Business Auxiliary Service, Franchise Service, and Mandap Keeper Service Taxes not leviable on Jharkhand State Cricket Association: CESTAT [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ), Kolkata Bench, ruled in favour of the Jharkhand State Cricket Association ( JSCA ) in a service tax dispute.

The case challenged the demands raised by the Commissioner of Central Excise and Service Tax, Jamshedpur, related to various services provided by JSCA, amounting to substantial sums, with the primary contention centering on services categorised under Business Auxiliary Service, Franchise Service, and Mandap Keeper Service.

The Future of Tax and Finance: Upskill with Us

The Commissioner of Central Excise and Service Tax had initially issued a demand of ₹21.63 crore against JSCA, citing liability for service tax on revenues generated from activities associated with cricket promotion, including advertising, space leasing, and renting of immovable property. Upon adjudication, the Commissioner dropped a significant portion of the demand, concluding that the majority of JSCA’s activities were non-taxable. However, a demand of ₹16.47 lakh was confirmed under categories such as “selling of space for advertisement,” “franchisee service,” and “club or association service.” Both JSCA and the revenue department appealed the order.

The CESTAT bench, comprising Judicial Member Shri Ashok Jindal and Technical Member Shri K. Anpazhakan, heard arguments from both JSCA and the revenue department. JSCA contended that its activities were exempt as they were fundamentally related to the promotion of cricket, a recognized charitable objective, and did not constitute taxable services.

JSCA’s activities, such as advertisement sales and leasing of corporate boxes, were intrinsically connected to cricket events. These services were classified as "bundled services" essential for the sport’s promotion, aligning with Section 66F of the Finance Act, 1994, which governs the interpretation of bundled services.

The Future of Tax and Finance: Upskill with Us

Since JSCA is a recognized charitable institution promoting sports, it was eligible for tax exemptions as outlined in the Mega Exemption Notification No. 25/2012-S.T. For services post-2012, the tribunal held that such services by a recognized sports body in connection with sports events were exempt from service tax.

The tribunal dismissed the demand for the extended period, citing precedents like Hindustan Cables Ltd. and UT Ltd., which held that if a demand is based on the assessee’s financial records without any concealed facts, an extended limitation cannot be invoked.

The tribunal concurred with JSCA’s argument that it was not involved in a franchise agreement per the Finance Act, 1994, as the association’s revenue related to cricket promotion and did not constitute franchise activities. The tribunal ruled that corporate and hospitality boxes leased during cricket events did not qualify as mandap keeper services, since they were not exclusively let out as traditional “mandaps.” Dismissing the tax on subsidies from BCCI for event management, the tribunal accepted JSCA’s position that these subsidies were not taxable as they were grants-in-aid rather than fees for services.

The Future of Tax and Finance: Upskill with Us

In its final order, CESTAT fully set aside the service tax demands confirmed by the Commissioner and upheld the dropped demands totaling ₹17.12 crore.

Consequently, the appeal by JSCA was allowed, the revenue’s appeal was dismissed, and all associated penalties were annulled.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates