TMI Blog2016 (3) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in a cross-border transaction. Such a tax is not contemplated in Finance Act, 1994. Therefore, no Service tax can be demanded. - Decided in favour of appellant - Appeal No. ST/333/2010 - Final Order No. A/85647/2016-WZB/STB - Dated:- 10-2-2016 - M V Ravindran, Member (J) And C J Mathew, Member (T) For the Appellant : Shri Dayanand Kumar, CA For the Respondent : Shri KS Mishra, Addl. Commissioner (AR) ORDER Per C J Mathew M/s. Genom Biotech Pvt Ltd. a 100% Export Oriented Unit under that eponymous scheme notified in the Foreign Trade Policy issued under the Foreign Trade (Development Regulation) Act, 1992,is in appeal before us against order-in-original no.06/ST/2010 dated 29th March 2010 which has held them liable to service tax of ₹ 2,38,50,339 (including cess) as recipient of 'advertising agency service' from providers based abroad, interest thereon and penalty under section 78 of Finance Act, 1994. The demand pertains to the period from 18th April 2006 to 31 st March 2008 as recipient of 'advertising agency service' and the provisions of section 66A of Finance Act, 1994 for discharge of tax liability on reverse charge bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracted to prepare advertising material for different media and the appellant has proprietorial interest in the prepared material. The agreements with the other two also involve marketing of goods using various channels and strategies which include marketing and, therefore, those also covered the activity intended to be taxed as 'advertising agency service'. The tax was held to be payable by the appellant under section 66A of Finance Act, 1994 as provider of service is outside India. 4. The primary contention in appeal is that no service is rendered in India and hence tax liability will not arise. The appellant reiterates the claims made before the original authority, along with the evidences of connected invoices, that these payments were in the nature of reimbursements for publicity material that were paid for, on their behalf, by the three entities. It is also claimed that the bulk of the payments made related to services rendered prior to 2006-07 and that ₹ 14,71,38,383 should have been excluded from the tax base of ₹ 21,77,51,826. Learned Chartered Account submits on behalf of the appellant that the decision of this Tribunal in KPIT Cummins Infosyste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not accepting the plea of the appellant for exclusion of those payments claimed to be reimbursements. 7. The payments that were subject to tax in the impugned order are the amounts recorded as paid to Cyprus-based entities who sub-contact the obligations to Ukranian entities for performance. That these payments are made for advertising and business promotion is not in doubt. The original authority has also accepted the segregation of the derived value of the service from the gross value and we can, therefore, reasonably assume the base used for computing to be net of other costs incidental to placing the advertising and publicity material within the 'eye-reach' of the intended market. 8. The learned Authorized Representative has laboured to point out that the agreements of the appellant with all three entities relate to promotion and marketing, including advertising, of goods exported to Ukraine by the appellant and that the amounts paid are undeniably towards advertising as evidenced by their accounting records. Inclusion of a payment in the books of accounts under specific head that mirrors any of the taxable services in section 65 (105) may not, of itself, rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residuary services shall be liable to tax if received by a recipient in India for use in relation to business and commerce. 12. We notice from the records that the appellant is an exporter registered under an export promotion scheme whose objective is to generate employment and contribute to the inflow of 'convertible currency.' That the appellant exports its entire production to Ukraine is not in dispute. The appellant is entitled to exemption of tax and duties on all imports effected for production of goods listed in the Letter of Permission issued by the Development Commissioner in accordance with the Foreign Trade Policy. Exporters can claim refund of tax paid on specified input services in accordance with notifications issued under section 93 of Finance Act, 1994. Services that are utilised in exports of goods or services are entitled to a rebate of tax paid on such input services under section 93A of Finance Act, 1994. This is the mechanism which, along with exemption accorded to the goods or output service that are exported, ensures that taxes are not exported. Taxes distort the true price in a market place; domestic residents are subject to national taxes and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order by recourse to Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 by deeming the provision of 'advertising agency service' by the three Cyprus-based entities to be an import of service into India. 17. Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 is: 3. Taxable services provided from outside India and received in India.- Subject to section 66A of the Act, the taxable services provided for outside India and received in India shall, in relation to taxable services - (i) ***** (ii) ***** (iii) specified in clause (105) of section 65 of the Act, but excluding- (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in clauses (d), (zzzc), (zzzr) and (zzzzm) does not relate to immovable property; and (c) those specified in clause (ii) of this rule, be such services as are received by a recipient located in India for use in relation to business or commerce. 18. From the context in which the appellant has entered into agreements with three provider ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
