Holding

The term "manpower recruitment or supply agency" under s.65(68) must be given its plain, expansive meaning without requiring an employer‑employee relationship, while "programme producer" under s.65(86b) requires production on behalf of another, which was absent; consequently, the extended limitation period and penalty were inapplicable.

Summary

International Merchandising Co. organized the Chennai Open tennis tournament and entered into agreements with First Serve Entertainment (FSE) for a player's appearance, with Zee Telefilms for broadcast rights, and with Trans World International for overseas telecast rights. The Service Tax Commissioner issued demands under various heads, including "manpower recruitment or supply agency" (reverse charge) and "programme producer" services. The Tribunal upheld the demands, interpreting the FSE services as covered by s.65(68) and the broadcast agreements as "programme producer" services, and also invoked the extended period of limitation and imposed a penalty. The Supreme Court held that the definition of "manpower recruitment or supply agency" under s.65(68) is broad and does not require an employer‑employee relationship, and that the CBEC circular does not override the statute; however, the "programme producer" definition under s.65(86b) requires production on behalf of another, which was not present, so the demand under that head was reversed. The Court also ruled that the extended limitation period was inapplicable and that no penalty could be imposed, partially allowing the appeals.

Issues considered

Whether services rendered by FSE for the appearance of a tennis player fall within the definition of "manpower recruitment or supply agency" under s.65(68) and s.65(105)(k) of the Finance Act, 1994.
Whether the definition of "manpower recruitment or supply agency" requires an employer‑employee relationship between the agency and the individual whose services are supplied.
Whether the CBEC circular dated 23 August 2007 narrows the statutory definition and is binding on revenue authorities.
Whether the agreements with Zee Telefilms and Trans World International attract the definition of "programme producer" under s.65(86b) of the Finance Act, 1994.
Whether the extended period of limitation can be invoked for the first show‑cause notice dated 20 October 2009.
Whether a penalty can be imposed when the dispute is purely a matter of statutory interpretation.

Legislation cited

Finance Act, 1994s. 65(105)(k), s. 65(68), s. 65(86b)

Subjects

service taxmanpower recruitmentsupply agencyprogramme producerextended limitation periodpenaltyCBEC circularinterpretation of statutesFinance Act 1994

Judgment

872 [2022]
SUPREME COURT 8 S.C.R. 872
REPORTS [2022] 8 S.C.R.

A M/S INTERNATIONAL MERCHANDISING COMPANY,
LLC (EARLIER KNOWN AS INTERNATIONAL
MERCHANDISING CORPORATION)
v.
COMMISSIONER, SERVICE TAX, NEW DELHI
B
(Civil Appeal Nos 3532-3536 of 2020)
November 01, 2022
[DR DHANANJAYA Y CHANDRACHUD AND
HIMA KOHLI, JJ.]
C Finance Act, 1994: ss. 65(105), 65(68) – Manpower
recruitment or supply agency – Service Tax – Appellant was engaged
in 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 connection
with the Chennai Open Tennis Tournament (‘tournament’) –
D Appellants entered into an agreement with Zee telefilms to license
the rights to broadcast tournament in India – Another agreement
between appellant and Trans World International for the sale of
telecast rights of the tournament outside India – Demand of service
tax from the appellants under various heads, including manpower
E recruitment or supply agency service under reverse charge,
programme producer service, sponsorship service, and other
services – Customs, Excise and Services Tax Appellate Tribunal
upheld the demand while observing that the services provided by
FSE were in the nature of supplying, recruiting, and providing
players for sport events organised by the appellant – Therefore,
F such services will be covered under the definition “manpower
recruitment or supply agency” u/s. 65(105)(k) r/w s.65(68) of the
Finance Act – Tribunal also did not accept the argument of the
appellant that the Commissioner could not have invoked the extended
period of limitation – On appeal, held: There was nothing on the
G record 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 and
the persons whose services are provided – Circular issued by the
Central Board of Excise and Customs deals with a situation where
H
872
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 873
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI

