Archana Wadhwa, Member (J)

1. Both appeals filed by the appellant as also filed by Revenue are being disposed off by a common order. The appeal No. ST/251/2005 stands filed by Board of Cricket Control in India (hereinafter referred to as BCCI) against Order-in-Appeal dt.30.06.05, passed by Commissioner (Appeals) of Central Excise, Mumbai vide which he has confirmed the demand of service tax of Rs. 11,19,61,602 (Rs. Eleven Crores, Nineteen Lakhs, sixty one thousands, six hundred and two only) in respect of amount received by the appellants towards sale of television rights, sponsorship money, and logo money holding that the same is covered by the definition of taxable service provided by the advertising agency. In addition, penalty of Rs. 22,39,00,000/- (Rs. Twenty two crores, thirty nine lakhs only) stands imposed under the provisions of Section 78 of Finance Act, of Rs. 6,000/- under Section 76 and Rs. 200/- per day under Section 76 and Rs. 5,000/- under Section 75 of thealong with confirmation of interest.

Revenues appeal is against Order-in-Original dt.24.11.05 passed by Commissioner of Service Tax, dropping the proceedings raised against Board of Cricket Control in India on identical issue for the subsequent period.

2. We have heard learned advocate Shri V. Sridharan, appearing for the appellant and Shri Anil Kumar DR, learned advocate for the Revenue. Both sides have advanced extensive arguments and have also filed written submissions.

3. It is the appellants contention that BCCI is a registered society with the main object of promotion of the game of cricket throughout India. For the said purpose, they undertake various activities like organizing test matches, one days, international and other tournaments and enters into agreement with similar organizations of other countries for holding the matches etc. During such activities, the appellant received amount from sponsorer of the tournaments/matches, by permitting putting of logo of the organization on clothing and clothing accessories of the players and for sale of telecast rights to any channel. It is in respect of the said amount received by the appellant on account of above reasons, the authorities below has held them to be covered under the category of advertising agency, thus liable to pay taxes on the services so provided by them. It is seen that the disputed activities are:

i) sale of telecast right of cricket matches.

ii) Permitting sponsors to use space for putting up of advertisement in stadium, and

iii) Permitting logos on clothing and clothing accessories of players.

4. Before proceeding to deal with the various arguments, we would like to reproduce the relevant Sections of Finance Act, 1994, around which the entire dispute revolves.

Section 65(105)(e) defines the "Taxable Services" as any service provided to a client, by an any advertising agency in relation to advertisement, in any manner.

Section 65(3) defines the advertising agency as under:

advertising agency" means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisements and includes an advertising consultant.

The term "advertising" stands defined under Clause 2 of Section 65 of Finance Act, 1994 as under:

Advertising Agency" includes any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas.

5.1 The appellants main contention is that BCCI does not satisfy the statutory definition of advertising agency, as contained in Section 65(2) of Finance Act, 1994. For fulfilling the criteria of advertising agency, the same has to be a commercial concern, engaged in providing any service connected with the advertisement. It has been primarily argued that BCCI is a Government body for control of cricket in India and stands exempted from payment of income tax under Section 12 of Income Tax Act, 1961 as a charitable institution. The same is not established with the purpose of making profit and neither it has declared any dividend to its shareholders, trustees, and/or members and ploughs back the surplus, if any, for the purpose and object of the organization. As such, the same has to be considered as a charitable organization. Even if in the process some profits are made by it, as held by Honble Supreme Court in case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association reported in : 121 ITR 1 (SC), the same still remains a charitable organisation. It has been strongly contended that the surplus revenues, if any, earned by the appellant, is used for the promotion of the sports and even in the case of winding up of BCCI, surplus would be transferred to another organization with similar object. Reliance was placed upon the Tribunals decision in case of CCE v. Employ Me reported in 2006 (4) STR 303 Para 6, holding that Employ Me was not a manpower recruitment agency taxable under the act as it was not a commercial concern, even though it was collecting some fees from youth for employment.

