Finance Act, 1994: ss. 65(105), 65(68) – Manpower recruitment or supply agency – Service Tax – Appellant was engaged in providing diversified sports, entertainment and media services – Appellant entered into an agreement with First Serve Entertainment (‘FSE’) for the appearance of a noted tennis player, in connection with the Chennai Open Tennis Tournament (‘tournament’) – Appellants entered into an agreement with Zee telefilms to license the rights to broadcast tournament in India – Another agreement between appellant and Trans World International for the sale of telecast rights of the tournament outside India – Demand of service tax from the appellants under various heads, including manpower recruitment or supply agency service under reverse charge, programme producer service, sponsorship service, and other services – Customs, Excise and Services Tax Appellate Tribunal upheld the demand while observing that the services provided by FSE were in the nature of supplying, recruiting, and providing players for sport events organised by the appellant – Therefore, such services will be covered under the definition “manpower recruitment or supply agency” u/s. 65(105)(k) r/w s.65(68) of the Finance Act – Tribunal also did not accept the argument of the appellant that the Commissioner could not have invoked the extended period of limitation – On appeal, held: There was nothing on the record to indicate that Tennis player was an employee of FSE – However, the definition of “manpower recruitment or supply agency” does not incorporate such a requirement or condition of employeremployee relationship between the manpower supply agency and the persons whose services are provided – Circular issued by the Central Board of Excise and Customs deals with a situation where there exists a relationship of employer and employee between the agency which supplies the service and a person whose service is supplied – But the circular does not postulate that such a relationship must exist for the statutory definition to be attracted – Hence, the fact that there may be no relationship of employment between tennis player and FSE would not be dispositive for the purposes of the statutory definition in s.65(68) – No fault in the decision of the Tribunal.
Finance Act, 1994: s.65(86b) – Definition of “programme producer” – Whether the agreements entered into by appellants with Zee Telefilms and Trans World International are covered under the definition of “programme producer” in s.65(86b) – Held: The expression “programme producer” would implicate a situation where a person has produced a programme on behalf of another person – In the present proceedings, the appellant produced the programmes and sold the telecast rights to Zee Telefilms and Trans World International – There was no production of a programme on behalf of the appellant either by Zee Telefilms Limited or by Trans World International – Therefore, the definition of “programme producer” in s. 65(86b) was not attracted in the present case. Finance Act, 1994: Extended period of limitation – Since, the issue was to be decided on the basis of interpretation of the provisions of s. 65(68) and 65(86b) of the Finance Act, there was no warrant to allow the invocation of the extended period of limitation – The extended period of limitation would clearly not stand attracted in respect of the first show cause notice – The show cause notice shall hence have to be confined to the normal period of limitation excluding the extended period.
Finance Act, 1994: Imposition of penalty – Whether a valid ground for the imposition of a penalty was made out – Held: There was no warrant for the imposition of the penalty as the dispute in the present case essentially involved the interpretation of the statutory provisions and their inter play with the circular issued by the CBEC.
Partly allowing the appeals, the Court
HELD: 1. Section 65(68) defines a “manpower recruitment or supply agency” to mean (i) any person engaged in providing any service; (ii) directly or indirectly; (iii) in any manner; (iv) for recruitment or supply of manpower; (v) temporarily or otherwise; and (vi) to any other person. The definition encompasses a situation where a person is engaged in providing a service for the recruitment or supply of manpower to any other person. The definition incorporates recruitment as well as a supply of manpower. The expression ‘supply’ is of a wider connotation than recruitment. Moreover, the width of the provision is abundantly clear by the use of the expressions “directly or indirectly”, “in any manner” and “temporarily or otherwise” [Para 14][883-BD]
2. FSE, which is a company with a distinct legal identity, had an agreement with the appellant in terms of which the services of VA were to be provided. There was undoubtedly nothing on the record to indicate that VA was an employee of FSE. The issue however is as to whether the definition which has been extracted earlier of “manpower recruitment or supply agency” must be constrained by a further requirement of the existence of an employer-employee relationship between the manpower supply agency and the person whose services are provided. Plainly, the definition does not incorporate such a requirement or condition. [Para 15][883-E-F]
3. The circular issued by the CBEC narrates that after the introduction of service tax in 1994, several clarifications in the form of circulars, instructions and letters were issued by the CBEC and the Directorate General Services Tax. A committee was constituted for purpose which invited opinions of all stakeholders. The Union government issued the circular so as to reflect the interpretation of the law and the current practice of the department. Paragraph 8 of the circular clarifies that the circular would not override legal provisions. [Para 16][883-G-H; 884-A-B]
4. An employer-employee relationship exists between the agency and the individual and not between the individual and the person who uses the services of the individual. Such cases were held to be governed by the definition of “manpower recruitment or supply agency” in Section 65(68) and hence liable to service tax. The CBEC circular dated 23 August 2007 deals with a situation where there exists a relationship of employer and employee between the agency which supplies the service and a person whose service is supplied. But it does not postulate that such a relationship must exist for the statutory definition to be attracted. Hence, the fact that there may be no relationship of employment between tennis player and FSE would not be dispositive for the purposes of the statutory definition in Section 65(68). [Para 17][885-C-E]
5. The essence of the definition of “programme producer” is that a person must produce a programme on behalf of another person. On examination of the terms of the agreement with Zee Telefilms, it becomes evident that the appellant licensed the right to broadcast the Chennai Open Tennis Tournament owned by the appellant on the Zee Sports television channel. Likewise, the agreement with Trans World International was a contract for the sale of telecast rights in territories outside India in relation to the Chennai Open Tennis Tournament. Plainly, the definition in Section 65(86b) was not attracted. The expression “programme producer” would implicate a situation where a person has produced a programme on behalf of another person. The appellant produced the programmes and sold the telecast rights to Zee Telefilms and Trans World International. There was no production of a programme on behalf of the appellant either by Zee Telefilms Limited or by Trans World International. [Para 19][885-G-H; 886A-B]
6. The Tribunal having come to the conclusion that the issue turned upon an interpretation of the provisions of Section 65(68) and Section 65(86b) of the Finance Act 1994, there was no warrant to allow the invocation of the extended period of limitation and to direct the determination of the penalty following the requantification of the demand. The extended period of limitation would clearly not stand attracted in respect of the first show cause notice dated 20 October 2009. The show cause notice shall hence have to be confined to the normal period of limitation excluding the extended period. There was no warrant for the imposition of the penalty as the dispute in the present case essentially turned on the interpretation of the statutory provisions and their inter play with the circular issued by the CBEC. [Paras 24, 25][887-FH; 888-A-B] Board of Cricket Control for India v. Commissioner 2015
(37) ELT STR 785 (T-MUM) – distinguished
Padmini Products v. CCE, Bangalore (1989) 4 SCC 275 : [1989] 3 SCR 873 - referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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