there exists a relationship of employer and employee between the A
agency which supplies the service and a person whose service is
supplied – But the circular does not postulate that such a relationship
must exist for the statutory definition to be attracted – Hence, the
fact that there may be no relationship of employment between tennis
player and FSE would not be dispositive for the purposes of the
B
statutory definition in s.65(68) – No fault in the decision of the
Tribunal.
Finance Act, 1994: s.65(86b) – Definition of “programme
producer” – Whether the agreements entered into by appellants with
Zee Telefilms and Trans World International are covered under the
definition of “programme producer” in s.65(86b) – Held: The C
expression “programme producer” would implicate a situation where
a person has produced a programme on behalf of another person –
In the present proceedings, the appellant produced the programmes
and sold the telecast rights to Zee Telefilms and Trans World
International – There was no production of a programme on behalf D
of the appellant either by Zee Telefilms Limited or by Trans World
International – 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, the
issue was to be decided on the basis of interpretation of the E
provisions of s. 65(68) and 65(86b) of the Finance Act, there was
no warrant to allow the invocation of the extended period of
limitation – The extended period of limitation would clearly not stand
attracted in respect of the first show cause notice – The show cause
notice shall hence have to be confined to the normal period of
limitation excluding the extended period. F

Finance Act, 1994: Imposition of penalty – Whether a valid
ground for the imposition of a penalty was made out – Held: There
was no warrant for the imposition of the penalty as the dispute in
the present case essentially involved the interpretation of the statutory
provisions and their inter play with the circular issued by the CBEC. G
Partly allowing the appeals, the Court
HELD: 1. Section 65(68) defines a “manpower recruitment
or supply agency” to mean (i) any person engaged in providing
any service; (ii) directly or indirectly; (iii) in any manner; (iv) for
H
874 SUPREME COURT REPORTS [2022] 8 S.C.R.

A recruitment or supply of manpower; (v) temporarily or otherwise;
and (vi) to any other person. The definition encompasses a
situation where a person is engaged in providing a service for
the recruitment or supply of manpower to any other person. The
definition incorporates recruitment as well as a supply of
manpower. The expression ‘supply’ is of a wider connotation than
B
recruitment. Moreover, the width of the provision is abundantly
clear by the use of the expressions “directly or indirectly”, “in
any manner” and “temporarily or otherwise” [Para 14][883-B-
D]
2. FSE, which is a company with a distinct legal identity,
C had an agreement with the appellant in terms of which the services
of VA were to be provided. There was undoubtedly nothing on
the record to indicate that VA was an employee of FSE. The issue
however is as to whether the definition which has been extracted
earlier of “manpower recruitment or supply agency” must be
D constrained by a further requirement of the existence of an
employer-employee relationship between the manpower supply
agency and the person whose services are provided. Plainly, the
definition does not incorporate such a requirement or condition.
[Para 15][883-E-F]
E 3. The circular issued by the CBEC narrates that after the
introduction of service tax in 1994, several clarifications in the
form of circulars, instructions and letters were issued by the
CBEC and the Directorate General Services Tax. A committee
was constituted for purpose which invited opinions of all
stakeholders. The Union government issued the circular so as
F to reflect the interpretation of the law and the current practice of
the department. Paragraph 8 of the circular clarifies that the
circular would not override legal provisions. [Para 16][883-G-H;
884-A-B]
4. An employer-employee relationship exists between the
G agency and the individual and not between the individual and the
person who uses the services of the individual. Such cases were
held to be governed by the definition of “manpower recruitment
or supply agency” in Section 65(68) and hence liable to service
tax. The CBEC circular dated 23 August 2007 deals with a situation
H where there exists a relationship of employer and employee
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 875
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI

