Custom, Excise & Service Tax Tribunal
Vidarbha Cricket Association vs Nagpur on 9 May, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: ST/136/2012 & ST/85107/2013
[Arising out of Orders-in-Original No: 24/ST/2011-12/C dated 14/12/2011 & 58/ST/2012/C dated 08/10/2012 passed by the Commissioner of Central Excise & Customs, Nagpur.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Vidarbha Cricket Association
Appellant
Vs
Commissioner of Central Excise
Nagpur
Respondent
Appearance:
Shri Bharat Raichandani, Advocate with Mr. S.S. Gupta, Chartered Accountant for the appellant Shri P.N. Das, Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 09/05/2013 Date of decision: 14/06/2013 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeals are directed against Orders-in-Original No. 24/ST/2011-12/C dated 14/12/2011 and 58/ST/2012/C dated 8/10/2012 and passed by the Commissioner of Central Excise, Nagpur.
2. On intelligence that M/s Vidarbha Cricket Association, Nagpur, appellant herein, is rendering various taxable services without discharging service tax liability thereon, investigation was conducted by the Central Excise Department into the activities undertaken by the appellant. The investigation revealed the following.
a) The appellant was running a club on subscription/ contribution basis and had collected an amount of Rs.12,64,08,595/- by way of membership fees during 2005-06 (from August, 2005) to 2009-10 involving service tax of Rs.1,52,48,932/-. The said service rendered by the appellant merited classification under Club or Association Service as defined in Section 65(25a) read with Section 65 (105) (zzze) of the Finance Act, 1994.
b) It was noticed that the appellant had entered into an agreement with M/s Sporting Frontiers India Pvt. Ltd. providing exclusive rights to the said company to use the Advertising sites to sell and exhibit advertising of any kind and advertising signs, during matches and erect, display, affix, maintain, renew, repair and remove advertising signs of any kind but limited to sites allocated to the said company at the ground at least three days prior to a match and removal within two days. The appellant received a consideration of Rs. 7,91,20,000/-during 2006-07 to 2009-10 involving service tax liability of Rs.31,26,600/- under the taxable service category of Sale of space or time for advertisement as defined under section 65 (105) (zzzm) of the Finance Act.
c) The appellant had rented out temporarily their premises for conduct of social, official or business functions and had collected an amount of Rs.4,71,500/- during 2005-06 to 2009-10 without payment of service tax amounting to Rs. 54933/- and the said activity attracted service tax under the category of Mandap Keeper Services vide sections 65(66) and 65(67) read with section 65 (105)(m) of the Finance Act, 1994.
d) The appellant had collected payments from various shop owners towards lease and rent for the shops situated in the stadium and had collected a rental of Rs.30,11,323/- during 2007-08 to 2009-10 involving a service tax liability of Rs. 3,58,725/- and no service tax liability has been discharged on the said service.
e) The appellant was affiliated to the Board for Control of Cricket in India (BCCI in short) and the BCCI had conducted various cricket matches/tournaments utilizing the facility of the appellants stadium and BCCI had paid the appellant by way of various subsidies such as TV subsidy, IPL subsidy, Tournament receipts, Advance lease fees, etc. amounting to Rs.123,05,20,263/- during 2006-07 to 2009-10 on which the service tax liability worked out to Rs. 14,57,72,251/- and the said service provided by the appellant to BCCI merited classification under Business Support Service (BSS in short)as defined in section 65(104c) read with section 65 (105)(zzzq).
2.1. On conclusion of the investigation, a show cause notice dated 30-09-2010 was issued to the appellant proposing to classify the services under the various categories of taxable services as discussed above and to demand a total service tax liability of Rs.16,45,61,441/- along with interest thereon and also proposing to impose penalties on the appellant under the various provisions of the Finance Act, 1994. The appellant contested the demand on various grounds. The notice was adjudicated vide the impugned order dated 14/12/2011 wherein the service tax demands were confirmed along with interest thereon and penalties were imposed on the appellant under the provisions of Section 76, 77 and 78 of the Finance Act, 1994. Another show cause notice21/10/2011 was issued demanding service tax under BSS for the period 2010-11 on the amounts received by the appellant as grant/subsidy from BCCI. The said notice was adjudicated vide order dated 8/10/2012 and a service tax demand of Rs.4,76,12,954/- was confirmed along with interest apart from imposing penalties. Hence the appellant is before us.
