M/S INTERNATIONAL MERCHANDISING COMPANY, LLC (EARLIER KNOWN AS INTERNATIONAL MERCHANDISING CORPORATION) versus COMMISSIONER, SERVICE TAX, NEW DELHI on 1 November 2022

SUPREME COURT REPORTS

[2022] 8 S.C.R.

AM/S INTERNATIONAL MERCHANDISING COMPANY,LLC (EARLIER KNOWN AS INTERNATIONALMERCHANDISING CORPORATION)

v.

COMMISSIONER, SERVICE TAX, NEW DELHIB

(Civil Appeal Nos 3532-3536 of 2020)

November 01, 2022

[DR DHANANJAYA Y CHANDRACHUD ANDHIMA KOHLI, JJ.]

CFinance Act, 1994: ss. 65(105), 65(68) – Manpowerrecruitment or supply agency – Service Tax – Appellant was engagedin 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 connectionwith the Chennai Open Tennis Tournament (‘tournament’) –DAppellants entered into an agreement with Zee telefilms to licensethe rights to broadcast tournament in India – Another agreementbetween appellant and Trans World International for the sale oftelecast rights of the tournament outside India – Demand of servicetax from the appellants under various heads, including manpowerErecruitment or supply agency service under reverse charge,programme producer service, sponsorship service, and otherservices – Customs, Excise and Services Tax Appellate Tribunalupheld the demand while observing that the services provided byFSE were in the nature of supplying, recruiting, and providingplayers for sport events organised by the appellant – Therefore,Fsuch services will be covered under the definition “manpowerrecruitment or supply agency” u/s. 65(105)(k) r/w s.65(68) of theFinance Act – Tribunal also did not accept the argument of theappellant that the Commissioner could not have invoked the extendedperiod of limitation – On appeal, held: There was nothing on theGrecord 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 employer-employee relationship between the manpower supply agency andthe persons whose services are provided – Circular issued by theCentral Board of Excise and Customs deals with a situation whereH

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE

TAX, NEW DELHI

there exists a relationship of employer and employee between theagency which supplies the service and a person whose service issupplied – But the circular does not postulate that such a relationshipmust exist for the statutory definition to be attracted – Hence, thefact that there may be no relationship of employment between tennisplayer and FSE would not be dispositive for the purposes of thestatutory definition in s.65(68) – No fault in the decision of theTribunal.

Finance Act, 1994: s.65(86b) – Definition of “programmeproducer” – Whether the agreements entered into by appellants withZee Telefilms and Trans World International are covered under thedefinition of “programme producer” in s.65(86b) – Held: Theexpression “programme producer” would implicate a situation wherea person has produced a programme on behalf of another person –In the present proceedings, the appellant produced the programmesand sold the telecast rights to Zee Telefilms and Trans WorldInternational – There was no production of a programme on behalfof the appellant either by Zee Telefilms Limited or by Trans WorldInternational – 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, theissue was to be decided on the basis of interpretation of theprovisions of s. 65(68) and 65(86b) of the Finance Act, there wasno warrant to allow the invocation of the extended period oflimitation – The extended period of limitation would clearly not standattracted in respect of the first show cause notice – The show causenotice shall hence have to be confined to the normal period oflimitation excluding the extended period.

Conclusion

Finance Act, 1994: Imposition of penalty – Whether a validground for the imposition of a penalty was made out – Held: Therewas no warrant for the imposition of the penalty as the dispute inthe present case essentially involved the interpretation of the statutoryprovisions 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 recruitmentor supply agency” to mean (i) any person engaged in providingany service; (ii) directly or indirectly; (iii) in any manner; (iv) for

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Arecruitment or supply of manpower; (v) temporarily or otherwise;and (vi) to any other person. The definition encompasses asituation where a person is engaged in providing a service forthe recruitment or supply of manpower to any other person. Thedefinition incorporates recruitment as well as a supply ofmanpower. The expression ‘supply’ is of a wider connotation thanBrecruitment. Moreover, the width of the provision is abundantlyclear by the use of the expressions “directly or indirectly”, “inany manner” and “temporarily or otherwise” [Para 14][883-B-D]

