Service Tax Not Leviable on Cricket Association’s Club Services to Members: CESTAT

Service Tax Not Leviable on Cricket Association’s Club Services to Members: CESTAT

Introduction

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable on services provided by a cricket association club to its members. Additionally, the Tribunal allowed Cenvat Credit on an LED scoreboard, rejecting the department’s objection on its inapplicability.

The bench comprising Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) delivered the ruling in the case of M/s. Karnataka State Cricket Association v. Commissioner of Service Tax, Bangalore North.

Factual Background & Procedural History

The assessee, M/s. Karnataka State Cricket Association, affiliated with the Board of Control for Cricket in India (BCCI), operates a club facility for its members – the Karnataka State Cricket Association Club House.

A show-cause notice was issued to the assessee alleging:

• Provision of services under the taxable category of "sale of space or time for advertisement",
• Renting of immovable property services,
• Failure to discharge service tax on "club or association service", and
• Irregular availing of Cenvat Credit on the LED scoreboard.

The Adjudicating Authority confirmed the demands with interest and penalties. The assessee filed an appeal before the Tribunal.

Arguments by Parties

Assessee’s Contentions

• The assessee contended that advertisement services were provided not by them but by external agencies who leased space to display ads.
• Therefore, the assessee merely provided space, while the advertisement agencies acted as service providers under the category of “sale of space/time for advertisement”.
• On the issue of the LED scoreboard, it was argued that the credit claimed was eligible and not capitalized under the Income Tax Act.

Department’s Contentions

• The department argued that the amounts received were booked under advertisement charges and hire charges, aligning with the taxable service definition.
• It also claimed that the LED scoreboard had no nexus with taxable services, and therefore, Cenvat credit was ineligible.

Tribunal’s Observations & Legal Reasoning

• The Tribunal disagreed with the Commissioner’s findings.
• It observed that although depreciation was initially claimed in FY 2004–05, the amount of ₹28,64,140 was later reversed, which removed any bar on availing Cenvat credit under Rule 4(4) of the Cenvat Credit Rules.
• The denial of Cenvat credit on the LED scoreboard was found to be unjustified.
• On the issue of club services, the Tribunal referred to precedents clarifying that service tax is not leviable on services rendered by a club to its members, in view of the principle of mutuality.

“The Commissioner’s reasoning that the LED scoreboard has no connection with the taxable service (Mandap Keeper, etc.) is devoid of merit,” held the Tribunal.

Outcome of the Case

• Set aside:

o Demand under the category of ‘club or association service’

o Denial of Cenvat credit on the LED scoreboard

• Remanded:

o The matter relating to ‘sale of space or time for advertisement’ and ‘renting of immovable property service’ was remanded back to the Adjudicating Authority to recompute service tax liability with interest for the normal period of limitation only.

Implications

This ruling is significant for sports associations and clubs, affirming that services offered to members are not liable to service tax under the mutuality principle. It also reinforces the eligibility of Cenvat credit on capital goods that are not capitalized for income tax purposes.

In this case the appellant was represented by Mr. G. Shivadass, Advocate. Meanwhile the respondent was represented by Mr. Rajiv Kumar Agarwal, Commissioner (AR).