5.2 As against above, Shri Anil Kumar learned Dr appearing for the Revenue submits that the BCCI is a commercial concern, in as much as it is making profit out of the advertising activities undertaken by it. Merely because it is exempted from Income Tax, will not convert the same into a charitable institution and will not automatically make them exempted from Service Tax. Shri Anil Kr. in their written submission, dealt with the object of BCCI and whether the same stands fulfilled in terms of registration granted under the Tamilnadu Registration Act, 1961 as well as their registration under Section 12 of the Income Tax Act, 1961 i.e. where they are registered as charitable institution. However, the elaborate arguments placed on record, in support of above plea, as to whether the BCCI has been able to fulfil its obligation of promotion of sports or not or whether the sport is reduced to a mere amusement, are not being adverted to by us, as not being relevant to the disputed issue involved. One thing becomes clear from the submission of Revenue that admittedly the appellant is a registered charitable institution for the purpose of Income Tax. Whether the activities undertaken by BCCI are contrary to the objects of memorandum of agreement or their registration under the Tamilnadu Registration Act 1961 or their registration under Section 12 of Income Tax Act, 1961, as contended by learned advocate for the Revenue, do not impress us in as much as we are only called upon to interpret the provisions of law relatable to the issue as to whether the various services, enumerated above, are covered by the definition of taxable service as a service provided by advertising agency.

6. One of the main criteria of definition of Advertising Agency is that the same should be a commercial concern. The expression Commercial Concern does not stand defined under the. As such, for understanding the scope of the above expression, help has to be taken from other sources.

7. The Honble Supreme Court in case of Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal reported in : 1995 2 SCC 161 , Para 75, has held that BCCI is not a commercial organization. Relevant extracts of the said judgment is reproduced below:

...An organization such as the BCCI or CAB in the present case which are indisputably devoted to the promotion of the game of cricket, cannot be placed in the same scale as the business organizations whose only intention is to make as large a profit as can be made by telecasting the game. Whereas it can be said that there is hardly any free speech element in the right to telecast when it is asserted by the latter, it will be warped and cussed view to take when the former claim the same right and contend that in claiming the right to telecast the cricket matches organized by them, they are asserting the right to make business out of it. The sporting organizations such as BCCI/CAB which are interested in promoting the sport or sports are under an obligation to organize the sports events and can legitimately be accused of failing in their to do so. The promotion of sports also includes it popularization through all legitimate means. For this purpose, they are duty bound to select the best means and methods to reach the maximum number of listeners and viewers. Since at present, radio or TV are the most efficacious methods, thanks to the technological development, the sports organizations like BCCI/CAB will be neglecting their duty in not exploring the said media and in not employing the best means available to them to popularize the game. That while pursuing their objective of popularizing the sports by selecting the best available means of doing so, they incidentally earn some revenue, will not convert either them into commercial organizations or the right claimed by them to explore the said means, into a commercial right or interest. It must further be remembered that sporting organizations such as BCCI/CAB in the present case, have not been established only to organize the sports events or to broadcast or telecast them. The organization of sporting events is only a part of their various objects, as pointed out earlier and even when they organize the events, they are primarily to educate the sportsmen, to promote and popularize the sports and also to inform and entertain the viewers. The organization of such events involves huge costs. Whatever surplus is left after defraying all the expenses is ploughed back to them in the organization itself. It will be taking a deliberately distorted view of the right claimed by such organizations to telecast the sporting event to call it an assertion of a commercial right.

Though, the above decision was rendered not in the context of the disputed issue, and the dispute before Honble Supreme Court was on altogether different point, the finding of status of BCCI, as arrived at by Honble Apex Court can not be ignored. The Honble Supreme Court was dealing with an issue as to whether the telecasting right of Cricket Association which are commercial in nature are protected by fundamental guarantee of freedom of speech and expression enshrined under Article 19(1)(a) of the Constitution. It was in that context that Honble Supreme Court held that the BCCI is not a commercial concern in nature. In the present dispute also, the advertising agency is the one which is a "commercial concern" engaged in the various activities of the advertising. As already observed, the expression - commercial concern -does not stand defined in the act and as such, support can be derived from the above decision. The Honble Supreme Court having held the same organization i.e. BCCI though, in a different context, being not a commercial concern, adopting of said finding from the above decision and applying the same to the definition of advertising agency would lead us to hold that BCCI is not a commercial concern. Having held that it has to be concluded that they do not fall under the definition of advertising agency and hence, any service provided by them would not be covered by the Service Tax in the area of advertisement. Further, the fact that it has been held to be charitable institution in terms of Income Tax Act, would also lend support to the appellants plea that the same is not an advertising agency.