between the agency which supplies the service and a person A
whose service is supplied. But it does not postulate that such a
relationship must exist for the statutory definition to be attracted.
Hence, the fact that there may be no relationship of employment
between tennis player and FSE would not be dispositive for the
purposes of the statutory definition in Section 65(68). [Para
B
17][885-C-E]
5. The essence of the definition of “programme producer”
is that a person must produce a programme on behalf of another
person. On examination of the terms of the agreement with Zee
Telefilms, it becomes evident that the appellant licensed the right
to broadcast the Chennai Open Tennis Tournament owned by C
the appellant on the Zee Sports television channel. Likewise,
the agreement with Trans World International was a contract for
the sale of telecast rights in territories outside India in relation
to the Chennai Open Tennis Tournament. Plainly, the definition
in Section 65(86b) was not attracted. The expression “programme D
producer” would implicate a situation where a person has
produced a programme on behalf of another person. The appellant
produced the programmes and sold the telecast rights to Zee
Telefilms and Trans World International. There was no production
of a programme on behalf of the appellant either by Zee Telefilms
Limited or by Trans World International. [Para 19][885-G-H; 886- E
A-B]
6. The Tribunal having come to the conclusion that the issue
turned upon an interpretation of the provisions of Section 65(68)
and Section 65(86b) of the Finance Act 1994, there was no warrant
to allow the invocation of the extended period of limitation and to F
direct the determination of the penalty following the re-
quantification of the demand. The extended period of limitation
would clearly not stand attracted in respect of the first show cause
notice dated 20 October 2009. The show cause notice shall hence
have to be confined to the normal period of limitation excluding G
the extended period. There was no warrant for the imposition of
the penalty as the dispute in the present case essentially turned
on the interpretation of the statutory provisions and their inter
play with the circular issued by the CBEC. [Paras 24, 25][887-F-
H; 888-A-B]
H
876 SUPREME COURT REPORTS [2022] 8 S.C.R.

A Board 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
B
[1989] 3 SCR 873 referred to Para 22
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3532-
3536 of 2020.
From the Judgment and Order dated 29.05.2020 of the Customs,
C Excise and Service Tax Appellate Tribunal, Regional Bench at
Chandigarh in ST/60379-60383/2013-ST (DB).
S. Ganesh, Sr. Adv., Ashok Dhingra, Karan Bharihoke, Siddhant
Sharma, Ms. Sonia Gupta, Ms. Anushi Aggarwal, Advs. for the Appellant.
N. Venkataraman, ASG, Arijit Prasad, Sr. Adv., Mukesh Kumar
D
Maroria, Shashank Bajpai, Madhav Singhal, V. C. Bharathi, Advs. for
the 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 the
Customs, Excise and Services Tax Appellate Tribunal1 in a batch of
service tax appeals. The appeals before the Tribunal arose from an order
dated 1 August 2013 of the Commissioner (Adjudication) which dealt
with five show cause notices dated 20 October 2009, 20 April 2010, 20
F April 2011, 23 March 2012 and 23 April 2013. The first of the five show
cause 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 jurisdictional
service tax authorities under Chapter V of the Finance Act, 1994 for
G taxable event categories such as management consultant services, event
management services, business auxiliary services, business exhibition
services, and TV or radio programme production services. The appellant
organizes events such as the Chennai Open Tennis Tournament and
Lakme Fashion Week. It entered into various agreements, both domestic
1
H “Tribunal”
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 877
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