3. The ld. Counsel for the appellant made the following submissions.
i) The appellant does not dispute the service tax liability in respect of Mandap Keeper Services.
ii) As regards the service tax on renting of immovable property, since the issue is pending consideration before the Apex Court, they would abide by the decision of the Apex Court in the matter.
iii) As regards the demand under the category of Sale of Space or time for advertisement, it is their contention that they have not rented out the space for advertisement. They had entered into an agreement with M/s Sporting Frontiers India Pvt. Ltd. (SFIPL in short) providing exclusive rights to the said company to use the Advertising sites to sell and exhibit advertising of any kind. It is M/s Sporting Frontiers India Pvt. Ltd. who has actually rented out the space for advertisement. Therefore, they are not liable to pay any service tax on sale of rights under the said category. If it all any tax liability arises on the said activity, it is SFIPL who are liable to pay the service tax and not the appellant. It is also stated that the SFIPL has discharged service tax liability on the consideration received by them for display of advertisement. Therefore, the appellant should be treated as a sub-contractor of M/s SFIPL and as a sub-contractor, they should not be held liable to payment of service tax as clarified in the circular of DG, Service Tax dated 11-2-99. It is also argued that any tax paid by the appellant would be available as credit to M/s SFIPL and the exercise is revenue neutral. Similarly in the case of amounts received from M/s Technology Frontier Pvt. Ltd.(TFPL in short), they have provided the space for installation of a giant screen and mere providing of space for installation of screen is not taxable service per se prior to 1-7-2010. Reliance is placed on the decisions of this Tribunal in the case of Dr. Lal Path Laboratories [2006 (4)STR 0527] and Federal Bank [2008 (10) STR 320] in support of this contention.
iv) Regarding the demand of service tax under the category of club or association service, the ld. Counsel submits that the said service excludes from its purview, the services rendered by any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature. It is contended that as per the memorandum and rules of Vidarbha Cricket Association, which is an affiliate of BCCI, the aims and objects include 1) encouragement of cricket in the area under its territorial jurisdiction; 2) encourage bona fide cricket clubs in promoting cricket activities; 3) facilitate and provide conditions for training to players; 4) arrange, promote, regulate and control cricket tournaments in the area within the jurisdiction of the association; 5) undertake schemes and projects for cricket education, study and research; 6) to seek co-operation from and to extend cooperation to other sports, social and Government organizations, to fulfill the Associations aims and objects and participate in socially useful causes for creating goodwill for the Association. It is also argued that the appellant has been treated as a Charitable Organization for the purposes of Income Tax vide order dated 31st July, 2009 by the Income Tax Appellate Tribunal during the assessment years 1999-2000 to 2006-07. Thus the appellant is not liable to service tax under the said service. Even if it is assumed that the appellant is liable to pay tax, the computation of service tax demand is wrong since the value of bar/liquor sales made by the appellant to its members has been included in the taxable value which is not permissible. Hence it is contended that the activity does not attract service tax.
v) With respect to the demand of service tax under the category of Business Support Services (BSS in short), the appellant is an affiliate of BCCI and they have received subsidies/ reimbursements from BCCI under various categories such as TV Rights subsidy, Tournament receipts, IPL subsidy, Players expenses re-imbursements and subsidy for international matches. These amounts granted by BCCI is for promoting cricket within the region and therefore, the question of levy of service tax would not arise at all since the amounts received are not in consideration of any service rendered. Similar demands raised against Gujarat Cricket Association and Saurashtra Cricket Association have been dropped by the jurisdictional Commissioner of Service Tax vide orders dated 24/09/2007 and 27/03/2009. In the appellants case, the demand has been made under the category of BSS. In Secretary, Ministry of Information & Broadcasting vs. Cricket Association of Bengal [1995 (2) SCC (161)], it has been held that organizations such as BCCI and CAB are devoted to the promotion of the game of cricket and therefore, they cannot placed in the same scale as the business organizations whose only intention is to make profit. In other words, the activities of BCCI cannot be considered as business or commerce and therefore, the services rendered if any, by the appellant in allowing BCCI to use appellants infrastructural facilities cannot be treated as support services to business or commerce. Further there is no nexus between the amounts received by way of subsidies/grants with the usage of the facility. Therefore, the demand of service tax under the category of BSS is unsustainable in law.
