Remuneration received by Sourav Ganguly for Writing Articles, Anchoring TV shows would not attract Service Tax; Calcutta HC [Read Judgment]

Sourav Ganguly

“Calcutta High Court also quashes Service Tax demand notice against Former Cricketer Saurav Ganguly”.

A single Judge bench of Calcutta High Court recently nullified the Show Cause Notice issued against the Former Cricketer Sourav Ganguly. While invalidating the said SCN it was held that, remuneration received for writing articles, Anchoring TV shows, playing IPL would not attract Service Tax under the head under of ‘Business Auxiliary Service’, is also not legally tenable.

The petitioner is a cricketer and is a former captain of the Indian Cricket Team. He participated in the IPL Cricket tournament held in India as a member of the Kolkata Knight Rider Team. At all material times he acted and still acts as brand ambassador for various products. He also acted as anchor in television shows and particularly on Zee Bangla Channel. The petitioner is also engaged in writing articles for Sports Magazines.

The Court observed that, “the impugned show cause notice is hopelessly barred by limitation. There was no ground or justification whatsoever for issuing such notice by invoking the extended period of limitation. None of the preconditions necessary for taking recourse to the extended period of limitation exists in the facts of this case and by wrongfully invoking the extended period of limitation the respondent no. 4 conferred on himself a jurisdiction which he otherwise did not have”.

Justice Banerjee said, “Even if, I were to decide the issue of limitation in favour of the Department, I would still have been compelled to quash the impugned show cause notice and the order dated 12 November, 2012”.

The aforesaid amounts of service tax have been claimed by the Department under the heads of ‘Business Auxiliary Service’ or ‘Business Support Service’. Business auxiliary service is defined in Sec. 65(19) of the Finance Act which has been set out earlier in this judgment. It is an exhaustive definition and not an inclusive one.

It was not the intention of the legislature that any and every kind of activity which can loosely be termed as ‘Business’ would attract service tax. It being a taxing provision, the same must be construed strictly and any benefit of doubt in the matter of interpretation of the provision must go in favour of the assessee.

“Writing articles for newspapers or sports magazines or for any other form of media cannot by any stretch of imagination be said to be amounting to rendering business auxiliary service within the meaning of Sec. 65(19) or business support service under Sec. 65(104c) of the Finance Act, 1994. Writing article for publication in a media is for the benefit of the readers who have interest in the concerned topic”, the Court said.

The remuneration received by the petitioner for anchoring TV shows cannot be brought within the service tax net. Television shows are meant for entertainment of the viewers. In contemporary world watching television is a primary form of recreation. It would be absurd to say that anchoring TV shows amounts to rendering business auxiliary service or business support service. By anchoring a TV show, a celebrity or for that matter any other person does not render service with the object of enhancing any business or commercial interest. No reasonable authority with proper application of mind could classify anchoring of TV show as business auxiliary service or business support service. Hence, in my view, the remuneration received by the petitioner for anchoring TV shows does not attract service tax, Justice Banerjee observed.

“I am inclined to agree with the submission of Ld. Counsel for the petitioner that since by amendment of the Finance, Act, 1994, a new taxable service category of ‘Brand Promotion’ was introduced with effect from 1 July, 2010, the logical corollary and inevitable inference is that such category of service was not taxable prior to 1 July, 2010”.

As regards the remuneration received by the petitioner for playing IPL cricket, in my opinion, the service tax demand raised on such amount under the head of ‘Business Support Service’, is also not legally tenable. According to the Department, the terms of the contract that the petitioner entered into with M/s. Knight Riders Sports Pvt. Ltd. would reveal that the petitioner’s obligation was not limited to displaying his cricket skills in a cricket match. He also lent himself to business promotional activities. Thus he provided taxable service when he wore apparel provided by the franchisee that was embossed with commercial endorsements or when he participated in endorsement event. The Department admits that the fee charged for playing the matches will fall outside the purview of taxable service. However, the Department contends that the petitioner has been paid composite fee for playing matches and for participating in promotional activities but the component of promotional activities could not be segregated for charging service tax. Accordingly, service tax is chargeable on the composite amount.

The Court also slammed the department and said, “A circular/instruction/letter cannot create tax liability. The statutory provisions relating to service tax do not provide that the fees received by an IPL player would attract service tax. This is admitted by the Department even in the said circular which states, inter alia, that charges for playing matches will fall outside the purview of taxable service. If the statute does not provide for levying service tax on fee received for playing matches, such a liability cannot be created by issuing a letter/instruction/circular. A circular cannot travel beyond the statute. The statute does not provide that if a player receives a composite amount for playing matches and promotional activities and the segregation of the two elements is not possible, then the composite entire amount may be taxed. Such an act on the part of the Department will be de hors the statute and without jurisdiction or authority of law. It will also be in contravention of Art. 265 of the Constitution of India. The Central Board of Excise and Customs cannot seek to legislate by issuing circulars/instructions”.

The Court opinied that, “if such circulars/instructions/clarifications are contrary to or inconsistent with the statutory provision in question or seek to create a liability which the statute does not contemplate, such circular/instruction is liable to be struck down. A misconceived and legally untenable interpretation of a statutory provision and/or an erroneous understanding thereof, which if applied by the quasi-judicial authorities will unduly prejudice the citizens of the country, cannot be allowed to stand. Accordingly the impugned circular/instruction dated 26 July, 2010 is quashed to the extent it states that if composite fee received for playing matches and for participating in promotional activities cannot be segregated, then service tax should be levied on the total composite amount”.

The Court also quashed show cause notice citing the reason, “impugned notice is barred by limitation”.

The Court also directed to refund of the sum of Rs. 1,51,66,500/- and the sum of Rs. 50,00,000/- that he has deposited in terms of this Court’s order along with interest at the rate of 10 per cent per annum from the date of deposit till the date of payment.

Read the full text of the Judgment below.

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