CESTAT: Service Tax Cannot be Levied on Services of Advertisement in Print-Media

CESTAT: Service Tax Cannot be Levied on Services of Advertisement in Print-Media

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi by its two-member bench of Justice Dilip Gupta (President) and Hemambika M. Priya (Technical Member) ruled that services of advertisement in respect of print media are exempted in terms of the negative list of services under section 66D(g) of the Finance Act, hence, service tax is not applicable to the service of advertisement in print media.

The brief facts of the case are that the appellant/assessee- M/s Kusum Healthcare Pvt. Ltd. is a manufacturer-exporter of pharmaceutical products and is a 100% Export Oriented Unit. It established representative offices in many countries to promote its goods and to liaison with the local authorities in such countries.

The 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 reimbursed other expenses incurred by the representative offices for its operations. These expenses were in the nature of rent, security, electricity, etc.

The Commissioner by order dated 1 December, 2016 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 order also appropriates an amount of Rs. 1,25,20,769 deposited by the appellant.

The issue that came up for consideration before the CESTAT was the demand for service tax on a reverse charge basis in respect of expenses incurred in foreign currency on business promotion and other activities.

The assessee argued that both prior to and post the amendment of clause (g) of section 66D of the Finance Act, the sale of slots in an advertisement in print media did not attract service tax liability.

The CESTAT observed, “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.”

The CESTAT was of the considered view that it was not possible to sustain the order dated 1st December, 2016 passed by the Commissioner. It accordingly, allowed the appeal.