1. Heard Shri S. Ganesh, ld. Senior Advocate-I for the appellant and the Shri Amresh Jain, ld. AR for the respondent - Revenue.

2. These appeals are preferred by M/s. Hero Honda Motors Limited, since re-designated as Hero Motocorp Ltd., a company incorporated under the Companies Act, 1956. Appeals are preferred against a common adjudication order dated 30-6-2011 passed by the Commissioner, Service Tax for the period 1-4-2008 to 31-3-2008, 1-4-2009 to 22-9-2009 and 23-9-2007 to 17-5-2010, corresponding cricket matches known as IPL twenty 20 (1, 2 and 3) tournaments played at different venues in India.

3. Under an agreement dated 14-5-2008, GMR Sports Pvt. Ltd. (author company) and the appellant agreed, in accordance with terms and conditions set out therein, that the appellant would sponsor the GMR team called “Delhi Daredevils” in the tournament conducted under auspicious of BCCI. The relevant terms and conditions of this agreement may be noticed;

(a) GMR is granted franchisee rights by the BCCI for forming a cricket team to represent State of Delhi in a T-20 Cricket Tournament (league) called “DLF - IPL - 20” organised by BCCI-IPL.
(b) In consideration of rights and privileges (specified in the agreement) granted by the appellant by GMR, the appellant agree to sponsor the GMR team called “Delhi Daredevils” in the league tournament.
(c) Agreement would be in force for three years from 1-4-2008 or till earlier determination in accordance with the agreement;
(d) GMR appoints the appellant as an official team sponsor of the cricket team called “Delhi Daredevils” for the duration of the agreement GMR will provide the appellant a schedule of all matches for its team immediately after pronouncement by the BCCI-IPL and notify any changes in the schedule; ensure that the appellant’s logo would be displayed/ positioned at appropriate places as specified in Annexure -’A’; will explore the possibility for the appellant to display its two wheeler product, clearly indicating that the appellant’s affiliation with Delhi Daredevils at a prime hoarding space at the Delhi Airport operated by GMR’s Group Company;

4. Show cause notices were issued to the appellant on 9-3-2009, 21-9-2009 and 23-7-2010, alleging default in remitting service tax i.e. due in relation to sponsorship services; in view of provisions of Section 68(2) of the Finance Act, 1994 (the Act), read with Rule 2(1)(d)(vii) of the Service Tax Rules, 1994 (the Rules).

5. It is the admitted position that if service tax liability exists on the sponsorship service qua the agreement dated 14-5-2008 between the appellant and GMR, the appellant is liable to remit such tax. It is also admitted that the appellant has not remitted service tax. The show cause notice was to the effect that the appellant is liable to service tax under provision of Section 65(105)(zzzn) of the Act, which bring to charge in service or to be provided to anybody corporate or firm, by any person receiving sponsorship, in relation to such sponsorship, in any manner, but excluding services in relation to sponsorship of sports events.

6. The appellant responded to the show cause notice denying the liability to service tax, claiming immunity under the exclusionary clause in Section 65(105)(zzzn) according to the appellant response since its sponsorship agreement with GMR was in relation to sponsorship of the BCCI-IPL-T-20 league tournament, the transaction was immune to liability to service tax in view of the relevant clause i.e. it does not include services in relation to sponsorship of sports event.

7. Rejecting the appellant’s claim to immunity to service tax, the impugned adjudication order dated 30-6-2011 was passed by the Commissioner of Service Tax, Delhi. The adjudication order confirmed the demand of service tax; education cess, SHEC; interest under Section 75; penalty of Rs. 5,000/- under Section 77 and the specified penalty under Section 78 of the Act while deleting the proposal imposition of penalty under Section 76. The common adjudication order assessed and levied service tax, cess, interest and penalties as above, separately for the three periods covered by the show cause notices dated 9-3-2009, 21-10-2009 and 23-7-2010.

8. Dealing with and rejecting the appellant’s claim of immunity to service tax (qua the exclusionary clause), the adjudicating authority observed that -

(a) while T-20 matches being played by various teams under the IPL banner are sporting events, a team cannot be a sporting event;
(b) the terms and conditions (in the agreement between GMR and the appellant) clearly show that the appellant made payments not for the T-20 tournament of any cricket match but to GMR for sponsoring GMR’s team, which in itself is not a sports events;
(c) GMR could not be called a sports event;
(d) though the appellant claims to have obtain sponsorship rights for being designated as official sponsorship of the team which is a participant in the T-20 tournament, the appellant is not entitled to the benefit of the exclusionary clause since BCCI-IPL by itself is not a sports events but is a society registered under the Tamil Nadu Societies Act, 1975;
(e) though the use of the expression “in relation to” indicates the wide sweep and ambit of the exclusionary clause, the expression cannot be extended to cover BCCI/IPL/GMR;
(f) Delhi Daredevils is not a sporting event; and
(g) sponsoring the IPL cannot be said to be a sponsorship in relation to a sports event. Only a proximate connections though not a direct connection with a sporting event is contemplated by the exclusionary clause.

9. The adjudicating authority also relied on C.B.E. & C. instructions dated 26-7-2010 which clarified that even prior to the Finance Act, 2010 (whereby the exclusionary clause was omitted) a participating team itself not being sport events, team sponsorship would fall outside the ambit of the exclusionary clause. Considering the Board circular, the adjudicating authority recorded that sponsorship of IPL is itself not sponsorship of any sport, since IPL is not an event but an entity of franchisee teams. On the same analogy, sponsorship of a team would not be sponsorship of a sports event and would therefore be taxable.