vi) It is also contended that the demand is time barred as the appellant was under the bona fide belief that no tax is payable. Reliance is placed on the decisions of the honble Apex Court in the case of Cosmic Dye Chemical vs. Collector of Central Excise, Bombay [1995 (75) ELT 721 (SC)], CCE vs. Chemphar Drug and Liniments [1989 (40) ELT 276 (SC)], Pushpam Pharmaceuticals Company vs. CCE, Bombay [1995 (78) ELT 401 (SC)] and Tamil Nadu Housing Board [2004 (74) ELT 9(SC)].
vii) It is urged that no penalty is imposable on the appellant as the appellant was under the bona fide belief that they are not liable to service tax in view of the decisions of the department in the case of Gujarat Cricket Association and Saurashtra Association, the charitable nature of the organization of the appellant, dispute on the leviability of service tax on renting of immovable property before various high courts/supreme court, etc. and the appellants case merits waiver of penalties under the provisions of section 80 of the Finance Act, 1994.
In the light of the foregoing, the Ld. Counsel prays for setting aside the impugned order and allowing the appeal.
4. The ld. Commissioner (AR) appearing for the Revenue strongly refutes the contentions raised on behalf of the appellant and submits as follows:-
a) As regards the demand of service tax under Mandap Keeper Services, the appellant has not disputed the levy. Therefore, the demand needs to be upheld along with interest thereon;
b) With regard to the demand of service tax on renting of immovable property, the honble High Court of Bombay vide order dated 4-8-2011 in a batch of writ petitions filed by Retailers Association and others Vs. UOI upheld the validity of the levy of service tax on renting of immovable property. Similarly, the honble Delhi High Court in W.P. No. 3398/2010 upheld the validity of levy on renting of immovable property. Though the said order is under challenge before the Supreme Court, the same has not been set aside. Therefore, as per the current legal position, the renting of immovable property is a taxable service attracting service tax levy and therefore, the demand of service tax along with interest thereon needs to be upheld.
c) Regarding the demand of service tax under Club or Association Service, the ld. AR submits that the fact that the appellant is treated as a Charitable Organization for the purposes of Income Tax Act does not in any way obliterate or nullify the levy of service tax under Finance Act, 1994 as the two enactments are not pari materia. He also relies on the circular 96/7/2007 dated 23-8-2007 issued by CBEC wherein it has been clarified that exemption under the Income Tax Act on the ground of being a public charitable institution is of no consequence or relevance for service tax purposes. In as much as the appellant is collecting subscription from its members for the services rendered, the same is leviable to service tax under the category of Club or Association service. Consequently the demand confirmed along with interest is sustainable in law and merits to be upheld.
d) With regard to the demand of service tax under the category of sale of space for advertisement, he re-iterates the findings of the adjudicating authority and submits that the grant of rights to use the space for advertisement purposes to SFIPL and TFPL does amount to activity in relation to sale of space or time for advertisement and hence correctly leviable to service tax. The argument of revenue neutrality advanced by the appellant does not merit acceptance because the levy is not dependent on the availability of credit at the subsequent stage and therefore, this argument has to be rejected outright. Accordingly he pleads for upholding the demand in this regard.
e) Regarding the demand of service tax on the consideration received from BCCI under BSS service, the ld.AR submits that the decisions of the Commissioner of Service Tax, Ahmedabad in the case of Gujarat Cricket Association and Saurashtra Cricket Association were rendered in a different context altogether wherein the demand was made under the category of Event Management Service. That is not the position in the present case. The appellant has allowed utilization of its infrastructural facilities by BCCI for conducting cricket tournaments/matches and has received consideration in the form of subsidies/grants from BCCI. Thus there is a nexus between the service rendered and the consideration received. Therefore, the said service attracts levy under the category of Business Support Services.
f) In the present case, the appellant has neither obtained service tax registration nor complied with any of the service tax law procedures such as filing of returns, payment of service tax and so on. Only upon the investigation conducted by the department, the short levy /non-levy came to light. Thus the appellant has suppressed the facts from the department. Therefore, the extended period of time has been correctly invoked to demand service tax. Consequently, the appellant is liable to penalty under sections 76 for default in payment of service tax, under section 77 for non-compliance with the statutory procedures and under section 78 for suppression of facts with an intent to evade payment of tax. Accordingly he pleads for upholding the imposition of penalties on the appellant.
In the light of the foregoing submissions, the ld. AR pleads for upholding the impugned order.
5. We have carefully considered the submissions made by both the sides. Our findings and conclusions are discussed in the ensuring paragraphs.
5.1. As regards the service tax demand under the category of Mandap Keeper Services, the appellant himself has admitted to the tax liability. Therefore, we uphold the demand in this regard along with interest liability, if any.
