Kusum Healthcare Pvt. Ltd. Vs Commissioner of Central Excise & Service Tax (CESTAT Delhi)
CESTAT Delhi held that services of advertisement in print-media is exempt in terms of negative list of services under section 66D(g) of the Finance Act, 1994. Accordingly, service tax not leviable on the services of advertisement in print-media.
Facts- The appellant is a manufacturer-exporter of pharmaceutical products and is a 100% Export Oriented Units. It 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. These expenses are in the nature of rent, security, electricity etc.
The department entertained a view that the expenses incurred by the appellant are liable to service tax on reverse charge basis.
Post submission of details of foreign expenses incurred by the appellant, iit was alleged that the appellant made payments in foreign currency to its representative offices in countries other than India and such expenses were towards business promotions, marketing and consultancy activity and were taxable in India.
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.
Conclusion- The appellant had discharged service tax liability on expenses for non-print media advertisements. 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. Thus, the appellant is not liable to pay service tax on the service of advertisement in print- media.
FULL TEXT OF THE CESTAT DELHI ORDER
This appeal has been filed by M/s Kusum Healthcare Pvt. Ltd.1 to assail the order dated December 01, 2016 passed by the Commissioner of Central Excise & Service Tax, Alwar2, by which the demand of service tax of Rs. 4,58,38,070/- has been confirmed with interest and penalty pursuant to the issuance of a show cause notice dated April 18, 2016 to the appellant for the period from September 2014 to September 2015.
2. The issue involved in the appeal relates to demand of service tax on reverse charge basis in respect of expenses incurred in foreign currency on business promotion and other activities.
3. The appellant is a manufacturer-exporter of pharmaceutical products and is a 100% Export Oriented Units. It 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. These expenses are in the nature of rent, security, electricity etc.
4. 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. A summary of the proceedings is as follows:
