Cricketer Ishant Sharma not liable to pay service tax for activities part of 2008 IPL contract with KKR: CESTAT

Activities by Indian cricketer Ishant Sharma in connection with his Indian Premier League (IPL) contract with M/s. Knight Riders Sports Private Limited (Knight Riders) do not attract service tax, the Central Excise and Service Tax Appellate Tribunal (CESTAT) in New Delhi recently held..A coram comprising CESTAT President Justice Dilip Gupta and technical member P Anjani Kumar made the observation while granting Sharma relief in relation to service tax demands made with respect to the periods 2008-09 to 2010-11 and 2012-13.The CESTAT agreed with Sharma’s stance that his activities were part of an employment contract and not a “service” attracting service tax.“It clearly transpires from the Agreement that the appellant (Ishant Sharma) has been employed by the Knight Riders to play cricket in the IPL tournaments. The appellant is under the control of Knight Riders and has to act in the manner instructed by them. The activity undertaken by the appellant pursuant to the contract of employment would, therefore, not be a “service‟ and, therefore, not leviable to service tax,” the CESTAT held in its August 11 ruling..The CESTAT also disagreed with a decision to invoke Section 73(1) of the Finance Act of 1994 to confirm the service tax demand by extending the period of limitation.The CESTAT noted that the limitation period could have been so extended only if there was any wilful suppression of information by the assesse (Sharma, in this case) with respect to the “services” rendered.“The Supreme Court and the Delhi High Court have held that suppression of facts has to be “wilful‟ and there should also be an intent to evade payment of service tax (to invoke Section 73)," the CESTAT explained.The CESTAT concluded that there was no such wilful suppression of information. Hence, the service tax demand in this case could not have been confirmed by extending the period of limitation, the CESTAT held.“The entire demand has been confirmed by invoking the extended period of limitation. As the extended period of limitation could not have been invoked in the present case, the demand deserves to be set aside,” the CESTAT said..The dispute arose from two show-cause notices issued by the tax authorities in 2012 and 2014.The tax authority claimed that Sharma owed service taxes for providing “business support services” and “brand promotion services” as part of his 2008 IPL contract to play for and represent the Kolkata Knight Riders.Sharma contested the demand before the Commissioner of Central Excise and Service Tax.In 2015, the Commissioner confirmed a part of the service tax demand by invoking the extended period of limitation under Section 73(1) of the 1994 Finance Act.The Commissioner added that in respect of the service tax demand for the time before July 2012, Sharma was liable to pay service tax only for 20% of the money he received in connection with his IPL contract since only that part of his fee related to the “services” rendered by him. The other 80% of the money received was for playing cricket and not for rendering "services" attracting service tax, the Commissioner held.Both Sharma and the tax authorities filed appeals against this 2015 ruling. Sharma maintained that he was under an employment contract and therefore, not liable to pay any service tax for such activity. The tax department questioned the decision to drop 80% of the service tax demand..The CESTAT ruled in Sharma’s favour after noting that similar decisions were earlier rendered in cases concerning cricketers Yusuf Pathan and Irfan Pathan.The CESTAT reasoned that it was clear from Sharma’s contract that the money being paid to him was for playing cricket and not for “business promotion activities” or any “support assistance to Knight Riders to carry out its business.”“The player’s fee in the Agreement is a fixed amount which is not linked to or subject to change pursuant to any alleged promotional activities to be performed under the Agreement. The fee is payable to the appellant for participating in the matches organized in the tournament regardless of whether he does or does not undertake any promotional activity. This clearly indicates that the consideration paid under the contract is for the activity of playing cricket and not for any promotional activity,” the CESTAT said..Ishant Sharma was represented by advocates Reena Khair, Shreya Dahiya, Vrinda Bagaria and Subham Jaiswal from Kochhar & Co along with advocate Samarth Kashyap from Kashyap and Patil Legal.Dr. Radhe Tallo represented the tax authorities..[Read Order]