2019 (8) TMI 1508 - AT - Service Tax

Tribunal Rejects Revenue's Appeal on Service Tax & Business Auxiliary Service, Upholds Decision

CST, Kolkata Versus M/s ITC Ltd.

CST, Kolkata Versus M/s ITC Ltd. - TMI Issues:1. Appeal against dropping of demand under show-cause notice.2. Taxability of specific claims under different service categories.3. Change of classification from 'Advertising Agency Service' to 'Business Auxiliary Service.'4. Applicability of reverse charge mechanism for the period prior to 18.04.2006.Analysis:1. The appeal was filed by the Revenue against the dropping of the demand under a show-cause notice. The period in dispute ranged from October 2002 to 31.03.2007. The appeal specifically addressed claims related to Management Consultancy Service, Courier Service, Advertising Service, and Reimbursement of Expenses.2. Regarding the amount of Rs. 1,15,44,169/- for the period prior to April 18, 2006, the Tribunal referred to the enactment of Section 66A in the Finance Act, 1994, which established the reverse charge mechanism effective from 18.04.2006. Citing various High Court judgments and a Board instruction, it was concluded that no proceeding could be initiated for service tax on a reverse charge basis for the period before 18.04.2006.3. The remaining amount of Rs. 37,47,412/- for the period from 18.04.2006 was in dispute under the category of 'Advertising Agency Service.' The Commissioner had previously ruled that the reimbursement of the cost of free samples was not taxable under this category. However, the Revenue sought to tax this amount under 'Business Auxiliary Service' by alleging that the non-resident acted as the respondent's agent in distributing samples to promote the product.4. The argument presented by the respondent's advocate emphasized that the change in classification from 'Advertising Agency Service' to 'Business Auxiliary Service' was based on new factual allegations not included in the show-cause notice. It was contended that the reimbursement of the cost of free samples amounted to providing discounts to customers who had already paid for the goods, and no service tax could be levied on such discounts. The Tribunal agreed with this argument, citing established law and the fact that the overseas customers did not render any service to the respondent.5. Ultimately, the Tribunal found no reason to interfere with the impugned order and upheld the decision. The appeal filed by the Revenue was rejected, and the operative part of the order was pronounced in open court.