The BCCI refutes the notion that the sale of their media rights falls under the category of ‘franchise services’ and asserts that they are not obliged to pay service tax.
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The Board of Control for Cricket in India (BCCI) has turned to the Supreme Court to seek clarification on whether the sale of media rights is subject to service tax categorization as ‘franchise services’. This decision follows a directive from the Bombay High Court instructing the BCCI to seek the Supreme Court’s guidance on the imposition of service tax concerning media rights agreements with MSM Satellite (Singapore) and World Sport Group from 2008 and 2009.
The BCCI disputes the characterization of their sale of media rights as ‘franchise services’ and thus contends that they are not obligated to pay service tax. The disputed amount totals around Rs 250 crore, inclusive of penalties.
A Bench led by Chief Justice DY Chandrachud has requested responses from the Finance Ministry and the Commissioner of Service Tax, Mumbai, in response to the BCCI’s appeals challenging the service tax demand.
This development pertains to the broadcasting of Indian Premier League (IPL) matches conducted in India. The Supreme Court’s verdict will have significant implications for the taxation of media rights within the realm of Indian cricket.
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BACKGROUND of the case in Bombay High Court
The Bombay High Court instructed the Board of Control for Cricket in India (BCCI) to take its service tax dispute to the Supreme Court. This directive comes in the wake of a legal battle over whether service tax is applicable for services provided by the BCCI under agreements with MSM Satellite (Singapore) Pte Ltd and World Sport Group (India) Pvt Ltd for the telecast of IPL matches on Indian soil in 2008 and 2009.
The division bench, consisting of Justices Girish Kulkarni and Jitendra Jain, made this recommendation after considering the complexities involved in determining the taxability of the services in question. The court observed,
“In our view, the present appeals raise an issue on the taxability of the services in question, hence these appeals are not maintainable before this court. The remedy of the appellant (BCCI) would be to approach the Supreme Court by filing an appeal under Section 35 of the Central Excise Act, 1994.”
This case traces back to a challenge by the BCCI against a common order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, on December 10, 2008. The tribunal had dismissed four appeals by the BCCI, upholding the Assessing Officer’s (AO) demand for service tax payment based on the agreements signed with MSM Satellite (Singapore) and World Sport Group (India) on January 21, 2008, and March 25, 2009, respectively.
The AO had classified the BCCI as a ‘Franchisee’ under Section 65 (47) of Chapter V of the Finance Act, 1994, in relation to services rendered to MSM Satellite (Singapore), specifically for the telecast of IPL matches in India. The BCCI, however, contended that the services provided as per the agreements were transactions of “export of service” under the Export of Services Rules, 2005, and thus, not liable for service tax.
The CESTAT, however, did not concur with the BCCI’s argument, ruling that the transaction did not qualify as an export of service, thereby making it taxable. The BCCI’s subsequent challenge of the CESTAT’s decision brought the matter before the Bombay High Court.
Advocates Jitendra Mishra and Satyaprakash Sharma, representing the Commissioner of Service Tax, questioned the maintainability of the BCCI’s plea, arguing that the appeals, concerning the determination of service taxability for assessment purposes, should be directed to the Supreme Court as per Sections 35H and 35L of the Central Excise Act, 1944.
The High Court’s decision to direct the BCCI to the Supreme Court underscores the intricate nature of determining taxability in cases involving complex service agreements. The bench explicitly stated that the issue of taxability, particularly whether the services in question could be classified as non-taxable due to being considered as ‘export of services’, is a matter that only the Supreme Court can adjudicate according to the provisions of Section 35L of the 1994 Act.
By keeping all contentions “expressly open” and allowing the BCCI to approach the Supreme Court, the Bombay High Court has paved the way for a definitive resolution on this matter, which could have far-reaching implications for the taxation of sports-related services in India.
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