10. In our considered view the reasons recorded by the adjudicating authority are misconceived and unsustainable. Under the agreement with GMR the appellant had sponsored (for the relevant period) the Delhi Daredevils team which was owned by GMR (under a franchise agreement with BCCI/IPL. Delhi Daredevils team was sponsored in the context of the participation of this team in the T-20 league matches. The several rights accruing to the appellant under the sponsorship agreement (adverted to above) clearly indicate that sponsorship was neither of BCCI - IPL; nor GMR, the sponsorship was clearly of the GMR owned Delhi Daredevils team in relation to participation of such team in the IPL T-20 cricket tournament. The enumerated bouquet of benefits accruing to the appellant under the agreement such as printing; player’s appearances; motorcycle display; merchandise; motorcycle for promotion; and participative rights in prize presentation; championship tournaments; celebrity events; website/blog entitlement; and marketing plans by GMR, clearly establish that the sponsorship is of the GMR owned Delhi Daredevils team in relation to its participation in the T-20 tournament.

11. The sponsorship agreement is in our considered view a clear commercial transaction, the underlying purpose being the assumption that since BCCI-IPL-T-20 matches generate huge public viewership, either directly at the venues or through audio visual and print media as well, the appellant’s association with the T-20 sports event through Delhi Daredevils team would showcase the appellant’s presence in its core business as a manufacturer of two wheeler motorbikes. It is neither the case of the adjudicating authority as revealed in the adjudication order nor the case of Revenue before this Tribunal that the sponsorship agreement was entered into with GMR either to sponsor GMR or to sponsor BCCI/IPL without reference to the T-20 fixtures. We are not persuaded by any material on record that a huge amount of Rs. 4,80,00,000/- (for three years) was expended by appellant for deriving any commercial benefit out of its association with either GMR or BCCI/IPL alone. We are also not persuaded to infer that GMR and/or BCCI-IPL by themselves and unrelated to the T-20 cricket tournament/event would have any audience/viewership interest or footfall as to have any commercial utility whatsoever to the appellant. The sponsorship agreement is thus for sponsoring the T-20 sports event and not for sponsoring the owner of the Delhi Daredevils owner or the BCCI - IPL.

12. The conclusion recorded by the adjudicating authority, is in our considered view based on a fundamental misconception of the purpose of the sponsorship agreement. The conclusion that under the agreement appellant sponsored GMR, by predicating this inference on the singular circumstance that GMR was other party to the agreement, overlooking the terms and conditions of the agreement, constitutes a fatal infirmity of analysis, which invalidates the adjudication order.

13. The relevant clauses of the relevant statutory provision [Section 65(105)(zzzn)] (as it stood at the relevant time) reads “Taxable service” means any service provided or to be provided” to any body corporate or firm, by any person receiving sponsorship, in relation to such sponsorship, in any manner, but does not include services in relation to sponsorship of sports events. Sponsorship is defined in Section 65(99a) of the Act and its essential ingredients are defined to include naming the events after the sponsor, display the sponsor company logo or trade name, giving the sponsor exclusive or priority booking rights, and sponsoring prizes or trophies for competition but excluding 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 donor. The agreement in issue (between GMR and the appellant) clearly constitutes sponsorship. That is also the admitted position, since that is the basis for initiation of proceedings leading to the assessment of the appellant’s liability to service tax under provisions of Section 65(105)(zzzn). Since the sponsorship agreement, in our considered view falls within the exclusionary clause i.e. the clause which excludes sponsorship services in relation to sports events, the appellant is clearly immune to the charge of service tax. It is a settled principle of statutory construction that the phrase “in relation to” is indicative of expansive intention. As pointed out in Doypack Systems (Pvt) Ltd. v. Union of India reported in (S.C.). The expression “in relation to” is a very broad expression. These are words of comprehensiveness which might both have a direct significance as well as indirect significance depending on the context. The Supreme Court explained that the said expression connotes “concerning that” and “pertaining to”, are expressions of expansion and not contraction.

14. Shri Amresh Jain, ld. DR contends on behalf of Revenue that sponsorship was only of a team and not of sport events and that the amounts paid by the appellant to GMR fall outside the exclusionary clause of the provision. This contention is stated to be rejected. Under Article 265 of the Constitution no tax could be levied without legislative authority. A legislative provision is thus the sine qua non for a legitimate levy of tax. The relevant legislative provision must thus receive a strict construction. A true and fair construction of the relevant legislative provision, in accordance with settled and applicable principles of statutory interpretation is therefore the non-derogable obligation of an executor/interpretator of legislation. It is also settled principle of statutory interpretation that where the verbal formula of a legislative provision on its grammatical construction corresponds to the legal meaning of the expression used, full faith and unreserved fidelity must be accorded to the provision.

15. We notice that the expression “in relation to” is understood to have an extensive connotation, in several decisions apart from Doypack Systems (Pvt.) Ltd. The same view is reiterated in Kasilingam v. P.S.G. College of Technology - AIR 1995 SC 1395 and in Karnataka Power Transmission Corporation v. Ashok Iron Works Pvt. Ltd. - (2009) 3 SCC 240.

16. On the aforesaid analysis, the appellant is immune to levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994. Consequently, the impugned adjudication order dated 30-6-2011 cannot be sustained and is accordingly quashed. The appeals are allowed. There shall however be no order as to costs.