2. FSE, which is a company with a distinct legal identity,Chad an agreement with the appellant in terms of which the servicesof VA were to be provided. There was undoubtedly nothing onthe record to indicate that VA was an employee of FSE. The issuehowever is as to whether the definition which has been extractedearlier of “manpower recruitment or supply agency” must be Dconstrained by a further requirement of the existence of anemployer-employee relationship between the manpower supplyagency and the person whose services are provided. Plainly, thedefinition does not incorporate such a requirement or condition.[Para 15][883-E-F]

E3. The circular issued by the CBEC narrates that after theintroduction of service tax in 1994, several clarifications in theform of circulars, instructions and letters were issued by theCBEC and the Directorate General Services Tax. A committeewas constituted for purpose which invited opinions of allstakeholders. The Union government issued the circular so asFto reflect the interpretation of the law and the current practice ofthe department. Paragraph 8 of the circular clarifies that thecircular would not override legal provisions. [Para 16][883-G-H;884-A-B]

4. An employer-employee relationship exists between theGagency and the individual and not between the individual and theperson who uses the services of the individual. Such cases wereheld to be governed by the definition of “manpower recruitmentor supply agency” in Section 65(68) and hence liable to servicetax. The CBEC circular dated 23 August 2007 deals with a situationHwhere there exists a relationship of employer and employee M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI

between the agency which supplies the service and a personwhose service is supplied. But it does not postulate that such arelationship must exist for the statutory definition to be attracted.Hence, the fact that there may be no relationship of employmentbetween tennis player and FSE would not be dispositive for thepurposes of the statutory definition in Section 65(68). [Para17][885-C-E]

5. The essence of the definition of “programme producer”is that a person must produce a programme on behalf of anotherperson. On examination of the terms of the agreement with ZeeTelefilms, it becomes evident that the appellant licensed the rightto broadcast the Chennai Open Tennis Tournament owned bythe appellant on the Zee Sports television channel. Likewise,the agreement with Trans World International was a contract forthe sale of telecast rights in territories outside India in relationto the Chennai Open Tennis Tournament. Plainly, the definitionin Section 65(86b) was not attracted. The expression “programmeproducer” would implicate a situation where a person hasproduced a programme on behalf of another person. The appellantproduced the programmes and sold the telecast rights to ZeeTelefilms and Trans World International. There was no productionof a programme on behalf of the appellant either by Zee TelefilmsLimited or by Trans World International. [Para 19][885-G-H; 886-A-B]

6. The Tribunal having come to the conclusion that the issueturned upon an interpretation of the provisions of Section 65(68)and Section 65(86b) of the Finance Act 1994, there was no warrantto allow the invocation of the extended period of limitation and todirect the determination of the penalty following the re-quantification of the demand. The extended period of limitationwould clearly not stand attracted in respect of the first show causenotice dated 20 October 2009. The show cause notice shall hencehave to be confined to the normal period of limitation excludingthe extended period. There was no warrant for the imposition ofthe penalty as the dispute in the present case essentially turnedon the interpretation of the statutory provisions and their interplay with the circular issued by the CBEC. [Paras 24, 25][887-F-H; 888-A-B]

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ABoard 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.

Case Law Reference

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[1989] 3 SCR 873

referred toPara 22

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3532-3536 of 2020.

From the Judgment and Order dated 29.05.2020 of the Customs,CExcise and Service Tax Appellate Tribunal, Regional Bench atChandigarh in ST/60379-60383/2013-ST (DB).

S. Ganesh, Sr. Adv., Ashok Dhingra, Karan Bharihoke, SiddhantSharma, Ms. Sonia Gupta, Ms. Anushi Aggarwal, Advs. for the Appellant.