and international, with regard to the hiring of celebrities for appearances A
at the events, selling broadcasting rights, sharing IT services with group
companies abroad, and secondment with group companies.
3. The appellant entered into an agreement on 1 January 2005
with an entity by the name of First Serve Entertainment 2 for the
appearance of Mr Vijay Amritraj3, a noted tennis player, in connection B
with the Chennai Open Tennis Tournament. On 3 January 2005, the
appellant 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 and
participation of VA are extracted below: C
“2. Appearance and Participation, IMC hereby engages First serve
for appearance and participation of Amritraj of First Serve in
connection with Chennai open. Amritraj will appear and participate
in the opening and closing ceremonies and also play in the charity
auction match at the Chennai open [and] First Serve hereby D
accepts such engagement and agrees to cause Amritraj to
appear and participate in the Chennai open in accordance
with all applicable laws and regulations.
3. Terms, (a) The term of this Agreement (the Term, subject to
the provisions of sub section (b) immediately below) is five (5) E
consecutive years as of January 1, 2005 and concluding on
December 31, 2009 unless terminated earlier as provided herein.
(b) If (I) IMC, in its reasonable judgment, determines that the
Chennai open is no longer economically viable (meaning that IMC
is no longer able to conduct the Chennai open as a going concern F
and must cancel the Chennai open in any year(s) during the Term
due to economic losses due to, as an example, insufficient or non
existent sponsorship income), or (II) the Chennai open is no longer
held at the venue for any reason, then this Agreement will be
automatically terminated by IMC without liability or father [sic]
obligation of either party other than (if applicable) First Serve’s G
pro rata repayment of any fee received for the cancelled Chennai
open(s) during the Term, except for any obligation expressly
intended to survive the termination of this Agreement. If economic
2
“FSE”
3
“VA” H
878 SUPREME COURT REPORTS [2022] 8 S.C.R.

A circumstances change, or the Chennai open returns to its original
venue and IMC intends to reinstate the Chennai open during the
Term, then IMC shall promptly notify first serve and the parties
shall discuss in good faith whether to reinstate this agreement.
4. Fees, in consideration for the participation of Amritraj, IMC
B agrees 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 after
the conclusion of the Chennai Open in each year upon the
presentation of an invoice from First Serve to IMC, ***”
(emphasis supplied)
C 5. In November 2016, an agreement was executed between the
appellant and Zee Telefilms to license the rights to broadcast the Chennai
Open Tennis Tournament on Zee Sports channel in India. The relevant
extracts of the License Agreement with Zee Telefilms are set out below:
“A. Programmes/Events
D
Licensor is the owner of an ATP Tour, Inc. (“ATP”) Tour
International Series event which shall be names “The Chennai
Open Tennis Championships” (“the Event/Programme”) or such
other name to be determines by Licensor and Licensor has agreed
to provide Licensee the right to broadcast the Event on Licensee’s
E Satellite Television Channel “Zee Sports” in India oil [sic] the
terms and conditions more particularly described herein.
B. Rights and Definitions: The following rights and terms shall be
defined as set forth below for the purposes of this Agreement:

F

G

The above Rights with regards to the Event, whose Programmes
shall be produced and supplied by Licensor and which are
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M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 879
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

granted to Licensee in the Licensed Language on an A
exclusive basis in the Licensed Territory.
(emphasis supplied)
6. The appellant entered into an agreement with Trans World
International on 16 September 2010 for the sale of telecast rights of the
Chennai Open Tennis Tournament in territories outside India. The relevant B
extracts of the agreement between the appellant and Trans World
International are as follows:
“WHEREAS
A) IMC owns the rights to organize, promote and conduct a men’s C
international series tennis event in (the “Tournament”), once each
year, at Chennai in India;
B) The company is the television arm of the International
Management Group of companies and has agreed to sell telecast
rights for the Tournament (the “Rights”) in territories across world D
except India.
C) The parties have agreed to the terms under which the Company
would perform such activities for sale of the rights globally except
India and desire by this instrument to record their agreement.
It is agreed as follows:- *** E
2. Activities to be performed by the Company:
For the Chennai Open 2011, the company shall sell telecast rights
in the Territory by using all reasonable commercial endeavours
consistent with its best business judgment to maximize revenue
for the Tournament. F

Relationship between company and IMC is on principle to principle
basis. Company shall sell the rights to clients and collect the money
from them.”
7. The records of the appellant were audited by the officers of G
the Delhi Services Tax Commissionerate during May 2009 for the period
2004-2005 to 2007-2008. The Commissioner issued a demand of service
tax to the appellants under various heads, including manpower recruitment
or supply agency service under reverse charge, programme producer
service, sponsorship service, and other services. Five show cause notices,
H
880 SUPREME COURT REPORTS [2022] 8 S.C.R.

