Archana Wadhwa, Member (J)

1. The prayer in the application is to dispense with condition of pre-deposit of Service tax of Rs. 4.94 crores and education cess of Rs. 9.60 lakhs and Rs. 4.80 lakhs which stands confirmed against the applicant/appellant and penalty of identical amount imposed upon the applicant under Sections 78 of Finance Act, 1994. In addition a penalty of Rs. 5,000/- stands imposed upon the applicant under Section 77 of the Finance Act. After hearing both sides duly represented by Shri B.L. Narsimhan, learned Advocate appearing for the appellant and Shri K.P. Singh, learned SDR appearing for the Revenue, we find that the appellant entered into an agreement with BCCI-IPL dated 13-2-2008 for title sponsor agreement wherein the appellant was appointed as exclusive title sponsor of the League for the Cricket IPL 20-20 matches at a consideration of Rs. 40 crores. The demand against the appellant stands confirmed on the ground that the activity of sponsoring the IPL is liable to Service tax under the category of "sponsorship service" in terms of Section 55(99a) of Finance Act, 1994 read with sub-clause (zzzn) of Section 65(105) of Chapter 4 of Finance Act, 1994. The proceedings so initiated against the appellant stands culminated into passing of impugned order. The taxable service of sponsorship service stands defined in Section 65(105)(zzzn) read with Section 65(99a) of Finance Act, 1994. For better appreciation, we produce relevant provisions of Finance Act, 1994, which are as follows:-

(99a) "sponsorship" includes naming an event after the sponsor, displaying the sponsors company log or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors;

(105) "taxable service" means any service provided or to be provided, -(zzzn) to any body corporate or firm, by any person receiving sponsorship, in relation to such sponsorship, in any manner, but not include services in relation to sponsorship of sports events.

2. The fact that the appellant is sponsoring IPL matches is not disputed by either side. However, it is the contention of the appellant that the sponsorship service in relation to sponsorship of sports events stands excluded from the definition of taxable service as appearing in Section 65(105)(zzzn). Inasmuch as the appellants have provided sponsorship of sports events, that would be excluded from the definition of said service.

3. The Commissioner has observed that in terms of agreement entered into between the appellant and BCCI-IPL, League shall mean 20-20 Cricket league, which has been established by BCCI-IPL, and which it is anticipated shall take place in April-May of each year. The Company stands appointed as the exclusive title sponsor of the League for the duration of the rights period. For examining the various terms and conditions of the agreement, he has concluded that the agreement squarely stands covered by the definition of sponsorship service for the purpose of levy of Service tax.

4. As regards, the appellants contention that the sponsorship is in relation to sports events, he has observed that the sports events constitute games, matches or any tournament. The agreement entered into between appellant and BCCI-II cannot be held to be for sports events. For the above purposes, he has relied upon the instructions issued by the Board from Dy. No. 42/Comm (ST)/2008 dated 26-7-2010. For better appreciation., the said instructions are being reproduced below:-

Prior to Finance Act, 2010 sponsorship service did not include "services in relation to sponsorship of sports events". On the basis of this exclusion Service tax has largely not been paid on sponsorships that have been done under IPL. The standard argument is that the sponsorships contract falls within the exclusion clause. Show cause Notices have been issued in a few Commissionerates. These notices seek to exclude sponsorship of a team from the scope of the exclusion clause. The argument taken is that the exclusion clause can be invoked only for sponsorship of "sports events" - a term which naturally encompasses within its ambit sponsorship of games, matches or tournaments. At team in itself is not a "sports event". A team is an entity while "sports event" is an activity and so team sponsorship would fall outside the orbit of the exclusion clause.

It is felt that sponsorship of IPL, is not sponsorship of any sport event, since IPL in itself is not a sports event but an entity of franchisee teams and or a Team would be independent of sport event and hence taxable.

5. The adjudicating authority has further observed that the departmental officers are bound to follow instructions/circular/clarifications issued from time to time by the C.B.E. & C. He has held that the sponsorship fee paid by the noticee to the BCCI-IPL, a society registered under the Societies Act cannot be termed as sponsorship of any sports event but clearly is in the nature of obtaining sponsorship rights for being designated as exclusive "Title Sponsor of the League" by BCCI-IPL. Accordingly, he has held that the exclusion clause for sports event under sponsorship service is not available to the notice.

6. The above findings of the adjudicating authority stands contested by the appellant on the ground that the circular issued by the Board bind the officers only when they act in their administrative capacity. Such circular cannot interfere with quasi judicial powers of the assessing officers. As such instead of following circular blindly, the Commissioner should have applied his mind and should have given finding thereafter. In any case, learned Advocate submits that the circular talks about sponsorship of the team participating in matches, whereas in their case, they have sponsored the entire sport event, without sponsoring any individual team. In such a scenario, it stands contended before us that the sponsorship is required to be treated for sponsorship of sports events and not sponsorship of IPL. They have also placed reliance upon the Circular Letter D.O.F. No. 334/1/2010-TRU, dated 26-2-2010 which explains the changes proposed in the Finance Bill, 2010.

7. He also submits that the expression used in the present exclusion is in relation to sponsorship of sports events. He submits that the expression "in relation to" is very wide and would cover sponsorship of the League.