N. Venkataraman, ASG, Arijit Prasad, Sr. Adv., Mukesh KumarDMaroria, Shashank Bajpai, Madhav Singhal, V. C. Bharathi, Advs. forthe Respondent.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

E

1. These appeals arise from a judgment dated 29 May 2020 of theCustoms, Excise and Services Tax Appellate Tribunal[1] in a batch ofservice tax appeals. The appeals before the Tribunal arose from an orderdated 1 August 2013 of the Commissioner (Adjudication) which dealtwith five show cause notices dated 20 October 2009, 20 April 2010, 20FApril 2011, 23 March 2012 and 23 April 2013. The first of the five showcause notices invoked the extended period of limitation.

2. The appellant is engaged in providing diversified sports,entertainment and media services. It is registered with the jurisdictionalservice tax authorities under Chapter V of the Finance Act, 1994 forGtaxable event categories such as management consultant services, eventmanagement services, business auxiliary services, business exhibitionservices, and TV or radio programme production services. The appellantorganizes events such as the Chennai Open Tennis Tournament andLakme Fashion Week. It entered into various agreements, both domestic M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

and international, with regard to the hiring of celebrities for appearancesat the events, selling broadcasting rights, sharing IT services with groupcompanies abroad, and secondment with group companies.

3. The appellant entered into an agreement on 1 January 2005with an entity by the name of First Serve Entertainment[2] for theappearance of Mr Vijay Amritraj[3], a noted tennis player, in connectionwith the Chennai Open Tennis Tournament. On 3 January 2005, theappellant entered into an agreement with a tennis player of Thai origin,Mr Paradorn Srichaphan, for his participation in the same tournament.

4. The contents of the agreement with FSE for appearance andparticipation of VA are extracted below:

“2. Appearance and Participation, IMC hereby engages First servefor appearance and participation of Amritraj of First Serve inconnection with Chennai open. Amritraj will appear and participatein the opening and closing ceremonies and also play in the charityauction match at the Chennai open [and] First Serve herebyaccepts such engagement and agrees to cause Amritraj toappear and participate in the Chennai open in accordancewith all applicable laws and regulations.

3. Terms, (a) The term of this Agreement (the Term, subject tothe provisions of sub section (b) immediately below) is five (5)consecutive years as of January 1, 2005 and concluding onDecember 31, 2009 unless terminated earlier as provided herein.

(b) If (I) IMC, in its reasonable judgment, determines that theChennai open is no longer economically viable (meaning that IMCis no longer able to conduct the Chennai open as a going concernand must cancel the Chennai open in any year(s) during the Termdue to economic losses due to, as an example, insufficient or nonexistent sponsorship income), or (II) the Chennai open is no longerheld at the venue for any reason, then this Agreement will beautomatically terminated by IMC without liability or father [sic]obligation of either party other than (if applicable) First Serve’spro rata repayment of any fee received for the cancelled Chennaiopen(s) during the Term, except for any obligation expresslyintended to survive the termination of this Agreement. If economic 3 “VA”

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878SUPREME COURT REPORTS

[2022] 8 S.C.R.

Acircumstances change, or the Chennai open returns to its originalvenue and IMC intends to reinstate the Chennai open during theTerm, then IMC shall promptly notify first serve and the partiesshall discuss in good faith whether to reinstate this agreement.

4. Fees, in consideration for the participation of Amritraj, IMCBagrees to pay First Serve an annual fee in the amount of US $140,000 (each a fee). Each fee will be paid to First Serve afterthe conclusion of the Chennai Open in each year upon thepresentation of an invoice from First Serve to IMC, ***”

C5. In November 2016, an agreement was executed between theappellant and Zee Telefilms to license the rights to broadcast the ChennaiOpen Tennis Tournament on Zee Sports channel in India. The relevantextracts of the License Agreement with Zee Telefilms are set out below:

“A. Programmes/EventsD

Licensor is the owner of an ATP Tour, Inc. (“ATP”) TourInternational Series event which shall be names “The ChennaiOpen Tennis Championships” (“the Event/Programme”) or suchother name to be determines by Licensor and Licensor has agreedto provide Licensee the right to broadcast the Event on Licensee’sESatellite Television Channel “Zee Sports” in India oil [sic] theterms and conditions more particularly described herein.

