In a major relief to Indian Cricketer, R. Ashwin, the Chennai Bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand on brand promotion services.
R. Ashwin is a cricketer playing for the ‘Chennai Super Kings’ owned by M/s.India Cements Limited who is a Franchisee (M/s.ICL) in the Indian Premier League (IPL). M/s.ICL is engaged in the manufacture of cement which is sold under various brand names “Coromandel Cement”, “Sankar Cement”, “Rasi Cement” etc.The appellant was to receive the player fee and other benefits set out in Schedule I of the Agreement. In addition to the player fees, the appellant also received 10% of the player fee for various promotional activities of M/s.ICL and its partners, sponsors etc. From the agreement it appeared that the payment made to appellant though split up between player fee and payment for promotional activities, the whole payment appeared to be of composite nature.
The department was of the view that the amount paid to the appellant is a consideration for the brand promotion services rendered to M/s.ICL by the appellant and the activity would fall under the definition of service as under Section 65B (44) of the Finance Act, 1994 with effect from 1.7.2012. Show cause notice was issued for the period July 2012 to March 2014 proposing to demand service tax on the amounts received by the appellant from M/s.ICL along with interest and for imposing penalties.
Consultant Joseph Dominic appeared and argued for the appellant. The counsel submitted that the main work for which the appellant is appointed is to play cricket. The appellant takes part in some brand promotional activities which is only ancillary to the main work of playing cricket. Such promotional activities are done as part of the agreement. Being appointed as a full time player, the appellant is barred from taking up any other employment or to be engaged or involved in any trade or business in any capacity or participation in other sport other than above activity without the prior written consent of M/s.ICL. The counsel further submitted that these conditions in the contract establish that the contract is an employment contract and that there exists an employer-employee relationship between M/s.ICL and the appellant. There is no rendering of service by the appellant to M/s.ICl and the payments received are remuneration for work and not consideration for services of brand promotion.
A Two-Member Bench of the Tribunal comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “The Tribunal held that the relationship between the cricket player and the franchisee is that of an employer-employee relationship. This Bench in the case of M/s.India Cements Ltd. while considering the issue of demand of service tax on remuneration paid to foreign players had held that the contract is in the nature of employer-employee relationship and therefore the demand of service tax cannot sustain.”“After appreciating the facts of the case and evidence placed before us and also following the decisions of the Tribunal as cited supra, we are of the considered opinion that the demand of service tax cannot sustain and requires to be set aside. The impugned order is set aside” the Tribunal concluded.
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