Karur Vysya Bank Ltd. Vs Commissioner of GST and Central Excise (Madras High Court)
A Thank-You Is Not Sponsorship: Karur Vysya Bank Wins Service Tax Appeal
The Dispute: Charity or Commercial Sponsorship?
Karur Vysya Bank had contributed money to various organisations during October 2013 to June 2017. The contributions supported activities such as construction of toilets, school buildings and temple towers. The bank maintained that these were donations for charitable purposes. The Department treated them as sponsorship payments attracting service tax under the reverse charge mechanism.
A show cause notice dated 15 April 2019 culminated in an adjudication order dated 30 September 2019 confirming the demand.
The CESTAT granted relief on other issues concerning penal interest and liquidated damages. However, it upheld the sponsorship demand, applicable interest, extended limitation and penalties under Sections 77 and 78. The bank challenged that adverse portion before the High Court.
The Statutory Test: Was Anything Owed in Return?
The Court examined Section 65(99a) of the Finance Act, 1994, which describes sponsorship through arrangements such as naming an event after the sponsor, displaying its logo or trading name, granting exclusive or priority booking rights, and sponsoring prizes or trophies.
Crucially, the definition excludes financial or other support given as donations or gifts where the recipient has no obligation to provide anything in return.