A as stated above, were issued to the appellant cumulatively for the period
April 2004 to March 2012, which resulted in a common order of the
Commissioner (Adjudication). The Commissioner adjudicated all the five
show cause notices and confirmed the demand of service tax by an
order dated 1 August 2013.
B 8. The Commissioner ruled that the consideration paid to FSE for
appearance of VA for a sports tournament is taxable under the definition
of “manpower recruitment or supply agency”. The Commissioner
observed that the source of supply of skilled manpower is outside India
and has been received by the appellant in India. The Commissioner further
ruled that any programme made by a programme producer and then
C offered for sale to different TV channels or broadcasters for relay is a
taxable activity. The Commissioner concluded that the transaction made
by the appellant with Zee Telefilms includes element of service and is
taxable.
9. Aggrieved by the order of the Commissioner, the appellant
D lodged appeals before the Tribunal. The Tribunal by its judgment dated
29 May 2020 held against the appellant. It observed that the services
provided by FSE were in the nature of supplying, recruiting, and providing
players for sport events organized by the appellant. It held that such
services will be covered under the definition of “manpower recruitment
E or supply agency” under section 65(105)(k) read with section 65(68) of
the Finance Act, 1994. The Tribunal further relied upon the decision in
Board of Cricket Control for India v. Commissioner4 to uphold the
order of the Commissioner imposing the demand of service tax under
the category of programme producer services during the relevant period.
The Tribunal did not accept the argument of the appellant that the
F Commissioner could not have invoked the extended period of limitation
as the issues involved interpretation of legal provisions. On the issue of
imposition of penalty on the appellant, the Tribunal directed the
Commissioner to redetermine the amount of penalty in remand
proceedings.
G 10. Mr S Ganesh, senior counsel appearing on behalf of the appellant
submits that:
(i) The appellant identified VA for his participation in the tennis
tournament 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 AS 881
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

was entered into with FSE in terms of which VA would A
appear in or participate in the tournament conducted by the
appellant;
(ii) FSE is not a supplier of manpower because VA is an
identified person and hence the activity does not befit the
description 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 a
situation where the appellant entered into an agreement with
FSE at the behest of VA, the same position should obtain;
(iv) The contract between the appellant and FSE is a commercial C
contract and must hence be construed in a manner consistent
with the commercial sense and understanding between the
parties under the contract;
(v) The Central Board of Excise and Customs5 has issued a
circular dated 23 August 2007 clarifying this head of charge D
of service tax and the circular makes it clear that the trigger
for the levy of service tax is the existence of an employer-
employee relationship between the service provider and the
person whose service is provided to the customer;
(vi) In the present case, the appellant intended to secure the E
presence of VA who is a famous tennis player for which
purpose the appellant arrived at an understanding with VA,
which was followed by a formal contract with a one-man
company owned and controlled by him;
(vii) The Tribunal has based its conclusion on the premise that F
VA and his company constitute separate and distinct legal
entities by disregarding the provisions of the circular dated
23 August 2007 which specifies the requirement that the
service provider and the person whose service is provided
must be governed by an employer-employee relationship in
G
order for the provisions of Section 65(68) to be attracted.
11. These submissions have been controverted by Mr N
Venkataraman, Additional Solicitor General appearing on behalf of the
respondent. The Additional Solicitor General submitted that:
5
“CBEC” H
882 SUPREME COURT REPORTS [2022] 8 S.C.R.

