2015 (12) TMI 268 - AT - Service Tax

Tribunal rules donations not subject to Service Tax in sponsorship dispute

H.E.G. LTD. Versus COMMISSIONER OF C. EX. & S.T., BHOPAL

The Tribunal ruled in favor of the appellants in an appeal concerning the liability for Service Tax on sponsorship services. The Tribunal found that the ... Waiver of pre deposit - Demand of service tax - Sponsorship service - Held that:- Adjudication order or in the appellate order, the contention of the appellants does not seem to have been rebutted and merely because they had booked expenses in their accounts under the head of sponsorship service would not be sufficient to hold them liable to Service Tax in the absence of any evidence that they actually received the sponsorship service. The appellants have stated that no events were sponsored and no logo or trade name of the appellants were displayed. They only provided financial support in the form of donation or gifts for which they did not get anything in return. Prima facie such donations are outside the purview of the definition of sponsorship given in Section 65(99a) of Finance Act, 1994 which specifically excludes such donations/gifts. We have also seen some of the documents relating to such payments which prima facie support their contention; for example the payment of ₹ 1,39,500/- has been made in favour of Bhagwan Mahaveer Viklang Sahayata Samiti, Indore which is for defraying the expenses on artificial foot, crèches, sticks, etc. - appellants have been able to make out fairly a good case for waiver of pre-deposit. We order accordingly and stay recovery of the adjudicated liabilities during pendency of the appeal. - Stay granted. Issues involved:Interpretation of Service Tax Rules regarding liability for sponsorship services; applicability of Service Tax on donations and philanthropic contributions.Analysis:The appeal was filed against an Order-in-Appeal upholding an Order-in-Original confirming a duty demand for a specific period. The issue revolved around the liability for Service Tax concerning sponsorship services provided to a body corporate or firm. The appellants argued that the amounts in question were paid for charity and philanthropy, not for sponsorship services. They contended that they did not receive any sponsorship service and that the payments were donations to help the helpless or disabled persons. The Tribunal observed that the contention of the appellants was not rebutted in the adjudication or appellate orders. Merely booking expenses under the sponsorship service head was deemed insufficient to establish liability for Service Tax without evidence of actually receiving the sponsorship service. The appellants clarified that no events were sponsored, no logos were displayed, and they only provided financial support without expecting anything in return. The Tribunal noted that such donations fell outside the sponsorship definition in the Finance Act, which excludes donations and gifts. Supporting documents, like a payment made for artificial foot expenses, corroborated the appellants' contentions.The Tribunal found that the appellants had presented a strong case for waiving the pre-deposit requirement. Considering the arguments and evidence provided, the Tribunal ordered the stay of recovery of adjudicated liabilities during the appeal's pendency. The decision was based on the understanding that the appellants had demonstrated a reasonable case for exemption from the pre-deposit requirement, given the nature of the payments made and the lack of evidence supporting the imposition of Service Tax on the transactions in question.