B. Rights and Definitions: The following rights and terms shall bedefined as set forth below for the purposes of this Agreement:

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The above Rights with regards to the Event, whose Programmesshall be produced and supplied by Licensor and which are H

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

granted to Licensee in the Licensed Language on anexclusive basis in the Licensed Territory.

6. The appellant entered into an agreement with Trans WorldInternational on 16 September 2010 for the sale of telecast rights of theChennai Open Tennis Tournament in territories outside India. The relevantextracts of the agreement between the appellant and Trans WorldInternational are as follows:

“WHEREAS

A) IMC owns the rights to organize, promote and conduct a men’sinternational series tennis event in (the “Tournament”), once eachyear, at Chennai in India;

B) The company is the television arm of the InternationalManagement Group of companies and has agreed to sell telecastrights for the Tournament (the “Rights”) in territories across worldexcept India.

C) The parties have agreed to the terms under which the Companywould perform such activities for sale of the rights globally exceptIndia and desire by this instrument to record their agreement.

It is agreed as follows:- ***

2. Activities to be performed by the Company:

For the Chennai Open 2011, the company shall sell telecast rightsin the Territory by using all reasonable commercial endeavoursconsistent with its best business judgment to maximize revenuefor the Tournament.

Relationship between company and IMC is on principle to principlebasis. Company shall sell the rights to clients and collect the moneyfrom them.”

7. The records of the appellant were audited by the officers ofthe Delhi Services Tax Commissionerate during May 2009 for the period2004-2005 to 2007-2008. The Commissioner issued a demand of servicetax to the appellants under various heads, including manpower recruitmentor supply agency service under reverse charge, programme producerservice, sponsorship service, and other services. Five show cause notices,

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Aas stated above, were issued to the appellant cumulatively for the periodApril 2004 to March 2012, which resulted in a common order of theCommissioner (Adjudication). The Commissioner adjudicated all the fiveshow cause notices and confirmed the demand of service tax by anorder dated 1 August 2013.B8. The Commissioner ruled that the consideration paid to FSE forappearance of VA for a sports tournament is taxable under the definitionof “manpower recruitment or supply agency”. The Commissionerobserved that the source of supply of skilled manpower is outside Indiaand has been received by the appellant in India. The Commissioner furtherruled that any programme made by a programme producer and thenCoffered for sale to different TV channels or broadcasters for relay is ataxable activity. The Commissioner concluded that the transaction madeby the appellant with Zee Telefilms includes element of service and istaxable.

9. Aggrieved by the order of the Commissioner, the appellantDlodged appeals before the Tribunal. The Tribunal by its judgment dated29 May 2020 held against the appellant. It observed that the servicesprovided by FSE were in the nature of supplying, recruiting, and providingplayers for sport events organized by the appellant. It held that suchservices will be covered under the definition of “manpower recruitmentEor supply agency” under section 65(105)(k) read with section 65(68) ofthe Finance Act, 1994. The Tribunal further relied upon the decision inBoard of Cricket Control for India v. Commissioner[4] to uphold theorder of the Commissioner imposing the demand of service tax underthe category of programme producer services during the relevant period.The Tribunal did not accept the argument of the appellant that theFCommissioner could not have invoked the extended period of limitationas the issues involved interpretation of legal provisions. On the issue ofimposition of penalty on the appellant, the Tribunal directed theCommissioner to redetermine the amount of penalty in remandproceedings.G10. Mr S Ganesh, senior counsel appearing on behalf of the appellantsubmits that:

(i) The appellant identified VA for his participation in the tennistournament and that it was at his behest that an agreement 4 2015 (37) ELT STR 785 (T-MUM)H

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

was entered into with FSE in terms of which VA wouldappear in or participate in the tournament conducted by theappellant; A

(ii) FSE is not a supplier of manpower because VA is anidentified person and hence the activity does not befit thedescription of manpower supply; B

(iii) In the event that the appellant was to recruit VA directly,there would be no levy of service tax and hence in asituation where the appellant entered into an agreement withFSE at the behest of VA, the same position should obtain; C

