GR Thanga Maligai Vs Commissioner of GST and Central Excise (CESTAT Chennai)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, allowed the appeal and set aside the demand of service tax along with interest and penalty arising from classification of a joint advertisement arrangement as “sponsorship service.” The appellant, engaged in the sale of gold jewellery, had entered into a “Co-Op Partner Agreement” with the World Gold Council (WGC) to jointly promote 22 karat gold jewellery through media advertisements. Under this arrangement, WGC agreed to contribute up to 25% of the total approved media expenditure, subject to inclusion of its branding elements such as logo and strap-line.
The department alleged that the appellant provided sponsorship services to WGC by incorporating its logo and name in advertisements, and accordingly issued a show cause notice demanding service tax of ₹15,58,279/- with penalties. This view was upheld by the adjudicating authority and the appellate authority.
The appellant contended that the arrangement was one of cost sharing in a joint promotional activity and did not establish a service provider–service recipient relationship. It was argued that both parties benefited from the advertisements, payments received were reimbursements of expenses, and no consideration was paid for any service. It was also submitted that the appellant merely engaged third-party vendors for advertisement and shared invoices with WGC to obtain its agreed contribution.
