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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, HIMA KOHLI, JJ.
M/s International Merchandising Company, LLC (Earlier Known as International Merchandising Corporation) – Appellant
Versus
Commissioner, Service Tax, New Delhi - Respondent
Civil Appeal Nos 3532-3536 of 2020
Decided on : 01-11-2022
Service Tax - Interpretation of Sections 65(68) and 65(86b) of the Finance Act, 1994 - The court held that the services provided by FSE were in the nature of supplying, recruiting, and providing players for sport events organized by the appellant. It held that such services will be covered under the definition of 'manpower recruitment or supply agency' under section 65(105)(k) read with section 65(68) of the Finance Act, 1994. The Tribunal further relied upon the decision in Board of Cricket Control for India v. Commissioner, 2015 (37) ELT STR 785 (T-MUM) to uphold the order of the Commissioner imposing the demand of service tax under the category of programme producer services during the relevant period. The Tribunal did not accept the argument of the appellant that the Commissioner could not have invoked the extended period of limitation as the issues involved interpretation of legal provisions. On the issue of imposition of penalty on the appellant, the Tribunal directed the Commissioner to redetermine the amount of penalty in remand proceedings.
Fact of the Case:
The appellant, engaged in providing sports, entertainment, and media services, entered into agreements for appearance and participation of sports personalities in events, sale of broadcasting rights, and telecast rights of sports tournaments. The Commissioner issued a demand of service tax under various heads, resulting in a common order confirming the demand. Aggrieved by the order, the appellant lodged appeals before the Tribunal.
Finding of the Court:
The court found that the services provided by FSE were covered under the definition of 'manpower recruitment or supply agency' and upheld the demand of service tax under the category of programme producer services. The court also held that the extended period of limitation would not stand attracted in respect of the first show cause notice and that there was no warrant for the imposition of the penalty as the dispute essentially turned on the interpretation of the statutory provisions and their interplay with the circular issued by the CBEC.
Issues: The issues involved interpretation of legal provisions related to 'manpower recruitment or supply agency' and 'programme producer' services under the Finance Act, 1994. The court also addressed the applicability of the extended period of limitation and the imposition of penalty.
Ratio Decidendi: The court's decision was influenced by the interpretation of statutory provisions, the interplay with the circular issued by the CBEC, and the absence of an employer-employee relationship between the manpower supply agency and the person whose services are provided.
Final Decision: The appeals were allowed in part, with the court reversing the view of the Tribunal on the applicability of the provisions of Section 65(86b) of the Finance Act 1994 as amended. The court directed the adjudicating officer to abide by the above directions on remand in pursuance of the impugned order of the Tribunal.
JUDGMENT :
Dhananjaya Y. Chandrachud, J
1. These appeals arise from a judgment dated 29 May 2020 of the Customs, Excise and Services Tax Appellate Tribunal1[“Tribunal”] in a batch of service tax appeals. The appeals before the Tribunal arose from an order dated 1 August 2013 of the Commissioner (Adjudication) which dealt with five show cause notices dated 20 October 2009, 20 April 2010, 20 April 2011, 23 March 2012 and 23 April 2013. The first of the five show cause notices invoked the extended period of limitation.
2. The appellant is engaged in providing diversified sports, entertainment and media services. It is registered with the jurisdictional service tax authorities under Chapter V of the Finance Act, 1994 for taxable event categories such as management consultant services, event management services, business auxiliary services, business exhibition services, and TV or radio programme production services. The appellant organizes events such as the Chennai Open Tennis Tournament and Lakme Fashion Week. It entered into various agreements, both domestic and international, with regard to the hiring of celebrities for appearances at the events, selling broadcasting rights, sharing IT services with group companies abroad, and secondment with group companies.
3. The appellant entered into an agreement on 1 January 2005 with an entity by the name of First Serve Entertainment2[“FSE”] for the appearance of Mr Vijay Amritraj3[“VA”], a noted tennis player, in connection with the Chennai Open Tennis Tournament. On 3 January 2005, the appellant entered into an agreement with a tennis player of Thai origin, Mr Paradorn Srichaphan, for his participation in the same tournament.
4. The contents of the agreement with FSE for appearance and participation of VA are extracted below:
“2. Appearance and Participation, IMC hereby engages First serve for appearance and participation of Amritraj of First Serve in connection with Chennai open. Amritraj will appear and participate in the opening and closing ceremonies and also play in the charity auction match at the Chennai open [and] First Serve hereby accepts such engagement and agrees to cause Amritraj to appear and participate in the Chennai open in accordance with all applicable laws and regulations.
3. Terms, (a) The term of this Agreement (the Term, subject to the provisions of sub section (b) immediately below) is five (5) consecutive years as of January 1, 2005 and concluding on December 31, 2009 unless terminated earlier as provided herein.
(b) If (I) IMC, in its reasonable judgment, determines that the Chennai open is no longer economically viable (meaning that IMC is no longer able to conduct the Chennai open as a going concern and must cancel the Chennai open in any year(s) during the Term due to economic losses due to, as an example, insufficient or non existent sponsorship income), or (II) the Chennai open is no longer held at the venue for any reason, then this Agreement will be automatically terminated by IMC without liability or father [sic] obligation of either party other than (if applicable) First Serve’s pro rata repayment of any fee received for the cancelled Chennai open(s) during the Term, except for any obligation expressly intended to survive the termination of this Agreement. If economic circumstances change, or the Chennai open returns to its original venue and IMC intends to reinstate the Chennai open during the Term, then IMC shall promptly notify first serve and the parties shall discuss in good faith whether to reinstate this agreement.
4. Fees, in consideration for the participation of Amritraj, IMC agrees to pay First Serve an annual fee in the amount of US $ 140,000 (each a fee). Each fee will be paid to First Serve after the conclusion of the Chennai Open in each year upon the presentation of an invoice from First Serve to IMC, *** ” (emphasis supplied)
5. In Novem
The main legal point established in the judgment is the interpretation of statutory provisions related to 'manpower recruitment or supply agency' and 'programme producer' services under the Finance A....
Agreement for perpetual copyright assignment with production obligations as directed constitutes taxable programme producer service; per-episode payments are for production activity, justifying servi....
The Tribunal determined that the marketing activities related to music rights do not constitute taxable services, as these activities primarily benefit the appellants rather than the assignors, negat....
Service received by cricket players from franchisees for playing is not taxable under Business Support Services, affirming that contracts do not denote independent service provisions.
The classification of services under tax law must adhere strictly to specified definitions; mere speaker bookings do not constitute event management services, thereby nullifying the tax demand.
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