A (i) The provisions of Section 65(68) do not stipulate that there
must exist an employer-employee relationship between the
service provider and the person whose services are
provided;
(ii) The circular dated 23 August 2007 issued by the CBEC
B must be understood in terms of its context: and
(iii) It would not be permissible to restrict the plain terms
governing the definition in Section 65(68) by reference to
the circular of the CBEC when the circular has been issued
in a completely different context.
C 12. In the counter-affidavit filed by the respondent, it has been
averred that the agreement between the appellant and FSE indicates
that the latter has caused the participation of VA in terms of the
requirement of the appellant. Therefore, the said activity was specifically
covered under “manpower recruitment or supply agency” as defined
under section 65(68) read with section 65(105)(k). As regards the demand
D of service tax on programme producer services, the respondent averred
that 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 the
interpretation of the provisions of Section 65(68) read with Section
E 65(105)(k) of the Finance Act 1994. The definitions of “manpower
recruitment or supply agency” and “taxable service” under section 65
of the Finance Act, 1994 are as follows:
65. Definitions – In this Chapter, unless the context otherwise
requires, -
F ***
(68) “manpower recruitment or supply agency” means any person
engaged in providing any service, directly or indirectly, in any
manner for recruitment or supply of manpower, temporarily or
otherwise to any other person.”
G ***
(105) “taxable service” means any service provided or to be
provided –
(k) to any person, by a manpower recruitment or supply agency
in relation to the recruitment or supply of manpower, temporarily
or otherwise, in any manner;
H
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 883
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

[Explanation – For the removal of doubts, it is hereby declared A
that for the purposes of this sub-clause, recruitment or supply of
manpower includes services in relation to pre-recruitment
screening, verification of the credentials and antecedents of the
candidate and authenticity of documents submitted by the
candidate]
B
14. While analysing the rival submissions, it would be necessary
to set out the essential ingredients of the definition contained in Section
65(68). The provision defines a “manpower recruitment or supply agency”
to mean (i) any person engaged in providing any service; (ii) directly or
indirectly; (iii) in any manner; (iv) for recruitment or supply of manpower;
(v) temporarily or otherwise; and (vi) to any other person. In other words, C
the definition encompasses a situation where a person is engaged in
providing a service for the recruitment or supply of manpower to any
other person. The definition incorporates a recruitment as well as a supply
of manpower. The expression ‘supply’ is of a wider connotation than
recruitment. Moreover, the width of the provision is abundantly clear by D
the 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 that
FSE, which is admittedly a company with a distinct legal identity, had an
agreement with the appellant in terms of which the services of VA were E
to be provided. There was undoubtedly nothing on the record to indicate
that VA was an employee of FSE. The issue however is as to whether
the definition which has been extracted earlier of “manpower recruitment
or supply agency” must be constrained by a further requirement of the
existence of an employer-employee relationship between the manpower
supply agency and the person whose services are provided. Plainly, the F
definition does not incorporate such a requirement or condition.
16. But, the submission of Mr S Ganesh, senior counsel for the
appellant is that the CBEC having issued a circular dated 23 August
2007, the excise authorities would be bound by the circular which has
the effect of narrowing the ambit of the statutory definition contained in G
Section 65(68). There can be no doubt as a matter of first principle that
the revenue is bound by its own circulars. Equally, it is necessary to
understand the context in which the circular dated 23 August 2007 was
issued by the CBEC. The circular narrates that after the introduction of
service tax in 1994, several clarifications in the form of circulars, H
884 SUPREME COURT REPORTS [2022] 8 S.C.R.

A instructions and letters were issued by the CBEC and the Directorate
General Service Tax. The Union Government decided to undertake a
comprehensive review of all the clarifications having due regard to the
changes which have been brought about by statutory provisions and
judicial pronouncements. A Committee was constituted for that purpose
which invited the opinions of all stake holders. Following the report of
B
the Committee, the Union government issued the circular so as to reflect
the interpretation of the law and the current practice of the department.
Yet, paragraph 8 of the circular clarifies that the circular would not
override legal provisions. The relevant part of the circular which forms
the subject matter of the submissions urged in the present case reads as
C follows:
Issue Clarification