5.2. As regards renting of immovable property, the said service falls squarely within the definition of taxable service as defined in section 65(105)(zzzz) of the Finance Act. The vires of the levy was challenged before the honble Bombay High Court in Retailers Association and others vs. UOI decided on 4-8-2011 [2011-TIOL-523-HC-MUM-ST] and the honble high court held as follows:-
33. Therefore in our view, looked at from either stand point, the legislative basis that has been adopted by Parliament in subjecting taxable services involved in the renting of property to the charge of service tax cannot be questioned. The assumption by a legislative body that an element of service is involved in the renting of immovable property is certainly not an assumption which can be regarded by the Court as being so manifestly absurd or perverse as to lead to an inference that Parliament had treated as a service, an item which in no rational sense could be regarded as involving service. But more significantly, even if the Court were to proceed on the basis, suggested by the Petitioners that no element of service is involved, that would not make the legislation beyond the legislative competence of Parliament. So long as the legislation does not trench upon a field which has been reserved to the State legislatures, the only conclusion that can be drawn is that the law must be treated as valid and within the purview of the field set apart for Parliament. There is, it must be emphasized, no violation set up of any provision in Part III of the Constitution. The honble high court also upheld the retrospective amendment made to the provisions relating to the levy on renting of immovable property.
5.2.1. A larger bench of the honble high court of Delhi in the case of Home Solution Retails (India) Ltd. vs. UOI and Others [2011-TIOL-610-HC-DEL-ST-LB]also upheld the vires of the levy and held as follows:-
69. In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section 65(105)(zzzz) read with Section 66 is not a tax on land and building which is under Entry 49 of List II. What is being taxed is an activity, and the activity denotes the letting or leasing with a purpose, and the purpose is fundamentally for commercial or business purpose and its furtherance. The concept has to be read in conjunction. As we have explained that service tax is associated with value addition as evolved by the judgments of the Apex Court, the submission that the base of the said decisions cannot be taken away by a statutory amendment need not be adverted to. Once there is a value addition and the element of service is involved, in conceptual essentiality, service tax gets attracted and the impost gets out of the purview of Entry 49 of List II of the Seventh Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I. 5.2.2. Though the matter is pending in appeal before the honble Apex Court, the ratio of these decisions has not been set aside. Therefore, the demand of service tax on this activity by the appellant under the category of renting of immovable property service is sustainable in law and we hold accordingly. Needless to say, our decision in this regard is subject to the outcome of the appeals pending before the honble apex court.
5.3. The next issue for consideration relates to demand of service tax under the category of sale of space or time for advertisement. From the agreement entered into by the appellant with SFIPL, it is seen that the appellant, having control of the ground for the purpose of staging the match/or extra match, has granted exclusive rights at the ground to use the advertising sites to sell and exhibit advertising of any kind, and advertising signs, during matches and extra matches and the right to erect, display, affix, maintain, renew, repair and remove or permit the erection, display, affixing, maintenance, renewal, repair or removal within two days following and the right at all times, during the matches and extra matches, to have access to and to enter or to authorize any employee, agent or subcontractor of SFIPL to enter the ground for the purpose of exercising its right pursuant to this clause (2.1) without affecting the conduct of the match or extra match. In other words, the appellant has allowed SFIPL to use the advertising space available in the ground. Similarly the appellant has allowed TFPL to erect giant screen for advertisement purposes.
5.3.1. Section 65 (105) (zzzm) defines the taxable service as:
(zzzm) to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organization.
Explanation 1.For the purposes of this sub-clause, sale of space or time for advertisement includes,
(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;
(ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and
(iii) aerial advertising.
Explanation 2.For the purposes of this sub-clause, print media means,
(i) newspaper as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867;
(ii) book as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes; Section 65 (2) defines advertisement as follows:-
advertisement includes any notice, circular label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas. 5.3.2. From the legal provisions cited above, any service in relation to sale of space or time for advertisement, in any manner will attract the levy of service tax. The sale of advertising rights to M/s SFIPL and TFPL is in relation to advertisement and the appellant has allowed these agencies to use the space for advertisement purposes. The expressions in relation to and in any manner are wide enough to cover the activities of the appellant. It is not necessary that the person to whom the space has been sold should himself advertise. If the space provided is used for advertising, it would suffice. There is no dispute in the present case that the space provided by the appellant has been used for advertising purposes. If that be so, the appellant cannot escape the tax liability in respect of such a transaction.
