The Hyderabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside the service tax demand in absence of evidence proving transaction of payment did to Facebook as for business purpose. The Department has not come out with any proper evidence that the transaction of the appellant was any kind of business expenses.
The Appellant Shri P. Ramesh Kumar is the Managing Director of M/s Balaji Pressure Vessels Pvt Ltd (BPVL). The amount used in credit card has been reimbursed by BPVL on the ground that his credit card was used to make payments to “Facebook” by way of foreign exchange and the Department issued Show Cause Notice to recover Service Tax on such foreign exchange outflow on RCM basis.
The Appellant submitted before the Lower Authorities that one of his friends, Mr. Y. Ravindra Reddy of M/s AB Creatives has sought his help and the credit card facility was given to him to make the payments through this credit card. For the usage of credit card, whenever such amounts were debited in foreign exchange, subsequently, Mr. Y. Ravindra Reddy used to reimburse the entire amount.
It was submitted that the services of “Facebook” was neither used by him nor used by the Company BPVL. Before the Adjudicating Authority, they have produced a copy of the Certificate issued by
the CA of Mr. Y. Ravindra Reddy stating that he has used an amount of Rs.72,43,704/- towards FB online transactions for which the credit card of the Appellant has been used. After due process, the Lower Authorities confirmed the demand.
The Appellant, in light of the documentary evidence stated that the Appellant had no role in importing any service from Facebook and all the expenses shown under his credit card were actually incurred by Mr. Y. Ravindra Reddy of M/s AB Creatives. He further submitted that CA Certificates produced by them before the Lower Authorities were neither considered nor rebutted.
It was evident that the Appellant has failed to prove very clearly that there was any agreement between the Appellant and Mr. Y. Ravindra Reddy to the effect that the credit card will be used by Mr. Y. Ravindra Reddy, the same will be initially debited to the credit card account and subsequently, Mr. Y. Ravindra Reddy will make the payments.
The Tribunal observed that from the statement recorded by the Department nowhere had they stated that the ‘Facebook’ transactions were on account of BPVL. The CA Certificate proves that both the parties have properly accounted for the credit card expenditure. Admittedly, the expenditure was only on account of ‘Facebook’ transactions incurred by Mr. Y. Ravindra Reddy. A single member bench comprising Mr. R. Muralidhar, Member (Judicial), viewed that “If any individual imports any service in his personal capacity, there is no liability on him to pay Service Tax so long as it is not for any business purpose.”
“Since the Department has failed to establish that the service was imported by the Appellant and was used for business purpose,the entire premise under which the SCN has been issued is flawed and the Department could not have issued SCN to an individual without properly connecting the usage of the credit card expenses for business purposes by him.”, the CESTAT held.
While allowing the appeal, the Tribunal set aside the order.
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