The Delhi bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside service tax demand against an IPL franchise, JSW GMR Cricket Pvt. Ltd. on central rights income in franchise agreement.
The bench of Dr. Rachna Gupta (Judicial Member) and Ms. Hemambika R. Priya (Technical Member) has observed that a contractor-contractee or the principal-client relationship, which is the essential element of any taxable service, is absent in the case of the partners or co-venturers in a joint venture agreement. In the present case, since the demand in respect of Central Rights Income arising out of the franchise agreement cannot be considered as provision of any service between the members to the franchise agreement, such demand cannot be confirmed on the assessee-appellant.
The appellant / assessee, JSW GMR Cricket Pvt. Ltd. is a company engaged in activities relating to sports, including provision of sports infrastructure, consultancy, organizing sports events, etc. It is one of the franchises of the Indian Premier League (IPL) organized by BCCI and is obligated to form a team of cricket players to participate in the IPL. Under the franchise agreement, the appellant / assessee also engages foreign players to include them in its cricket team.
Hence, payments are made to the overseas cricket board for this purpose. Once the players are included in the team, they can be permanently transferred to other franchisees for which the transferor franchisee receives a player transfer fee. On an audit being conducted by the department, it was noted that the assessee did not pay service tax on Central Rights Income, CLT20 participation fees and prize money received from BCCI, support services of business provided by overseas cricket professionals under RCM and player transfer and release fee.
A Show Cause Notice was thus issued by the department proposing to raise a service tax demand of Rs. 22,17,01,026/- under several heads. The same was confirmed by the Commissioner of CGST, Delhi vide impugned order dated 26.02.2021. Hence, the assessee/appellant filed an appeal before the CESTAT.
It was argued by the assessee that the income generated by exploiting Central Rights such as media rights, umpire sponsorship rights, title sponsorship rights do not qualify as ‘business support services’. In terms of the franchise agreement, majority of the revenue generated from these Central rights is distributed by the BCCI amongst all franchisees in a pre-agreed proportion and is meant to be the income of the appellant/ assessee.
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The department, on the other hand, contended that it is only because of the active support of the appellant/assessee that BCCI successfully conducted the matches and was able to generate revenue by exploiting the central rights. Hence, the activity is appropriately covered under the category of “Business support service” as defined under Section 65 (104c) of the Finance Act, 1994.
The tribunal, while placing reliance on various decisions, held that there is no provision of business support service by the appellant/assessee to the Board of Control for Cricket in India (BCCI) and therefore the Central Rights Income and prize money received by the assessee is not liable to service tax. On the issue of service tax on support services rendered by overseas players under Reverse Charge Mechanism (RCM), it was held that the fees paid to overseas players was for the purpose of playing cricket only and hence the demand cannot be sustained. Similarly, on payments made to the overseas cricket board of Australia for engaging foreign players, it was held that the same is not a Manpower Recruitment or Supply agency service. Therefore no service tax is payable on the same. On the demand of service tax on player transfer fee received by the appellant/assessee from other franchisees, it was held that the assessee cannot be said to be engaged in providing manpower recruitment service as its main activity is to play cricket. Hence, this demand was also set aside.
On the issue of suppression of material facts, the bench observed that there was adequate disclosure of all facts by the appellant / assessee. It cannot be argued that the department became aware of the same only on conducting an audit. Hence, the demand was held to be barred by limitation.
Case title: JSW GMR Cricket Pvt Ltd. vs Commissioner of Central Goods, Service tax, New Delhi
Case No: Service Tax Appeal No. 50918 of 2021
Date of the decision: 13.03.2025
Counsel for the Appellant: Shri Sparsh Bhargava, Ms. Vanshika Taneja
Counsel for the Respondent: Ms. Jayakumari, Authorized Representative