8. Apart from the above, we note that BCCI is ordinarily known as an organization for controlling and promoting the cricket in India and not as an advertising agency. Ordinary meaning of the term advertising agency is an office which plans, designs and manages advertising for other companies. (Dictionary of marketing, 3rd Edition by Bloomsbury) (enclosed) and an organization acting as an agent for a producer of goods or services (an advertiser) devoted to the developing and placing advertising, in order to further the acceptance of a brand product, service or idea, (www.nielsenmedia.com/glosary/terms/A). Further, the same has been defined as an organization which specializes in providing services such as media selection, creative work, production and campaign planning to clients, (www.mcgraw-hill.co.uk). CBEC vide their circular issued by F.No. 345/4/97-TRU, dt.16.8.99, while dealing with the issue as to whether the activity of printing and publishing telephone directory, yellow pages, business directories would attract service tax under the category of advertisement has observed that the above activity would not attract service tax unless the person concerned also undertakes any activity relating to the making or preparation of an advertisement such as designing, visualizing, conceptualizing. Similarly, vide circular No. 64/13/2003-ST, dt.28.10.03, it has been clarified that any person engaged in canvassing for advertising, would not be covered by the expression advertisement if the said person is not undertaking any activity of advertisement.

The definition of advertising agency can not be read in isolation and out of context. Even if the services provided by the appellant (the scope of individual services being provided by them would be dealt with separately) is broadly covered by the expression "exhibiting" or "displaying" of advertisement, but when viewed in the context, would not convert BCCI into an advertising agency. If literal meaning is applied to the definition, the same may lead to absurd results in as much as the cinema hall flashing an advertisement or the newspaper/magazine publishing an advertisement will become an advertising agency on account of display or exhibiting the advertisement.

The expression in relation to appearing in Section 55(105)/e of the, was subject matter of interpretation by Mumbai High Court in case of M/s C.K.P. Mandal v. CCE 2006 (4) STR 183 (Bom). Para 14 and 15 of the said judgment are reproduced below:

14. Much emphasis was placed by the senior Counsel for the revenue on the aspect that by giving monopoly rights to Saideep Caterers to provide catering and decoration services to the hirer of halls, the appellant is indirectly providing catering and decoration services to the hirer. He would submit that the expression "in relation to" is an expression of comprehensiveness in Clause (m) of Section 90 which will include the exclusive rights of catering and decoration given to Saideep caterers by the appellants. We are afraid, the contention of the revenue cannot be accepted.

16 ...in relation to are words of comprehensiveness which might have both a direct as well as indirect significance depending on the context. The expression "in relation to" in Sub-clause (m) of Clause 90 of Section 65. However, the expansive, wide and comprehensive meaning we may give to the expression in relation to in Sub-clause (m), the consideration received by the appellants from Saideep caterers for giving them exclusive and monopoly rights for rendering services of catering and ecoration to the hirer of the appellants shall not be covered by taxable service as defined in the section.

9. In view of the above guidelines laid down by Honble High Court, the expression in relation to, though expansive, has to be read in context and can not be given such a vast meaning so as to cover any activity, howsoever remotely connected, if there is some element of display or exhibition of the same. The definition has to be interpreted, in a sense appropriate to the phrase defined and to the general purpose of enactment. (I.L.M. Cadija Umma and Anr. v. S. Don Manis Appu AIR 1939 Privy Council 63). Similarly, Honble Supreme Court in case of Hariprasad Shivshankar Shukla v. A.D. Divelkar reported in AIR 1957 SC 121 , held that terminating the services of all the employees on taking over railway company by Govt. of India can not be considered as retrenchment. In as much as retrenchment connotes that the business itself is being continued, but the portion of the staff or labour is discharged as surplusage. In view of the above ordinary acceptation, the Supreme Court held that termination of services of all the workmen as a result of closure of business can not be properly described as retrenchment. By applying the above guidelines, it can not be held that BCCI is an advertising agency. In the case of ZEE Telefilms Ltd. and Star India (P) Ltd. v. CCE Mumbai reported in 2006-TIOL-945-CESTAT- MUM, Tribunal has observed that the definition of advertising agency can not be read literally and out of context, if that is done, every person in some way or the other connected with advertisement will be an advertising agency. Any interpretation leading to absurdity has to be avoided.

