Ishant Sharma's Engagement With The Kolkata Knight Riders Should Be Regarded As A Contract Of Employment Rather Than A Taxable Service: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Ishant Sharma's engagement with the Kolkata Knight Riders should be regarded as a contract of employment rather than a taxable service.

The bench of Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member) has observed 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 the 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 be leviable to service tax.

The appellant/assessee, Ishant Sharma, assailed the order passed by the Commissioner by which the demand for service tax was confirmed with interest and penalty by invoking the extended period of limitation.

The appellant plays cricket at the national and international levels. By an agreement dated May 9, 2008, the appellant was engaged by the Knight Riders to play cricket in the Indian Premium League for three seasons commencing in 2008.

The show-cause notice was issued to the appellant. It was alleged that in terms of the agreement, the payments received by the appellant would be taxable under "business support services, as the appellant granted rights to the Knight Riders to get photographed, filmed, televised, identified, recorded, and to wear and use only team clothing.

The appellant submitted a reply to the show cause notice, disputing the allegations raised in the notice. The appellant submitted that he had been engaged by the Knight Riders to play cricket, which is not a taxable service under the Finance Act. The contract with Knight Riders was an employment contract, and the relationship was that of an employer and employee, which was also not taxable under the Finance Act.

Subsequently, another show cause notice dated April 17, 2014, was issued to the appellant, raising a service tax demand. The appellant disputed the allegations in the said notice in a reply dated June 22, 2015, and reiterated that the agreement between Knight Riders and the appellant was one of employment, which was not taxable under the Finance Act.

The Commissioner, by order, confirmed part of the demand for service tax with applicable interest by taking recourse to the extended period of limitation contemplated under Section 73(1) of the Finance Act.

For the period prior to July 2012, the Commissioner, based on the Agreement, held that only 20% of the consideration received by the appellant pursuant to the Agreement would be attributable to promotional activities and liable to service tax. The commissioner, therefore, dropped the demand for the balance of 80% of the player fees. For the period post-2012, the Commissioner confirmed the demand for the entire amount of remuneration received by the appellant.

The appellant contended that the first show cause notice dated April 26, 2012, raised the demand for service tax on the appellant under the category of business support services as defined under Section 65(104c) of the Finance Act. The services covered under the definition are back-end office support, commission agent work, and administrative work. There is no finding in order as to how the activities undertaken by the appellant support the business of Knight Riders in terms of the definition provided under the Finance Act.

The tribunal held that the agreement does not indicate that the appellant is providing any support or assistance to Knight Riders to carry out its business. The appellant is not undertaking any business promotion activities. The appellant is an employee of the Knight Riders. The agreement only stipulates certain conditions, which the appellant has to follow as an obligation under the contract of employment.

Case Title: Ishant Sharma Versus Commissioner of Central Excise and Service Tax

Case No.: Service Tax Appeal No. 249 Of 2016

Date: 11.08.2023

Counsel For Appellant: Reena Khair, Shreya Dahiya, Vrinda Bagaria and Subham Jaiswal, Advocates.

Counsel For Respondent: Radhe Tallo

Click Here To Read The Order