Relief to India Cements, No service Tax Payable under Sale of Space and Time for Advertisement on Sponsorship of Sports before 2010: CESTAT [Read Order]

The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in its recent ruling on the India Cement case, has held that no service tax is payable under the sale of space and time for advertisement on sponsorship of sports before 2010.

The appellant is engaged in the manufacture of cement and has manufacturing units in Tamil Nadu, Andhra Pradesh & Maharashtra.  The cement manufactured by them is sold under the brand names “Coromandel Cement, ‘Sankar Cement”, “Rasi Cement”, etc.  They have Central Excise registration as well as Service Tax registration.  The appellant is registered for various taxable services and also registered as Input Service Distributor.

The appellant selected its franchisee name- “Chennai Super Kings” in the Indian Premier League(IPL) conducted by the Board of Control for Cricket in India (BCCI).

A show cause notice was issued on demand of Service Tax under the sale of space and time for advertisement on the amount received under the sponsorship agreements entered by the appellant with various companies.

It was submitted that during the disputed period the sponsorship services for sports were excluded from the levy of Service Tax.  With effect from 01.07.2010, the definition has been amended and it does not give exclusion in respect of sports events.  The appellant thus was not liable to pay Service Tax on the sponsorship fee for the reason that before 01.07.2010, the sponsorship services for sports were not leviable to Service Tax. 

It was submitted that notices have been issued to the other franchisees of BCCI-IPL demanding Service Tax under sponsorship services concerning the agreements entered into for granting sponsorship rights.  

The Tribunal in such cases has held that the definition of sponsorship services does not include services about sponsorship of sports events and IPL being a sport event is not covered under the definition of sponsorship services.  

The two-member bench comprising Ms Sulekha Beevi C S, Member (Judicial) and Mr M Ajit Kumar, Member (Technical) concluded that “sponsorship of a sports event, which has a commercial element (the IPL events) is disentitled to the benefits of immunity to service tax, notwithstanding the clear phraseology of section 105(65)(zzzn) of the Act; and since the sponsorship is about league matches conducted under the auspicious of BCCI/ IPL and payments were made to the Board of Control for Cricket in India (BCCI)/ IPL, the sponsorship is not about sports events, but is sponsorship of BCCI / IPL.” 

Ms. Radhika Chandrasekar appeared for the appellant and  Mr. R. Rajaraman appeared for the respondent.

To Read the full text of the Order CLICK HERE

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