Tribunal Overturns Rs. 4.58 Crore Service Tax Demand on Kusum Healthcare; Cites Obsolete Provisions and Past Rulings

The Tribunal set aside the order dated December 01, 2016, by the Commissioner of Central Excise & Service Tax, Alwar, which had confirmed a service tax demand of Rs. 4,58,38,070/- on M/s Kusum Healthcare Pvt. Ltd. The Tribunal found that the demand was based on obsolete legal provisions and acknowledged previous decisions that favored the appellant on similar issues. It accepted the appellant's arguments regarding the non-taxability of business promotion and advertisement expenses, noting that the expenses incurred were either outside the taxable territory or involved the transfer of property in goods. The appeal was allowed in favor of the appellant.

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Issues Involved:
1. Demand of service tax on reverse charge basis for expenses incurred in foreign currency on business promotion and other activities.
2. Applicability of obsolete legal provisions.
3. Previous Tribunal decisions on identical issues.
4. Taxability of business promotion expenses.
5. Taxability of advertisement expenses.

Detailed Analysis:

1. Demand of Service Tax on Reverse Charge Basis:
The appeal by M/s Kusum Healthcare Pvt. Ltd. challenges the order dated December 01, 2016, by the Commissioner of Central Excise & Service Tax, Alwar, confirming a service tax demand of Rs. 4,58,38,070/- with interest and penalty. The demand is based on expenses incurred in foreign currency for business promotion and other activities, which the department claims are liable to service tax on a reverse charge basis.

2. Applicability of Obsolete Legal Provisions:
The appellant argued that the impugned order was based on outdated provisions of law. Although the show cause notice dated April 18, 2016, invoked relevant provisions, the order erroneously applied the erstwhile section 66A of the Finance Act, 1994, and rule 3 of the 2006 Rules, which were not applicable for the period from September 2014 to September 2015. The Tribunal acknowledged this error and cited the Karnataka High Court decision in CST, Bangalore vs The Peoples Choice [2014-TIOL-431-HC-KAR-ST], setting aside the demand.

3. Previous Tribunal Decisions on Identical Issues:
The Tribunal had previously adjudicated similar issues in the appellant's favor for different periods:
- April 2006 to June 2012: Tribunal set aside the demand under Business Auxiliary Services but upheld it for Advertisement Services, limiting it to the normal period of limitation (Order dated January 12, 2018).
- July 2012 to November 2013: Tribunal set aside the demand (Order dated June 13, 2018).
- December 2013 to August 2014: Tribunal set aside the demand (Order dated October 01, 2021).

4. Taxability of Business Promotion Expenses:
The appellant incurred foreign currency expenses totaling Rs. 25,75,99,285/- for business promotion activities. The department treated this amount as taxable value and raised a service tax demand. The appellant contended that:
- Payments for catalogues, leaflets, souvenirs, etc., involved transfer of property in goods and were not liable to service tax (section 65B (44) of the Finance Act).
- Expenses for the CPHI Worldwide Exhibition in Paris were incurred outside the taxable territory (rule 6 of the 2012 Rules).
- Foreign trip sponsorship charges for pharmacists were services provided and received outside India (rule 4(b) of the 2012 Rules).
- Vouchers/coupons were purchases of goods, not services.

The Tribunal accepted these submissions, noting that the expenses were directly paid by the appellant and invoices were addressed to the appellant, not the representative offices.

5. Taxability of Advertisement Expenses:
The appellant incurred Rs. 2,60,90,008/- on advertisement expenses, which included:
- Rs. 2,53,42,307/- for non-print media advertisements (service tax already paid).
- Rs. 7,47,701/- for print-media advertisements (exempt under section 66D(g) of the Finance Act).

The appellant argued that print-media advertisements were exempt from service tax, and they had already discharged the liability for non-print media advertisements. The Tribunal agreed, stating that the appellant was not liable to pay service tax on print-media advertisements.

Conclusion:
The Tribunal set aside the order dated December 01, 2016, by the Commissioner, and allowed the appeal, concluding that the demands were based on obsolete provisions and that previous decisions had favored the appellant on identical issues. The Tribunal also accepted the appellant's arguments regarding the non-taxability of business promotion and advertisement expenses.

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