10. We have observed in the preceding paragraphs that BCCI cannot be held to be a commercial concern, the same would not be covered by-definition of advertising agency. If that be so, any service provided by them would not be termed as a taxable service covered under the net of advertisement and on the short grounds itself, the appellants liability to pay service tax on the activities undertaken by them cannot be upheld.

11. However, we also would like to deal with the scope of individual services provided by the appellant and alleged to be as advertising services. The Revenue has sought to tax the sale of telecast rights of cricket matches conducted by the appellant to various broadcasting agencies. We would like to ask ourselves a question as to by selling the television rights to various channels which service relatable to advertisement is being provided by the appellant Firstly, there is no advertisement involved and secondly there are no services "rendered" by BCCI to the broadcasters. Admittedly, BCCI is the owner of the rights in the cricket match and by selling these rights for telecasting, no service can be said to have been provided by BCCI to any client. Taxable service, as defined in Clause 105(e) of Section 65 means any service provided to a client by an advertising agency in relation to advertisement, (emphasis provided). There is no advertisement when the performance rights of the match vested in BCCI is being sold for viewership of million of peoples and there is no client to which such service in relation to advertisement is being provided. We have examined the condition of contract entered into by the appellant with the broadcaster, which require them exhibit of the matches above 50 million homes; the telecast of opening and closing ceremonies of cricket match etc which may be fetters by BCCI to ensure compliance by the broadcaster. At the most, the rights in the cricket match owned by BCCI can be said to have been sold by them to the broadcasting agency and BCCI and television channel, at best, be termed as seller and buyer of rights. By taking a common example from recent time, coverage of marriage rites between celebrity couple Arun Nair and Elizabeth Hurley are reported to be exclusively sold to "Hello" magazine and similarly there are rumours of sale of "marriage function" of leading movie actor Abhishek Bachhan with Aishwarya Rai to a particular channel for broadcasting. Will such sale of performance rights coverage would convert the seller into an advertising agency, providing any service in relation to advertisement to a client. The answer is emphatic No. As such, we are of the considered opinion that such sale of television/telecasting rights would not be covered by a taxable service in relation to advertisement.

12. As regards sponsorship and logo money, it has been strongly contested that the appellant is not connected, in any way, with conceptualizing, designing or preparing of advertising material of any of the sponsors and they are simply providing space either on the ground, boundaries of the ground, near club board, on trolleys used for serving soft drinks, the front side of the tickets and passes used for matches. As such, providing of space, without any connection with the work relating to the designing or preparation of advertisement would not bring them under the service tax net. In support of above submission, reliance has been placed on the trade notice No. 1/96-ST, dt.31.10.03, No. 54/301/03-ST, dt.28.10.03, and Ministrys Letter No. 345 /4/97-TR, dt. 16.8.99, clarifying that canvassing with client to sponsor the event and persuade them to give advertisement in particular newspaper/periodical/magazine would not amount to rendering of services in connection with advertisement.

13. Tribunal in the case of CCE Ludhiana v. Azad Publication reported in : 2004 (167) ELT 59 (Tri -Del), has held that permitting the display of advertisement on its site and raising bill for realizing the rental charges is mere subletting to an advertising agency which was without providing services of nature defined for advertisement services. Hence, the activity will not bring him under definition of taxable service. Similarly, in the case of CCE v. The Incoda reported in : 2004 (174) ELT 65 , it was held that the respondent authorized by the Metro rail to install, maintain and display of advertisement supplied to them by their clients, would not invite service tax from them as advertiser.

