicability of the provision, namely fraud, collusion, wilful mis-statement, suppression of facts or contravention of any other provisions of the Act are similar. 67. It would, therefore, be necessary to again reproduce the finding recorded by the Commissioner, while dealing with the imposition of penalty under section 78 of the Finance Act. The Commissioner observed: "However, as observed earlier in relation to the issue of limitation make it clear that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or mere failure to pay duty or take out a license without the presence of such intention." xxxxx The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief." 72. In Pushpam Pharmaceutical Co. v/s Commissioner of Central Excise, Bombay[1995 (78) ELT 401 (SC)] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppression of facts' had been used in the company of strong words such as fraud, collusion, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Bombay [1995 Suppl. (3) SCC 462], 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 willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act." 74. These two decisions in Pushpam Pharmaceuticals Co. and Anand Nishikawa Company Ltd. were followed by the Supreme Court in a subsequent decision of the Supreme Court in Uniworth Textile Limited v/s Commissioner of Central Excise, Raipur [2013 (288) ELT 161 (SC)] and the observations are: "18. We are in complete agreement with the principal enuncia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order till the date amount was transferred to the Registrar General of the Calcutta High Court. 80. It transpires from the records that after the passing of the order dated November 12, 2012 by the Commissioner, the appellant deposited the confirmed demand of ₹ 1,51,66,500/- on February 26, 2014 and subsequently also deposited an amount of ₹ 50 lacs on March 21/26, 2014 in compliance of an interim order dated March 10, 2014 passed by the Calcutta High Court, in the Writ Petition filed by the appellant to assail the order passed by the Commissioner. The said Writ Petition filed by the appellant was allowed by a learned Judge of the High Court on June 30, 2016 and the amount deposited was directed to be refunded with interest at the rate of ten percent per annum from the date of deposit till the date of payment. The Department however, filed an appeal before a Division Bench of the Calcutta High Court against the order of the learned Judge and by an interim order dated February 16, 2017, the Division Bench directed that the amount of ₹ 2,01,66,500/- (1,51,66,500+50,00,000/-) should to be deposited by the Department with the Registrar General of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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