5.3.3. The scope of the phrase in relation to was examined by the honble Apex Court in Hrishikesh Nag Ishwar Chandra vs. State [AIR 1965 Tri 13 at p 14] and the Supreme Court held as follows:-
The words in relation to do not mean that the offence must have been committed after the proceeding had started. Even if the offence was committed prior to the proceeding, it can be said to be in relation to the proceeding if the proceeding is undertaken in consequence of it. If the proceeding is related to an offence, the offence itself is related to the proceeding. [Law Lexicon 2nd Edition by Venkataramaiyya] The sale of rights to use the space for advertising purposes is integrally connected to the use of space for advertising and therefore, the activity undertaken by the appellant is in relation to sale of space for advertisement.
5.3.4. The argument of the appellant that they are sub-contractors of SFIPL/TFPL and since the main contractors have discharged the service tax liability, they are not liable to service tax has no merit whatsoever. The agreement entered into between the appellant with SFIPL/TFPL shows that it is on a principal to principal basis and there is no sub-contractor relationship between the appellant and SFIPL/TFPL. Further, even if it is assumed that such a relationship exists, that does not obliterate the liability of the appellant to discharge service tax liability. Every service provider has to discharge service tax liability on the activity undertaken by him on the consideration received by him. If the recipient of the service undertakes further taxable services, he has to discharge service tax liability on the value addition made by him by taking credit of the service tax paid at the preceding stage. That is the essence of value added taxation in service tax. The appellant has also argued that the demand pertains to a revenue neutral situation. The concept of revenue neutrality applies when taxability arises within the same legal entity. That is not the situation here. The appellant and SFIPL and TFPL are different and distinct legal entities. The tribunal`s larger bench had an occasion to examine the applicability of revenue neutrality in Jay Yushin case [2002-TIOL-126-CESTAT-DEL-LB] and the larger bench held as follows:-
(a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme;
(b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence;
(c) With particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods;
(d) We express our opinion in favour of the view taken in the case of M/s. International Auto Products (P) Ltd. (supra) and endorse the proposition that once an assessee has chosen to pay duty, he has to take all the consequences of payment of duty. In view of the above factual and legal position, we are of the considered view that the appellant is liable to discharge service tax on the sale of space for advertisement and the demand confirmed by the adjudicating authority in this regard is sustainable in law.
5.4. The next issue for consideration is the liability of the appellant to pay service tax under the category of Club or Association Service. The appellants claim is that they fall within the exclusion clause under section 65(25a) which reads as any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature. It is argued that activity of promotion of cricket undertaken by the appellant is public service and the appellant is a charitable organization under the Income Tax Act, 1961 and hence they are not liable to service tax. The term Public service or Charitable organization have not been defined in the Finance Act, 1994 and therefore, they have to be understood in their ordinary and natural meaning.
5.4.1. As per Blacks Law Dictionary Public Service is described as a term applied to the objects and enterprises of certain kinds of corporations, which specially serve the needs of the general public or conduce to the comfort and convenience of an entire community such as rail road, gas, water, and electric light companies and companies furnishing public transportation.
As per Wikipedia-
public service is a service which is provided by the Government to people living within its jurisdiction, either directly or by financing private provision of service.
As per Collins English Dictionary a public service is something such as health care, transport, or the removal of waste, which is organized by the Government or an official body in order to benefit all people in a particular society or community.
As per Shorter Oxford English Dictionary (5th Edition), public service means- a) Government employment; b) a service provided for the community, especially under the direction of local or central government or other official agency From these definitions, it can be inferred that to constitute public service, the activity should sub-serve an essential public need. There are many countries in the world where cricket is not played at all and only in very few countries, cricket is played. Can it, therefore, be said that promotion of cricket sub-serves an essential public need? It is difficult to answer this question in the affirmative with any certainty.
5.4.2. Is the appellant a charitable organization merely because it is held so for the purposes of Income Tax Act. Income Tax Act and Finance Act, 1994 are not pari materia and they operate in totally different fields. As per Blacks Law dictionary charity is defined as:
aid given to the poor, the suffering or the general community for religious, economic, public safety, or medical purposes and charitable as dedicated to a general public purpose, usually for the benefit of needy people who cannot pay for the benefits received.
There is nothing on record to show that the activities rendered by the appellant are for the benefit of the needy people who cannot pay for the benefits received. In view of the above legal and factual position, we are unable to accept the plea of the appellant that they fall within the exclusion clause under section 65(25a) of the Finance Act, 1994.