14. We may here take note of the observations made by the Honble High Court Madras in their judgment in case of Advertising Club v. Commissioner of Central Excise and Custom reported in : 2001 (131) ELT 35 MAS. For better appreciation, we would like to reproduce the relevant observations as contained in Para 17 and 21 of their judgment.

17. ...The advertising agency uses its expertise in making or preparing the advertisement so that it becomes an effective advertisement. It also decides as to where it should be displayed and on what occasions it should be exhibited. It selects the place, time as also the media for flashing the advertisement....

21. In the first place, let us first see where a person gets his advertisement flashed in the press media or electronic media, can it be said to be a service. In our opinion, it could certainly not be said to be service provided by the press media or electronic media. There is nothing done excepting flashing a prepared advertisement by the press media or for that matter, electronic media. The decision as to how and in what format the advertisement should be, how it, should be projected at what point of time it should be flashed in which areas it should be exhibited or the manner in which it should be drafted and exhibited has got nothing to do with the press media or electronic media. That would be the task of advertising agency alone. Therefore, when we consider the situation where a client goes to the press media and asks for flashing of the advertisement and such advertisement is flashed in the media, this cannot be deemed to be a service provided by that media to such a client. Similarly, when a person approaches the electronic media and flashes an advertisement on the radio or television, as the case may be, the ratio or television simply would flash the advertisement as per instructions of the person concerned but such person will not get the advantage of the expertise of the advertising agency. Therefore, it can not be said that the press media and electronic media provide the same service and therefore, it cannot be complained that they should also be brought in the tax net like the advertising agencies....

As such, it is clear that what is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and not simply providing of a place or space to the advertiser. The expression "display" or "exhibit" does not mean the physical act of display and exhibit, but relates to the services rendered, as an expert body, to the client, for the purposes of display or exhibit. The same may involve the expertise of the provider of the services to advise the client as to in which manner, the advertisement should be displayed i.e. whether in the newspaper or on TV channel or by way of hoardings or a audio/video advertisement in air or any other medium or at what point of time the same should be exhibited. We find that no such expert services are being provided by the appellant in the present case. They are merely canvassing their clients to make utilize of the space available with them for the purposes of advertisement of their product during the course of matches, which are going to be telecasted and by which they can popularize their products. As such, the activities amount to sale of space and not as regards advertisement.

15. Our above view also gets support from the fact that another head of "sale of space or time for advertisement and sponsorship services" stands created for the purposes of service tax w.e.f. 1.5.06. However, the taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. As such, we find that a subsequent entry having been enacted covering the activity without any change of the existing entry, has to be interpreted as if the earlier existing entry did not cover the subsequently created entry. If the subsequent entry was covered by the earlier entry, there was no reason or scope to create the present entry especially when the rate of tax in respect of both the entries remains unchanged. Certainly, creation of new entries was not by way of bifurcation of the earlier entry in as much as the earlier entry relating to advertisement remains unchanged without any change in the tax rate. As such, the introduction of new tariff entry do imply that the coverage in the new tariff for the purposes of tax was an area not covered by the earlier entry. It was so held in case of Glaxo Smithcline Pharmaceutical Ltd. reported in : 2005 (188) ELT 171 (Tri Mumbai) as also in case of M/s ZEE Telefilms Ltd. & M/s Star India (P) Ltd. v. CCE Mumbai reported in 2006-TIOL-945-CESTAT- MUM. If it is held that the activity of sponsorship and sale of space were covered under the earlier heading of advertising agency, the same would lead to the redundancy of new legislation and would defeat the legislative intent.

16. In view of foregoing discussion, we set aside the orders of the authorities below, confirming the demand of service tax and imposition of penalty upon the appellant. We make it clear in as much as we have allowed the appeal on merits, the plea of limitation being raised by the appellant is not being adverted to. As a consequence of allowing appellants appeal, the appeal filed by Revenue against the order of Commissioner dropping such demand has to be rejected. We order accordingly.

17. Both the appeals are disposed off in above manner.

(Pronounced in Court on 8.5.07)