In Service Tax Appeal No. 50411 of 2017-CESTAT- Assessee is not liable to pay service tax on service of advertisement in print- media: CESTAT allows plea of Manufacturer & Exporter of pharmaceutical products
President-Dilip Gupta & Technical Member-Hemambika R Priya [02-03-2023]

Read Order: Kusum Healthcare Pvt. Ltd Vs. Commissioner Of Central Excise & Service Tax 

LE Correspondent

New Delhi, March 4, 2023:  While setting aside the order of the Commissioner of Central Excise & Service Tax, Alwar, the Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal, has opined that the services of advertisement in respect of print media is exempted in terms of the negative list of services under section 66D(g) of the Finance Act.

The appeal had been filed by M/s Kusum Healthcare Pvt. Ltd. before the Bench comprising President-Dilip Gupta & Technical Member-Hemambika R Priya, assailing the order of the Commissioner of Central Excise & Service Tax, Alwar, by which the demand of service tax of Rs 4,58,38,070 had been confirmed with interest and penalty pursuant to the issuance of a show cause notice to the appellant for the period from September 2014 to September 2015.

The issue involved in the appeal related to demand of service tax on reverse charge basis in respect of expenses incurred in foreign currency on business promotion and other activities.

The appellant, a manufacturer-exporter of pharmaceutical products and a 100% Export Oriented Units, established representative offices in many countries to promote its goods and to liaison with the local authorities in such countries. 

According to the appellant, these representative offices do not have any independent revenue or clients and the purchase orders are entered with the clients directly by the appellant and so the representative offices do not enter into any contract with the clients. The payment for goods supplied to the customers is received by the appellant and all the expenses incurred in the supply of goods are claimed as expenses in India. The salaries of the employees working at the representative offices are also remitted by the appellant. The appellant also reimburses other expenses incurred by the representative offices for its operations. 

The department entertained a view that the expenses incurred by the appellant are liable to service tax on reverse charge basis. Earlier also, show cause notices were issued to the appellant and they were adjudicated upon.

The department sought details from the appellant of the expenses incurred by it on foreign based service providers during the period from September 2014 to September 2015. The appellant supplied the information, but the Department issued a show cause notice by proposing to demand service tax on the entire value of foreign expenses incurred by the appellant.

The appellant filed a reply to the show cause notice, but the Commissioner confirmed the demand of service tax of Rs 4,58,38,070 holding that the services were received by the appellant from its representative offices located abroad, as also from the independent service providers located abroad,and the said services were received in India in terms of rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 read with the erstwhile section 66A of the Finance Act, 1994. 

The Bench accepted the submission of the appellant that the impugned order had been passed on obsolete provisions of law which were not applicable for the relevant period. 

“The relevant period is September 2014 to September 2015, which is clearly after the introduction of the negative list regime. Thus, the provisions envisaged under negative list regime would be applicable, but the impugned order is passed based on the provisions of law applicable prior to July 01, 2012”, the Bench said while holding that the demand would have to be set aside in view of the decision of the Karnataka High Court in CST, Bangalore vs The Peoples Choice 2014-TIOL-431-HC-KAR-ST.

Also, referring to the earlier litigations, the Bench opined that the issue involved had been decided in favour of the appellant in the own case of the appellant for pre-negative list and post negative list, and so the demand deserved to be set aside.

On the issue of business promotion expenses, the Bench accepted the submission of the appellant  that it made foreign currency expenditure on account of business promotion activities during the relevant period from September 2014 to September 2015. The Bench was of the opinion that the said amount was directly paid by the appellant and even the invoices were raised upon the appellant and not the representative offices.

On the issue of advertisement expenses, the  appellant had stated that both prior and post the amendment of clause (g) of section 66D of the Finance Act, sale of slots in advertisement in print media did not attract service tax liability. 

Noting that the appellant had discharged service tax liability on expenses for non-print media advertisements, the Bench said, “The services of advertisement in respect of printmedia is exempted in terms of the negative list of services under section 66D(g) of the Finance Act. Thus,the appellant is not liable to pay service tax on the service of advertisement in print- media.”

Thus, the Bench allowed the appeal.