5.4.3. The CBEC has also vide circular 84/2/2006-ST dated 19-9-2006 has clarified that exemption under the Income Tax Act on the ground of being a public charitable institution is of no consequence to levy of service tax and the levy of service tax is entirely governed by the provisions of the Finance Act, 1994 and the rules made there under. Though the clarification given is not binding on this Tribunal, it has persuasive value as CBEC is the apex agency administering and enforcing service tax and due weightage needs to be given to views of the said agency while interpreting the legal provisions relating to service tax. In the decisions of the apex Court in the case of K.P. Varghese vs. Income Tax Officer [(1981) 131 ITR 597 (SC)] and Collector of Central Excise, Guntur vs. Andhra Sugar Ltd. 1988 (38) ELT 564 (SC) , it was held that "It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon, it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it".
5.4.4. In the light of the above factual and legal position, we hold that the appellant is liable to service tax on the membership fees received under the Club or Association service. However, no service tax liability will arise on the sale proceeds of any goods (food, liquors, etc) sold to the members.
5.5. The next issue for consideration is leviability of service tax on the amounts received from BCCI by the appellant by way of subsidies. Revenues contention is that these amounts have been paid to the appellant for infrastructural support rendered by the appellant to BCCI.
5.5.1. The following subsidies have been given by BCCI 1) TV Rights subsidy; 2) BCCI tournament receipts; 3)Infrastructure subsidy; 4)BCCI IPL subsidy; 5) Players expenses reimbursements; 6) lease fees for Corporate Box; and 7)subsidy granted by BCCI. The nature of these subsidies needs examination. From the minutes of the BCCIs meetings distributing subsidies, the following picture emerges:-
(i) As regards TV rights subsidy, BCCI receives income by selling TV rights of international matches and at the end of the financial year, the income earned by selling these rights are distributed among the affiliates and the formula for distribution is approved by the AGM . This amount has nothing to do with the organizing of any particular match by the affiliates and even associations who do not stage any match also receive subsidy from BCCI.
(ii) Tournament receipts, reimbursement of players expenses and payment of subsidy are made when their team participates in any tournament. This amount is paid to meet the expenses of travel, lodging, daily allowance payable to the members of the team.
(iii) IPL subsidy is distributed to all affiliates out of the income generated from IPL events. Even when no IPL event is held, the affiliate gets the subsidy. For example in 2009 when IPL events were held in South Africa, each affiliate got a subsidy of Rs.8,10,43,200/-.
5.5.2. The object of grant of subsidy as evident from BCCIs resolution is
a) to promote the game of cricket in India;
b) to arrange, organize, control and finance the visits of Indian Cricket team to other countries and visits of Cricket Teams of other countries to India;
c) to build, construct, maintain and repair various stadia and other amenities;
d) to help junior cricketers, needy cricketers, retiring cricketers, players, umpires and other persons connected with the game of cricket;
e) creation of infrastructure.
5.5.3. The question is whether these activities constitute Business support services as defined in the law. As per section 65(104c) of the Finance Act, 1994- support services for business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation- For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle matches, secretarial services, internet and telecom facilities, pantry and security.
From the above definition, it is evident that the support services should be provided in relation to business or commerce. The question is whether conducting cricket tournaments and telecasting the same would constitute business or commerce.