(iv) The contract between the appellant and FSE is a commercialcontract and must hence be construed in a manner consistentwith the commercial sense and understanding between theparties under the contract;

(v) The Central Board of Excise and Customs[5] has issued acircular dated 23 August 2007 clarifying this head of chargeDof service tax and the circular makes it clear that the triggerfor the levy of service tax is the existence of an employer-employee relationship between the service provider and theperson whose service is provided to the customer; E

(vi) In the present case, the appellant intended to secure thepresence of VA who is a famous tennis player for whichpurpose the appellant arrived at an understanding with VA,which was followed by a formal contract with a one-mancompany owned and controlled by him; F

(vii) The Tribunal has based its conclusion on the premise thatVA and his company constitute separate and distinct legalentities by disregarding the provisions of the circular dated23 August 2007 which specifies the requirement that theservice provider and the person whose service is providedmust be governed by an employer-employee relationship inorder for the provisions of Section 65(68) to be attracted.

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11. These submissions have been controverted by Mr NVenkataraman, Additional Solicitor General appearing on behalf of therespondent. The Additional Solicitor General submitted that:

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A(i)The provisions of Section 65(68) do not stipulate that theremust exist an employer-employee relationship between theservice provider and the person whose services areprovided;

(ii) The circular dated 23 August 2007 issued by the CBECmust be understood in terms of its context: andB

(iii) It would not be permissible to restrict the plain termsgoverning the definition in Section 65(68) by reference tothe circular of the CBEC when the circular has been issuedin a completely different context.

C12. In the counter-affidavit filed by the respondent, it has beenaverred that the agreement between the appellant and FSE indicatesthat the latter has caused the participation of VA in terms of therequirement of the appellant. Therefore, the said activity was specificallycovered under “manpower recruitment or supply agency” as definedunder section 65(68) read with section 65(105)(k). As regards the demandDof service tax on programme producer services, the respondent averredthat production of programmes for telecast on TV channels falls under the category of program producer services and was taxable.

13. The first issue which falls for determination bears upon theinterpretation of the provisions of Section 65(68) read with SectionE65(105)(k) of the Finance Act 1994. The definitions of “manpowerrecruitment or supply agency” and “taxable service” under section 65of the Finance Act, 1994 are as follows:

65. Definitions – In this Chapter, unless the context otherwiserequires, -***F

(68) “manpower recruitment or supply agency” means any personengaged in providing any service, directly or indirectly, in anymanner for recruitment or supply of manpower, temporarily orotherwise to any other person.”***G(105) “taxable service” means any service provided or to beprovided –

(k) to any person, by a manpower recruitment or supply agencyin relation to the recruitment or supply of manpower, temporarilyor otherwise, in any manner;H

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

[Explanation – For the removal of doubts, it is hereby declaredthat for the purposes of this sub-clause, recruitment or supply ofmanpower includes services in relation to pre-recruitmentscreening, verification of the credentials and antecedents of thecandidate and authenticity of documents submitted by thecandidate]

14. While analysing the rival submissions, it would be necessaryto set out the essential ingredients of the definition contained in Section65(68). The provision defines a “manpower recruitment or supply agency”to mean (i) any person engaged in providing any service; (ii) directly orindirectly; (iii) in any manner; (iv) for recruitment or supply of manpower;(v) temporarily or otherwise; and (vi) to any other person. In other words,the definition encompasses a situation where a person is engaged inproviding a service for the recruitment or supply of manpower to anyother person. The definition incorporates a recruitment as well as a supplyof manpower. The expression ‘supply’ is of a wider connotation thanrecruitment. Moreover, the width of the provision is abundantly clear bythe use of the expressions “directly or indirectly”, “in any manner” and“temporarily or otherwise”.

15. In the present case, there can be no manner of doubt thatFSE, which is admittedly a company with a distinct legal identity, had anagreement with the appellant in terms of which the services of VA wereto be provided. There was undoubtedly nothing on the record to indicatethat VA was an employee of FSE. The issue however is as to whetherthe definition which has been extracted earlier of “manpower recruitmentor supply agency” must be constrained by a further requirement of theexistence of an employer-employee relationship between the manpowersupply agency and the person whose services are provided. Plainly, thedefinition does not incorporate such a requirement or condition.

