Custom, Excise & Service Tax Tribunal
Reckitt Benckiser Healthcare India Pvt ... vs Cgst & Central Excise Gandhinagar on 15 January, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 2
SERVICE TAX APPEAL NO. 10743 OF 2023
RECKITT BENCKISER HEALTHCARE INDIA PVT
LTD
DLF Cyber Park 6th And
Appellant
7th Floor Tower, C- 405 B
Udyog Vihar Phase- III, Sector-20
Gurugram, Haryana- 122016
Vs.
COMMISSIONER OF CENTRAL EXCISE AND
SERVICE TAX-CGST & CENTRAL EXCISE
GANDHINAGAR
2nd Floor, Customs House, Respondent
Near All India Radio, Navrangpura, Ahmedabad, Gujarat-38009 Appearance:
Present for the Appellant : Shri Jigar Shah, Advocate Present for the Respondent: Shri P Ganesan, Superintendent (AR), Shri Anand Kumar, Superintendent (AR) CORAM:
HON'BLE MR. SULEKHA BEEVI C.S., MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) FINAL ORDER NO.A/ 10212 /2024 Date of Hearing/Decision: 15/01/2024 SULEKHA BEEVI C.S. The appellant who was formally known as M/s. Paras Pharmaceuticals Ltd. are engaged in proving taxable services of advertising agency, market research agency, Business Auxiliary Service, transport of goods by road service and rendering immoveable property service for which they are registered with the Service Tax Commissionerate. It was observed that appellant had entered into a memorandum of understanding with Jaipur IPL Cricket Pvt. Ltd. executed on 14.11.2009. As per the MOU, M/s. Jaipur IPL Cricket Pvt. Ltd. (hereafter referred to as M/s. JIPL) has agreed to grant the appellant the rights as an associate sponsor for the Indian Premium League 2 ST/10743/2023-DB Season 3 2010 (IPL) which was conducted from 12.03.2010 to 25.04.2010. After perusal of the terms and conditions of the memorandum of understanding it was noticed by the department that appellant has paid
2. Sponsorship Services was notified as a taxable service vide Notification No. 15/2006-S.T., dated 24.04.2006 w.e.f. 1-5-2006. The Sponsorship Services was defined under Section 65 (99) (a) of Finance Act, 1994, as under:
"Sponsorship" includes naming an event after the sponsor, displaying the sponsor's company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors. 2.1 Further, vide letter Dy. No. 42/Comm(ST)/2008 dated 26.07.2010 issued by the Commissioner (Service Tax), CBEC, New delhi on the subject matter 'Service Tax issues in respect of the Indian Premium League (IPL)' it was further clarified that; " Sponsorship Service:- Prior to Finance Act 2010, sponsorship service did not include " services in relation to sponsorship of sports event" on the basis of this exclusion services tax has largely not been paid on the sponsorship that have been done under IPL. The standard argument is that the sponsorships that have been done under IPL. The standard argument is that the sponsorship contract falls within the exclusion clause. Show Cause Notices have been issued in a few Commissionerates. These notices seek to exclude sponsorship of a team from the scope of the exclusion clause. The argument taken is that the exclusion clause can be invoked only for sponsorship of "Sport event"- a term which naturally encompasses within its ambit sponsorship of games, matches or tournaments. A team in itself is not a "Sport event". A team is an entity 3 ST/10743/2023-DB while "Sport event" is an activity and so team sponsorship would fall outside the orbit of the exclusion clause. It is felt that sponsorship of IPL is not sponsorship of any sport event, since IPL in itself is not a sports event but an entity of franchisee teams and therefore it is taxable. On the same analogy the sponsorship received by a player or a team would be independent of sport event and hence taxable."
3. The department was of the view that the exclusion clause is invocable only in cases where services are provided in relation to sponsorship of sports event and as the appellant has not sponsored sports event but only sponsored the team the exclusion of the definition is not applicable. Show Cause Notice dated 16.05.2013 was issued for the period November 2009 to April 2010 proposing to demand Service tax under the category of sponsorship service along with interest and for imposing penalties. After due process of law, the Original Authority confirmed the demand, interest and imposed penalties. On appeal, the Commissioner (Appeals) vide order impugned herein upheld the demand, interest and penalties. Aggrieved the appellant is now before the Tribunal.
4. The Learned Counsel, Shri Jigar Shah appeared and argued for the appellant. It is submitted that the appellant entered into an arrangement with M/s. JIPL for the sponsorship in Indian Premium League for Rajasthan Royals. A memorandum of understanding was executed between the appellant and M/s. JIPL on 14.11.2009, wherein, the appellant was granted associate sponsorship rights as for the IPL Season 3 (2010) which was conducted from 12.3.2010 to 25.04.2010.
