In a significant case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no service tax is leviable on reimbursement of advertisement charges in the absence of advertising agency services.
M/s. ABC Consultants Private Limited, the appellant is rendering a ‘manpower recruitment or supply agency’ service. On verification of accounts of the appellant, it was found that the appellant had received Rs.11,86,998/- towards reimbursement of advertisement charges from their clients for the period from October 2007 to January 2010, on which, apparently, the appellant did not pay Service Tax.
The revenue viewed that the appellant had availed input service credit on services like training, insurance on various office equipment, car hire charges and pest management services, for the above period. A Show Cause Notice was issued demanding a Service Tax of Rs.1,46,713/-.
The appellant filed a detailed reply denying any tax liability, on adjudication, the Deputy Commissioner-adjudicating authority vide Order-in-Original rejected the explanation and confirmed the demands as proposed in the Show Cause Notice.
On appeal, the first appellate authority confirmed the demand for Service Tax, but however, recalculating the same at Rs.1,30,574/-, the present appeal has been filed before this forum.
Ms. R. Sri Visvapriya appeared for the appellant and Shri Harendra Singh Pal, Assistant Commissioner appeared for the respondent.
In the case of Commissioner of Service Tax v. Sangamitra Services Agency [2014 (33) S.T.R. 137 (Mad.)], set aside the demand and held that “The appellants are engaged in rendering Manpower Recruitment and Supply Agency service and not any Advertisement Agency service. This is also brought out from the agreement in para-3(2), which speaks about expenses such as expenses like media, travel and stay costs etc., prior permission has to be taken and these have to be invoiced at cost. Thus it can be seen from the advertisement charges, which were incurred to be a one-time occasion and were only expenses incurred on behalf of the client which are reimbursed on an actual basis. We, therefore, follow the decision in the case of Sangamitra Services Agency (supra) and hold that the demand is unsustainable. The impugned order is set aside. The appeal is allowed with consequential relief if any, to the appellants.”
Following the decision, the two member bench comprising Mr P Dinesha, Member (Judicial) and Mr M Ajit Kumar, Member (Technical) set aside the impugned order and allowed the appeal with consequential benefits.
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