No Service Tax Liability on Artwork and Design Charges Paid in Foreign Currency: CESTAT [Read Order]
The tribunal noted that these payments were made under contractual terms to a buyer abroad and the assessee was not the recipient of the design services
No Service Tax Liability – Service Tax Liability – Service Tax – taxscan
No Service Tax Liability – Service Tax Liability – Service Tax – taxscan
The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT )held that no service tax was payable on artwork and design charges paid in foreign currency.
Artifacts India,appellant-assessee, was a proprietorship firm engaged in the manufacturing and export of paper products and handicrafts. It operated as a 100% Export Oriented Unit and received payments in foreign currency for the goods exported during the period from 01.04.2007 to 31.03.2012. Since the business was entirely export-based, the appellant-assessee did not obtain service tax registration.
During an audit, the Department observed that certain payments made in foreign currency had not been subjected to service tax under the Reverse Charge Mechanism (RCM). These included bank charges paid to foreign banks (classified under Banking and Other Financial Services), commission paid to agents (classified under Business Auxiliary Services), and design charges paid to professionals (classified under Design Services).
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A show cause notice dated 17.10.2012 was issued proposing a service tax demand of ₹10,09,952. The matter was adjudicated by the Additional Commissioner through an order dated 30.08.2013, wherein ₹1,67,895 was dropped due to computational errors, and the balance amount of ₹8,42,057 was confirmed along with interest and penalties under the Finance Act.
The assessee filed an appeal before the Commissioner (Appeals), who upheld the demand vide order dated 29.05.2014. Aggrieved by this, the appellant-assessee filed the present appeal before the tribunal.
The two member bench comprising Dr.Rachna Gupta (Judicial Member) and Hemambika R.Priya (Technical Member) heard both sides and examined the records. It found that the show cause notice claimed the assessee paid artwork and design charges in foreign currency.
However, the purchase order with the client M/s TESCO showed the appellant was required to pay these charges as per the agreement. The artwork charges were received by the buyer abroad, and the appellant paid them according to the contract. There was no proof that the assessee received design services. Therefore, no service tax was due on these charges.
In short,the appeal was allowed.
To Read the full text of the Order CLICK HERE
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