5. M/s. JIPL owns franchise for Rajasthan Royals which is the Jaipur Team of the Indian Premium League formed by the BCCI for 2020 Cricket tournament. All rights of the team Rajasthan Royals are exclusively owned by M/s. JIPL or have otherwise being license for used to M/s. JIPL. The MOU 4 ST/10743/2023-DB executed was subjected to the Rules / Regulations of IPL / BCCI / ICC. Any activity of marketing during the period of the agreement had to be in accordance to the terms of MOU and the rules and regulations of IPL / BCCI and ICC.
6. Section 65 (105)(zzzn) specifically exclude services in relation to sponsorship of sports events. From the bare perusal of the definition of taxable service it can be understood that services 'in relation to sponsorship of sports events' have been consciously excluded from the scope of taxable services. It is pertinent to note that Finance Act, 2010 substituted Section 65 (105)(zzzn) so as to withdraw the exclusion clause of sports events with effect from 01.07.2010. It is submitted by the Learned Counsel that in the present case, the entire demand is for the period prior to 01.07.2010 and therefore the amendment to the said section was no application so as to raise the demand against the appellant.
7. It is submitted that the issue is covered by the decision in the case of M/s. Hero Motorcorp Ltd. Vs. Commissioner of Service Tax, Delhi 2013 (32) STR 371 (Tri. Del.) wherein the Tribunal while interpreting the scope of taxable services in relation to sponsorship services for the period prior to 01.07.2010 has held that the expression 'in relation to' has a an extensive connotation and that the activity of sponsoring the team would also qualify to be excluded.
8. Further that in the following cases also the very same issue has been held in favor of assessee and the demand for the period prior to 01.07.2010 has been set aside. Cocacola India Pvt. Ltd. Vs. CST Delhi 2014 (12) TMI 667
(i) Cocacola India Pvt. Ltd. Vs. CST Delhi 2014 (12) TMI 667 5 ST/10743/2023-DB
(ii) KPH Dream Cricket Pvt. Ltd. Vs. CCE & ST Chandigarh 2019 (5) TMI 1171
(iii) Idea Cellular Ltd. Vs. CCE Mumbai 2016 (8) TMI 112
9. The Learned Counsel prayed that the appeal may be allowed.
10. The Learned AR Shri Anand Kumar appeared an argued for the department. The findings in the impugned order was reiterated
11. Heard both sides.
12. The issue to be decided is whether the sponsorship fee paid by the appellant to M/s. JIPL towards grant of associate sponsorship rights of IPL team Rajasthan Royals for the IPL Season 3 (2010) is taxable under the category of sponsorship service as defined under section 65 (99) (a) read with Section 65(105)(zzzn) Finance Act, 1994. The relevant provisions have already been noticed above. The allegation in the Show Cause Notice is that the exclusion provided in Section 65 (105)(zzzn) is not available to the appellant as the sponsorship is for a sports team and not a sports event. The very same issue was considered by the Tribunal in the case of Hero Motorcorp Ltd. (supra) wherein it was held that the expression in relation to sports event has an extensive connotation and the sponsorship of a team of IPL has to be considered as sponsorship of sports event itself. The relevant paragraph reads as under:
2. These appeal are preferred by M/s. Hero Honda Motors Ltd., since re-
designed as Hero Motorcorp Ltd., a company incorporated under the Companies Act, 1956. Appeals are preferred against a common adjudication order dated 30.06.2011 passed by Commissioner, Service Tax for the period 01.04.2008 to 31.03.2008, 01.04.2009 to 22.09.2009 and 23.09.2007 to 17.05.2010, corresponding cricket matches known as IPL twenty 20 (1,2 and 3) tournaments played at different venues in India.
3. Under an agreement dated 14.05.2008, GMR sports Pvt. Ltd. (author company) and the appellant agreed, in accordance with terms 6 ST/10743/2023-DB and conditions ser out herein, that the appellant would sponsor the GMR team called "Delhi Daredevils" in the tournament conducted under auspicious of BCCI. The relevant terms and conditions of this agreement may be noticed;
(a) GMR is granted franchisee rights by the BBCI for forming a cricket team to represent State of Delhi in a T-2- Cricket Tournament (League) called "DLF - IPL - 20" organized by BCCI.
(b) In consideration of rights and privileges (specified in the agreement) granted by the appellant by GMR, the appellant agree to sponsor the GMR team called "Delhi Daredevils" in the league tournament.
(c) Agreement would be in force for three years from 01.04.2008 or till earlier determination in according with agreement.