010.02/ Business or industrial Employer employee relationship in
23.08.07 organizations engage services of such case exists between the agency
D manpower recruitment or supply and the individual and whether
agencies for temporary supply of service tax is liable on such services
manpower which is engaged for a under manpower recruitment or
specified period or for completion supply agency’s service [section
of particular projects or tasks. In 65(105)(k)] not between the
E the case of supply of manpower, individual and the person who uses
individuals are contractually the services of the individual.
employed by the manpower
recruitment or supply agency. The Such cases are covered within the
agency agrees for use of the scope of the definition of the taxable
F services of an individual, service [section 65(105)(k)] and, since
employed by him, to another they act as supply agency, they fall
person for a consideration. within the definition of “manpower
recruitment or supply agency”
[section 65(68)] and are liable to
G service tax.

17. The second column of the circular which has been extracted
above deals with the issue while the third column contains the clarification.
The issue which was flagged is that services of manpower recruitment
or supply agencies are engaged by business or industrial organizations
H
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 885
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

for the temporary supply of manpower which may be engaged either for A
a specified period or for the completion of particular projects or tasks.
The question was whether service tax would be liable to be charged on
such services under the ‘manpower recruitment or supply agency’ service.
In other words, the issue which is dealt with is whether service tax
would be attracted where at the behest of a business or industrial
B
organization, the services of a manpower or supply agency is engaged
for the supply of manpower for specified periods, projects or tasks. The
clarification is that in such cases governing the supply of manpower,
individuals are contractually employed by the manpower recruitment or
supply agency. The agency agrees with another person to supply the
services of that individual employed by the agency for a consideration. C
An employer-employee relationship exists between the agency and the
individual and not between the individual and the person who uses the
services of the individual. Such cases were held to be governed by the
definition of “manpower recruitment or supply agency” in Section 65(68)
and hence liable to service tax. The CBEC circular dated 23 August
D
2007 deals with a situation where there exists a relationship of employer
and employee between the agency which supplies the service and a
person whose service is supplied. But it does not postulate that such a
relationship must exist for the statutory definition to be attracted. Hence,
the fact that there may be no relationship of employment between VA
and FSE would not be dispositive for the purposes of the statutory E
definition in Section 65(68). For the above reasons, we are of the view
that the decision of the Tribunal on this aspect of the matter cannot be
faulted with.
18. The second submission which has been urged on behalf of the
appellant by Mr S Ganesh, senior counsel relates to the definition of the F
expression “programme producer” in Section 65(86b) of the Finance
Act 1994 as amended. Section 65(86b) is extracted below:
“programme producer’ means any person who produces a
programme on behalf of another person.”
19. The essence of the definition of “programme producer” is G
that a person must produce a programme on behalf of another person.
The appellant had agreements with Zee Telefilms and with Trans World
International. On examination of the terms of the agreement with Zee
Telefilms, it becomes evident that the appellant licensed the right to
broadcast the Chennai Open Tennis Tournament owned by the appellant H
886 SUPREME COURT REPORTS [2022] 8 S.C.R.