5.5.4. A similar came up for consideration before the honble Apex Court in the case of Secretary, Ministry of Information and Broadcasting vs. Cricket Association of Bengal (supra) and it was held as follows:-
..An organization such as BCCI or CAB in the present case which are indisputably devoted to the promotion of the game of cricket, cannot be placed in the same scale as the business organizations whose only intention is to make as large a profit as can be made by telecasting the game. Whereas it can be said that there is hardly any free speech element in the right to telecast when it is asserted by the latter, it will be warped and cussed view to take when the former claim the same right and contend that in claiming the right to telecast the cricket matches organized by them, they are asserting the right to make business out of it. The sporting organizations such as BCCI/CAB which are interested in promoting the sport or sports are under an obligation to organize the sports events and can legitimately be accused of failing in their to do so. The promotion of sports also includes its popularization through all legitimate means. For this purpose, they are duty bound to select the best means and methods to reach the maximum number of listeners and viewers. Since at present, radio or TV are the most efficacious methods, thanks to technological development, the sports organizations like BCCI/CAB will be neglecting their duty in not exploring the said media and in not employing the best means available to them to popularize the game. That while pursuing their objective of popularizing the sports by selecting the best available means of doing so, they incidentally earn some revenue, will not convert either them into commercial organizations or the right claimed by them to explore the said means, into a commercial right or interest. It must be further remembered that sporting organizations such as BCCI/CAB in the present case, have not been established only to organize sport events or to broadcast or telecast them. The organization of sporting events is only a part of their various objects, as pointed out earlier and even when they organize events, they are primarily to educate the sportsmen, to promote and popularize the sports and also to inform and entertain the viewers. The organization of such events involve huge costs. Whatever surplus is left after defraying all the expenses is ploughed back to them in the organization itself. It will be taking a deliberately distorted view of the right claimed by such organizations to telecast the sporting event to call it an assertion of their commercial right. From the above decision of the honble Apex Court, it clearly comes out that sports organizations are not business or commercial organizations, conduct of sports or sporting events and their broadcasting/telecasting is not assertion of commercial rights. The ratio of the above judgment applies squarely to the facts of the case before us. It thus clearly emerges that, the service, if at all any, rendered by the appellant is not in relation to any business or commerce and therefore, there is no service tax liability on the said activity under section 65 (104c) read with 65(105)(zzzq) of the Finance Act, 1994.
5.5.5. From the records, it is seen that the very same activity was examined by the Commissioner of Service Tax at Ahmedabad in the case of Gujarat Cricket Association and Saurashtra Cricket Association and by the Commissioner of Central Excise (Appeals), Pune, in the case of Maharashtra Cricket Association as to their taxability under event management service and the demands were dropped vide orders dated 24-9-07 , 27-3-09 and 28-7-2006 respectively.
5.5.6. In the light of the above decisions, we hold that the appellant is not liable to service tax under the category of BSS and the service tax demands made in this regard in the impugned orders are unsustainable in law and accordingly are set aside.
5.6. The next issue for consideration is whether extended time limit could have been invoked to confirm the service tax demands. The appellant has pleaded that it was the under the bona fide belief that it was not liable to pay service tax. We have perused the decisions cited by the appellant to entertain this belief. The decisions in the case of Delhi Stock Exchange Association and Banaras Brass Merchant and Manufacturers Association was in relation to the provisions of the Income Tax Act which is not pari materia with service tax laws. As regards the reliance on the decision in the case of Secretary, Ministry of Information and Broadcasting, we have already granted the benefit of this decision in the case of BSS service. As regards the reference to Tribunals decision in the case of Institute of Banking and Personnel Selection, the said case relates to manpower recruitment agency services which is not an issue before us. As regards the decision of the Delhi High court in the case of renting of immovable property, the said decision was rendered in the case of Home Solutions, the first judgment was rendered in 2009 whereas the demand pertains to the period from 2007 onwards. Therefore, it cannot be said the appellant could have entertained a bona fide belief in 2007 on the basis of a judgment rendered in 2009. In the case of Mandap Keeper Services and Sale of Space or time for Advertisements, the appellant was not cited any decision/judgment in their favour for entertaining any reasonable belief. Therefore, such belief cannot be automatically presumed.
5.7. Similarly in the case of Club & Association service, the decision of the Income Tax Appellate Tribunal holding them to be charitable institution for the purposes of Income Tax Act was rendered on 31-7-2009 whereas the demand of service tax under the said category is for the period 2005-06 to 2009-10. Therefore, the appellant could not have entertained a reasonable belief in 2005-06 onwards about their non-liability to pay tax based on a decision rendered in 2009-10. This Tribunal in the case of Interscape [2006(198) ELT 275] held that bona fide belief is not blind belief. Belief can be said to be bona fide only when it is formed after reasonable considerations are taken into account. No evidence has been led before us to show that the appellant undertook such precautions either by way of referring the matter to the Departmental authorities or by seeking a legal opinion. Therefore, the argument of bona fide belief lacks conviction and is not convincing. It appears to be an argument of convenience rather than anything else. On the other hand, it is clear from the records that the appellant did not obtain service tax registration and did not comply with the statutory procedures and requirements of service tax law. Therefore, the inevitable conclusion that emerges is that the appellant has suppressed the facts of their activities from the Department with an intent to evade service tax. The Ld. Adjudicating authority has also dealt with this issue in detail in paragraphs 15.1 to 15.4 of the impugned order and has based his conclusions relying on the decisions of the Tribunal and the Supreme Court. Accordingly we hold that the extended period of time has been correctly invoked in the present case to confirm the service tax demand.