(d) GMR appoints the appellant as an official team sponsor of the cricket team called "Delhi Daredevils" for the duration of the agreement GMR will provice the appellant a schedule of all matches for its team immediately after pronouncement by the BCCI-IPL and notify any changes in the schedule; ensure that the appellant's logo would be displayed/positioned at appropriate places as specified in Annexure -'A'; will explore the possibility for the appellant to display its two wheeler product, clearly indicating that the appellant's affiliation with Delhi Daredevils at a prime hoarding space at the Delhi Airport operated by GMR's Group Company.
10. in our considered view the reasons recoded by the adjudicating authority are misconceived and unsustainable. Under the agreement with GMR the appellant had sponsored (for the relevant period) the Delhi Daredevils team which was owned by GMR (under a franchise agreement with BCCI/IPL Delhi Daredevils team was sponsored in the context of the participation of this team in the T-20 league matches. The several rights accruing to the appellant under the sponsorship agreement (adverted to above) clearly indicate that sponsorship was neither of BCCI - IPL; nor GMR, the sponsorship was clearly of the GMR owned Delhi Daredevils team in relation to participation of such team in the IPL T-20 cricket tournament. the enumerated bouquet of benefits accruing to the appellant under the agreement such as printing; player's appearances; motorcycle display; merchandise; motorcycle for promotion; and participative rights in prize presentation; championship tournaments; celebrity events; website/blog entitlement; and marketing plans by GMR, clearly establish that the sponsorship is of the GMR owned Delhi Daredevils team in relation to its participation in the T-20 Tournament.
11. the sponsorship agreement is in our considered view a clear commercial transaction, the underlying purpose being the assumption that since BCCI-IPL-T-20 matches generate huge public viewership, 7 ST/10743/2023-DB either directly at the venues or through audio visual and print media as well, the appellant's association with the T-20 sports event through Delhi Daredevils team would show case the appellant's presence in its core business as a manufacturer of two wheeler motorbikes. It is neither the case of the adjudicating authority 34 as revealed in the adjudication order nor the case of Revenue before this Tribunal that the sponsorship agreement was entered into with GMR either to sponsor GMR or to sponsor BCCI/IPL without reference to the T-20 fixtures. We are not persuaded by any material on record that a huge amount of ₹ 4,80,00,000/- (for three years) was expended by appellant for deriving any commercial benefit out of its association with either GMR or BCCI/ IPL alone. We are also not persuaded to infer that GMR and/ or BCCI -IPL by themselves and unrelated to the T-20 cricket tournament/ event would have any audience/ viewership interest or footfall as to have any commercial utility whatsoever to the appellant. The sponsorship agreement is thus for sponsoring the T-20 sports event and not for sponsoring the owner of the Delhi Daredevils owner or the BCCI - IPL.
14. Shri Amresh Jain, Id. DR contents on behalf of Revenue that sponsorship was only of a team and not of sport events and that the amounts paid by the appellant to GMR fall outside the exclusion clause of the provision. This contention is stated to be rejected. Under Article 265 of the Constitution no tax could be levied without legislative authority. A legislative provision is thus the sine qua non for a legitimate levy of tax. The relevant legislative provision must thus receive a strict construction. A true and fair construction of the relevant legislative provision, in accordance with settled and applicable principles of statutory interpretation is therefore the non derogable obligation of an executor/ interpretator of legislation. It is also settled principle of statutory interpretation that where the verbal formula of a legislative provision on its gramatical construction corresponds to the legal meaning of the expression used, full faith and unreserved fidelity must be accorded to the provision.
15. We notice that the expression "in relation to" is understood to have an extensive connotation, in several decisions apart from Doypack Systems (Pvt) Ltd. The same view is reiterated in Kasilingam vs. P.S.G. College of Technology - AIR 1995 SC 1395 and in Karnataka Power Transmission Corporation vs. Ashok Iron Works Pvt. Ltd. (2009) 3 SCC
240.
16. On the aforesaid analysis, the appellant is immune to levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994. Consequently, the impugned adjudication order dated 30.06.2011 8 ST/10743/2023-DB cannot be sustained and is accordingly quashed. The appeals are allowed. There shall however be no order as to costs.
13. The said decision has been upheld by the Hon'ble Supreme Court as reported in Commissioner Vs. Hero Motorcorp Ltd. 2016 (44) STR J59 (S.C.) vide judgment dated 09.07.2015 wherein the appeal filed by department was dismissed both on the ground of delay as well as being devoid of any merit.
14. After appreciating the facts, evidence placed before us and also following the decision cited supra, we are of the considered opinion that the demand cannot sustain and requires to be set aside.
15. In the result the impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced in the open court on ___________) (SULEKHA BEEVI C.S.) MEMBER ( JUDICIAL ) (C. L. MAHAR) MEMBER ( TECHNICAL ) Dharmi