16. But, the submission of Mr S Ganesh, senior counsel for theappellant is that the CBEC having issued a circular dated 23 August2007, the excise authorities would be bound by the circular which hasthe effect of narrowing the ambit of the statutory definition contained inSection 65(68). There can be no doubt as a matter of first principle thatthe revenue is bound by its own circulars. Equally, it is necessary tounderstand the context in which the circular dated 23 August 2007 wasissued by the CBEC. The circular narrates that after the introduction ofservice tax in 1994, several clarifications in the form of circulars,

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Ainstructions and letters were issued by the CBEC and the DirectorateGeneral Service Tax. The Union Government decided to undertake acomprehensive review of all the clarifications having due regard to thechanges which have been brought about by statutory provisions andjudicial pronouncements. A Committee was constituted for that purposewhich invited the opinions of all stake holders. Following the report ofBthe Committee, the Union government issued the circular so as to reflectthe interpretation of the law and the current practice of the department.Yet, paragraph 8 of the circular clarifies that the circular would notoverride legal provisions. The relevant part of the circular which formsthe subject matter of the submissions urged in the present case reads asCfollows:

17. The second column of the circular which has been extractedabove deals with the issue while the third column contains the clarification.The issue which was flagged is that services of manpower recruitmentor supply agencies are engaged by business or industrial organizationsH

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

for the temporary supply of manpower which may be engaged either fora specified period or for the completion of particular projects or tasks.The question was whether service tax would be liable to be charged onsuch services under the ‘manpower recruitment or supply agency’ service.In other words, the issue which is dealt with is whether service taxwould be attracted where at the behest of a business or industrialorganization, the services of a manpower or supply agency is engagedfor the supply of manpower for specified periods, projects or tasks. Theclarification is that in such cases governing the supply of manpower,individuals are contractually employed by the manpower recruitment orsupply agency. The agency agrees with another person to supply theservices of that individual employed by the agency for a consideration.An employer-employee relationship exists between the agency and theindividual and not between the individual and the person who uses theservices of the individual. Such cases were held to be governed by thedefinition of “manpower recruitment or supply agency” in Section 65(68)and hence liable to service tax. The CBEC circular dated 23 August2007 deals with a situation where there exists a relationship of employerand employee between the agency which supplies the service and aperson whose service is supplied. But it does not postulate that such arelationship must exist for the statutory definition to be attracted. Hence,the fact that there may be no relationship of employment between VAand FSE would not be dispositive for the purposes of the statutorydefinition in Section 65(68). For the above reasons, we are of the viewthat the decision of the Tribunal on this aspect of the matter cannot befaulted with.

18. The second submission which has been urged on behalf of theappellant by Mr S Ganesh, senior counsel relates to the definition of theexpression “programme producer” in Section 65(86b) of the FinanceAct 1994 as amended. Section 65(86b) is extracted below:

“programme producer’ means any person who produces aprogramme on behalf of another person.”

19. The essence of the definition of “programme producer” isthat a person must produce a programme on behalf of another person.The appellant had agreements with Zee Telefilms and with Trans WorldInternational. On examination of the terms of the agreement with ZeeTelefilms, it becomes evident that the appellant licensed the right tobroadcast the Chennai Open Tennis Tournament owned by the appellant

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Aon the Zee Sports television channel. Likewise, the agreement with TransWorld International was a contract for the sale of telecast rights interritories outside India in relation to the Chennai Open TennisTournament. Plainly, the definition in Section 65(86b) was not attracted.The expression “programme producer” would implicate a situation wherea person has produced a programme on behalf of another person. In theBpresent proceedings, the appellant produced the programmes and soldthe telecast rights to Zee Telefilms and Trans World International. Therewas no production of a programme on behalf of the appellant either byZee Telefilms Limited or by Trans World International. The factual positionis not in dispute during the course of the hearing of the appeal.C20. The Tribunal relied upon its decision in the case of Board ofControl for Cricket in India(supra).The extract from the decisionwhich was relied upon by the Tribunal is set out below, insofar as it isrelevant:

1. “6.2 As per clause 2.1, BCCI has appointed the producerDto exclusively produce the feed for and on behalf of BCCIand the feed means – the live and continuous clean audioand visual television signal of each match as described indetail in clause 3.2 of the agreement. Clause 3.1 of theagreement deals with production services and reads as - “theEproducer must produce the feed for each match of the events asper the production/technical specification detailed in schedule 3,using the personnel specified in clause 5, using the equipmentspecified in schedule 3 and otherwise in accordance with thisagreement.” Clause 3.2 specifies that the feed for each matchmust be live, continuous and uninterrupted and should be inFconformity with the specifications mentioned in sub-clauses (a)to (g) thereof. Clause 4 of the agreement deals with the otherobligations of the producer and clause 5 deals with personnel whoshould be engaged for production. Clause 6 deals with productionand technical specifications relating to the equipment, use of theGequipment, camera and key camera positions and so on. Clause 9deals with assignment of the copyright by the producer to BCCIin respect of all the sound recordings, broadcasting andtransmissions and so on. For the services rendered, clause 10 ofthe agreement specifies the consideration to be paid by BCCI tothe producer for the production of the feed which includes all H

M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN ASINTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICETAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

statutory taxes and charges, import duties and tariffs on importedmaterials and equipment, rise and fall, relevant award costs andallowances for the personnel.”

21. The above extract indicates that in terms of the contract, BCCIhad appointed the producer to exclusively produce the feed for and onbehalf of BCCI for each match. This is the distinguishable feature of thedecision of the Tribunal in BCCI which is absent in the present case.Therefore, we are of the considered view that the Tribunal was in errorin holding that the decision would apply squarely to the facts of thepresent case. The view of the Tribunal to that extent would have to beand is accordingly reversed.

22. The final submissions which need to be considered is whether(i) the extended period of limitation would stand attracted in the case ofthe first show cause notice; and (ii) whether a valid ground for theimposition of a penalty was made out. In this regard, reliance has beenplaced on behalf of the appellant on the decision of this Court in PadminiProductsv. CCE, Bangalore[6] to submit that the extended period oflimitation would not be attracted as the appellant has not acted withdishonest or fraudulent intent.

23. In paragraph 4.20 of its order, the Tribunal has specificallyobserved that the present case involves the interpretation of statutoryprovisions. Having said this, the Tribunal in the concluding paragraph ofits decision held that since the matter was being remitted back to theCommissioner for re-determination of the quantum of demand, the amountof penalty would have to be re-determined in accordance with the dutydemand confirmed in the demand proceedings.

24. We are of the considered view that the Tribunal having cometo the conclusion that the issue turned upon an interpretation of theprovisions of Section 65(68) and Section 65(86b) of the Finance Act1994, there was no warrant to allow the invocation of the extendedperiod of limitation and to direct the determination of the penalty followingthe re-quantification of the demand. The extended period of limitationwould clearly not stand attracted in respect of the first show cause noticedated 20 October 2009. The show cause notice shall hence have to beconfined to the normal period of limitation excluding the extended period.

6 (1989) 4 SCC 275

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A25. As far as the penalty is concerned, we are of the consideredview that there was no warrant for the imposition of the penalty as thedispute in the present case essentially turned on the interpretation of thestatutory provisions and their inter play with the circular issued by theCBEC. Finally, we also order and direct that the view of the Tribunal onthe applicability of the provisions of Section 65(86b) of the Finance ActB1994 as amended has been reversed by this Court. On remand inpursuance of the impugned order of the Tribunal, the adjudicating officershall abide by the above directions.

26. The appeals shall stand allowed in part in the above terms.

C27. Pending applications, if any, stand disposed of.

Devika Gujral

(Assisted by : Preetam Bharti, LCRA)

Appeals partly allowed.

D

E

F

G

H