5.7.1. The honble High Court of Gujarat in the case of Neminath Fabrics [2010 (256) ELT 369 (Guj.)] affirmed in [2013 (287) ELT 149 (Guj.)] held as follows:-
16. The term from which the period of one year or five years has to be computed is the relevant date which has been defined in sub-section 3(ii) of section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence if one imports such concept in sub-section (1) section 11A of the Act, or the proviso thereunder it would tantamount to rewriting the statutory provision and no cannon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal.
17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read in to the provision by some of the orders of the Tribunal also cannot be permitted in law when the statute itself has provided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation A similar view had been taken by this Tribunal in the case of Usha Rectifier Corporation (I) Ltd. [2001 (130) ELT 485] affirmed by the Apex Court in [2011 (263) ELT 665 (SC)]. In the light of these decisions, we are of the considered view that larger period of limitation has been correctly invoked in the present case and the demands are not time barred.
5.8. As regards the demand for interest, once the service tax demands are upheld, interest liability thereon is automatic and consequential. Interest is a compensatory payment for the delay in payment of tax. Accordingly we uphold the demand for interest.
5.9. The last issue for consideration is with regard to the imposition of penalties under sections 76, 77 and 78 of the Finance Act, 1994. While penalty under section 76 is for the default in payment of tax and no mens rea is required to impose this penalty as held by the honble High Court of Kerala in Krishna Poduval case [2006(1) STR 185 (Ker)], penalty under section 77 is for non-compliance with the statutory provisions/ requirements such as registration, filing of returns and so on. In the present case, there is no dispute in this regard. Therefore, we uphold the penalties imposed under sections 76 and 77 of the Finance Act, 1994. As regards the penalty imposed under section 78, except in the case of renting of immovable property (where the levy itself is under challenge before the Supreme Court), we find no reason to interfere with the same in view of our finding in para 5.6 above that the appellant had suppressed the facts from the department with an intent to evade tax.
6. To sum up, we hold that,-
a) the confirmation of service tax demands under the taxable service category of Mandap Keeper Service, Club and Association service, Renting of Immovable property service and Sale of space for advertisement service is sustainable in law. In the case of Club & Association service, the tax demand has to be recomputed excluding the bar sales subject to the appellant producing satisfactory evidence in this regard.
b) the appellant is liable to pay interest on the above service tax demands in accordance with law.
c) the appellant is liable to penalty under Sections 76 and 77 of the Finance Act, 1994.
d) the appellant is also liable to penalty under Section 78 of the said Finance Act except in the case of Renting of Immovable property service.
e) the demand of service tax under the category of Business Support Services is unsustainable in law and the same it set aside. Consequently, there will be no interest and penal liability on account of this demand.
7. The appeals are disposed of in the above terms.
(Operative part of the Order pronounced in the Court on 14 /06 /2013) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as DIFFERENCE OF OPINION
11. In view of the difference of opinion, the following points are placed before the honble President for reference to the Third Member.
i) Whether the appellant, M/s. Vidarbha Cricket Association is liable to service tax on the services rendered to its members under Club or Association Service as held by the Member (Technical) on the ground that the appellant is not rendering any public service nor are they a charitable organisation and the provisions of Income Tax 1961 are not para materia with Chapter V of the Finance Act, 1994 OR The appellant, M/s. Vidarbha Cricket Association is not liable to service tax under Club or Association Service as held by Member (Judicial) on the ground that the appellant is treated as a charitable organisation under the Income Tax act, 1961.
ii) Whether the appellant is liable to penalties under Sections 76, 77 and 78 of the Finance Act, 1994 in cases where the service tax demands have been confirmed invoking the extended period of time as held by Member (Technical) OR The appellant is not liable to penalty under the above provisions on the ground that there is no contumacious conduct on the part of the appellant and the disputes had arisen as a matter of interpretation of the tax provisions, as held by Member (Judicial).
iii) Is there any inherent contradiction in the waiver of penalty by Member (Judicial) inasmuch as he has upheld the confirmation of demand of service tax invoking the extended period of time and the same pre-supposes suppression of facts on the part of the appellant whereas while waiving of the penalty, the learned Member (Judicial) has held that there is no contumacious conduct on the part of the appellant. Further for imposition of penalty under Sections 76 and 77 no men rea is required and mere contravention of the statutory provisions would suffice.
(Pronounced in the Court on 11/ 06 /2013) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) 2