8. Learned SDR appearing for the Revenue submits and reiterates the findings of the Commissioner and submits that meaning of the expression - but not include services in relation to sponsorship of sports events." stands expressed by the Circular relied upon by the adjudicating authority. Inasmuch the legislative intent stands made clear in the Circular, the Commissioner was bound by the same and has rightly followed the same.

9. After careful consideration of the submissions made by both sides, we find that admittedly, sponsorship of sports event, is not covered by the definition of sponsorship appearing in the relevant provisions of the Finance Act. The adjudicating authority for arriving at finding against the appellant has simpliciter followed the Boards circular reproduced above. We fully agree with the appellants plea that the Commissioner, as independent quasi judicial authority was under legal obligation, independently was required to examine the issue before him instead of following the Boards circulars. It is only in respect of those circulars which are in favour of the assessee that the departmental officer cannot take view against the same and are required to follow the said circulars in favour of the assessee.

10. Honble Rajasthan High Court in the case of Popular Packing Pvt. Ltd. v. Union of India - : 2004 (175) E.L.T. 33 (Raj.) has observed that "... According to the thrust of the judicial dicta, notwithstanding few discordant notes here and there, the quasi-judicial authorities, especially the appellate authority is not bound by the Boards directions issued under Section 37." To the similar effect is the observation made by the Honble Madras High Court in the case of Madura Coats Ltd. v. C.B.E. & C. - : 2004 (163) E.L.T. 164 (Mad.), it was observed that the Board cannot shut down the quasi judicial power of the Authorities under the Excise Act and the Tariff Act.

11. There is no need to multiply the precedent decision clarifying the above issue. However, we can refer to the Honble Supreme Court decision in the case of C.C.E., Bolpur v. Ratan Melting & Wire Industries - : 2008 (12) S.T.R. 416 (S.C.) = 2008 (231) E.L.T. 22 (S.C.) observed that "Looked at from another angel, a circular which is contrary to the statutory provisions has really no existence in law."

12. We find that the Commissioner has simpliciter followed the above circular without independently examining the issue as to whether the activity of the appellant relates to sponsoring sports event. Even while examining the said instructions, so heavily relied upon by the adjudicating authority, we find in the first paragraph, reference seems to be made to a team. It is observed that the said instruction on team itself is not of sport event. A team is an entity, while sport event is an activity and so team sponsorship would fall outside exclusion clause or not, seems to be the subject matter of circular.

13. We find no difficulty in the above clarification, but only to the extent that sponsoring of a team cannot be considered to be sponsorship of sport event. Admittedly when two teams, like A and B, are performing at any match, sponsorship of any one of the teams cannot be held to be sponsorship of the sport event. The difficulty lies in the second conclusive paragraph of the said instruction, where it stands observed that sponsorship of IPL in itself is not a sport event but sponsorship of franchisee teams. If IPL team is one of the teams, as observed by circular, where is other team of the match The appellant has not provided sponsorship of the IPL but has obtained rights of sponsorship, rights for sponsoring the League, which is nothing but sport event of 20-20 cricket match between various teams. This is basically and primarily for sponsoring the sport event conducted by the BCCI-IPL. We also find favour in appellants contention that IPL was considered a cricket tournament, as is clearly shown in the official website of IPL and as such, has to be considered as sport event. Wherein official website of IPL refers to tournament as sport event and the same has even made it to fourth sport of the Forbes list of the Worlds hottest sporting properties. As such, prima facie, we agree with the appellant that the League is nothing but sport event organized by the BCCI-IPL and IPL is nothing but name of sport event.

14. We further note that exclusion clause used the expression in relation to sport event. The expression in relation to has been the subject matter of the various decisions of the judicial as also quasi judicial authority and has been held to be of wide connotation. As such, anything related to sport event is required to be considered as sport event and sponsorship of the same would get excluded from the definition of the sponsorship.

15. We may also take note of the TRU Circular dated 26-2-2010 which explains the changes proposed in the Finance Bill of 2010 to the provisions of Finance Act. For better appreciation we reproduce the relevant paragraph of the same which reads as under:-

7. Expanding the scope of Sponsorship Service

7.1 Business entities often associate their brand names, products or services by sponsoring popular or successful events with intent to obtain commercial benefits of spreading their name, goodwill or reputation to public. It is a form of advertisement. Sponsorship service was brought under tax net in Budget 2006. However, sponsorship of sports events was kept out of the purview of the taxation with a view to encourage sports activity and to provide an avenue for funding sports events.

7.2 Corporate involvement in certain sports such as cricket, golf and tennis has grown rapidly in the recent years and there is a substantial increase in sports events organized by private organizations or business entities. Further, the concept of owning and forming sports clubs that hire the services of sports persons has made many such events highly commercial and profitable activities. The advertisements through sponsorship of such events have created a disparity, as unlike advertisements displayed otherwise, advertisement (through sponsorship) when associated with sports, does not attract Service tax.

7.3 Therefore, the exclusion available for sponsorship pertaining to sports is being removed by suitable amendment. Suitable exemption to certain categories of sports events would be considered at the appropriate time.

16. Reading of the above, prima facie, leads us to believe that the existing provisions of Finance Act provide an exclusion of said cricket match etc. from ambit of Service tax and legislative intent is there to amend the same so as to bring the same into Service tax net. For all the reasons discussed above, we hold that the appellant has been able to make out a prima facie a good case in its favour so as to allow the stay petition unconditionally. We order accordingly.

(Pronounced in the open court on 13-1-2012)