Payment Under IPL Playing Contract, CESTAT Quashes Service Tax Demand Against Cricketer R. Ashwin

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand against cricketer R. Ashwin.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that payment received under the IPL playing contract is remuneration for work, not consideration for brand promotion.

The appellant/assessee, R. Ashwin, is a cricketer playing for the 'Chennai Super Kings' owned by M/s.India Cements Limited, which is a franchisee (ICL) in the Indian Premier League (IPL). ICL is engaged in the manufacture of cement, which is sold under various brand names such as “Coromandel Cement," “Sankar Cement," “Raasi Cement,” etc.

ICL, after successfully bidding the appellant, R. Ashwin, entered into an agreement named "Indian Premier League Playing Contract” dated 14.04.2008. As per the agreement, the appellant is required to play on behalf of ICL in the team of 'Chennai Super Kings'. The appellant was to receive the player fee and other benefits set out in the agreement. In addition to the player fees, the appellant also received 10% of the player fee for various promotional activities of ICL and its partners, sponsors, etc. From the agreement, it appeared that the payment made to the appellant, though split up between the player fee and payment for promotional activities, appeared to be of a composite nature.

The department was of the view that the amount paid to the appellant is a consideration for the brand promotion services rendered to ICL by the appellant. The activity would fall under the definition of service under Section 65B (44) of the Finance Act, 1994, with effect from 1.7.2012.

The assessee contended that the conditions in the contract establish that the contract is an employment contract. There exists an employer-employee relationship between ICL and the appellant. There is no rendering of service by the appellant to ICl, and the payments received are remuneration for work and not consideration for services for brand promotion.

The department contended that the essence of the contract between ICL and the appellant is for brand promotion, though the appellant is also engaged in playing cricket. Once the contract is entered for brand promotion, even if only 10% of the amount is bifurcated and provided for brand promotion and sponsorship-related activities, it can be seen from the terms of the contract that the entire amount received by the appellant is for brand promotion activity.

The issue raised was whether the appellant is liable to pay service tax on the amounts received by him from India Cements Ltd. under the IPL Playing Contract entered into by the appellant with ICL as well as the BCCI.

The CESTAT noted that the amount received by the appellant from ICL does not depend upon the number of advertisements or promotional activities in which the appellant participates or showcases. It remains the same as fixed in the agreement.

The tribunal held that merely because the appellant engages in some promotional activities of the employer, as part of playing cricket by way of wearing the shirt showcasing the logo and name of M/s. ICL, etc., it cannot be said that the entire payment is for brand promotional activities.

Counsel For Appellant: Joseph Dominic

Counsel For Respondent: Anandalakshmi Ganeshram

Case Title: R. Ashwin Versus The Commissioner of GST & Central Excise

Case No.: Service Tax Appeal No.40244 Of 2023

Click Here To Read The Order