A on the Zee Sports television channel. Likewise, the agreement with Trans
World International was a contract for the sale of telecast rights in
territories outside India in relation to the Chennai Open Tennis
Tournament. Plainly, the definition in Section 65(86b) was not attracted.
The expression “programme producer” would implicate a situation where
a person has produced a programme on behalf of another person. In the
B
present proceedings, the appellant produced the programmes and sold
the telecast rights to Zee Telefilms and Trans World International. There
was no production of a programme on behalf of the appellant either by
Zee Telefilms Limited or by Trans World International. The factual position
is not in dispute during the course of the hearing of the appeal.
C 20. The Tribunal relied upon its decision in the case of Board of
Control for Cricket in India(supra).The extract from the decision
which was relied upon by the Tribunal is set out below, insofar as it is
relevant:
1. “6.2 As per clause 2.1, BCCI has appointed the producer
D to exclusively produce the feed for and on behalf of BCCI
and the feed means – the live and continuous clean audio
and visual television signal of each match as described in
detail in clause 3.2 of the agreement. Clause 3.1 of the
agreement deals with production services and reads as - “the
E producer must produce the feed for each match of the events as
per the production/technical specification detailed in schedule 3,
using the personnel specified in clause 5, using the equipment
specified in schedule 3 and otherwise in accordance with this
agreement.” Clause 3.2 specifies that the feed for each match
must be live, continuous and uninterrupted and should be in
F conformity with the specifications mentioned in sub-clauses (a)
to (g) thereof. Clause 4 of the agreement deals with the other
obligations of the producer and clause 5 deals with personnel who
should be engaged for production. Clause 6 deals with production
and technical specifications relating to the equipment, use of the
G equipment, camera and key camera positions and so on. Clause 9
deals with assignment of the copyright by the producer to BCCI
in respect of all the sound recordings, broadcasting and
transmissions and so on. For the services rendered, clause 10 of
the agreement specifies the consideration to be paid by BCCI to
the producer for the production of the feed which includes all
H
M/S INTERNATIONAL MERCHANDISING CO. LLC (EARLIER KNOWN AS 887
INTERNATIONAL MERCHANDISING CORP.) v. COMMISSIONER, SERVICE
TAX, NEW DELHI [DR. DHANANJAYA Y CHANDRACHUD, J.]

statutory taxes and charges, import duties and tariffs on imported A
materials and equipment, rise and fall, relevant award costs and
allowances for the personnel.”
(emphasis supplied)
21. The above extract indicates that in terms of the contract, BCCI
had appointed the producer to exclusively produce the feed for and on B
behalf of BCCI for each match. This is the distinguishable feature of the
decision of the Tribunal in BCCI which is absent in the present case.
Therefore, we are of the considered view that the Tribunal was in error
in holding that the decision would apply squarely to the facts of the
present case. The view of the Tribunal to that extent would have to be C
and 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 of
the first show cause notice; and (ii) whether a valid ground for the
imposition of a penalty was made out. In this regard, reliance has been D
placed on behalf of the appellant on the decision of this Court in Padmini
Productsv. CCE, Bangalore6 to submit that the extended period of
limitation would not be attracted as the appellant has not acted with
dishonest or fraudulent intent.
23. In paragraph 4.20 of its order, the Tribunal has specifically E
observed that the present case involves the interpretation of statutory
provisions. Having said this, the Tribunal in the concluding paragraph of
its decision held that since the matter was being remitted back to the
Commissioner for re-determination of the quantum of demand, the amount
of penalty would have to be re-determined in accordance with the duty
demand confirmed in the demand proceedings. F
24. We are of the considered view that the Tribunal having come
to the conclusion that the issue turned upon an interpretation of the
provisions of Section 65(68) and Section 65(86b) of the Finance Act
1994, there was no warrant to allow the invocation of the extended
period of limitation and to direct the determination of the penalty following G
the re-quantification of the demand. The extended period of limitation
would clearly not stand attracted in respect of the first show cause notice
dated 20 October 2009. The show cause notice shall hence have to be
confined to the normal period of limitation excluding the extended period.
6
(1989) 4 SCC 275 H
888 SUPREME COURT REPORTS [2022] 8 S.C.R.

A 25. As far as the penalty is concerned, we are of the considered
view that there was no warrant for the imposition of the penalty as the
dispute in the present case essentially turned on the interpretation of the
statutory provisions and their inter play with the circular issued by the
CBEC. Finally, we also order and direct that the view of the Tribunal on
the applicability of the provisions of Section 65(86b) of the Finance Act
B
1994 as amended has been reversed by this Court. On remand in
pursuance of the impugned order of the Tribunal, the adjudicating officer
shall abide by the above directions.
26. The appeals shall stand allowed in part in the above terms.
C 27. Pending applications, if any, stand disposed of.

Devika Gujral Appeals partly allowed.
(Assisted by : Preetam Bharti, LCRA)

D

E

F

G

H