2015 (4) TMI 252 - AT - Service Tax

Demand of service tax - Various services - Travelling expenses component of foreign currency expenditure - Held that - In spite of noting that these expenses were on foreign trips of employees, the adjudicating authority states but still no service tax has been paid by the party without even mentioning for which taxable service. This is shoddy. In any case, the reimbursements made towards travelling expenses are not liable to service tax as there is no evidence that the same are in relation to any taxable service. - adjudicating authority has not undertaken any analysis of the appellants submissions and merely records a fiat that the appellants are liable to pay service tax in spite of taking note of the appellants submissions that they did not provide such services and merely reimbursed a part of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not expenses. Advertising and Marketing Expenses in Foreign Currency - The appellants claimed and submitted details showing that out of the expenses on advertising service, for payments made to various advertising agencies abroad, they have paid the service tax under reverse charge mechanism along with interest for the period 2006-07 to 2011-12. They had not paid service tax upto 2005-06 on such payments as the reverse charge mechanism came into effect with the introduction of Section 66A in the Finance Act, 1994 with effect from 18.04.2006. That the reverse charge mechanism did not have any legal basis prior to 18.04.2006 is no longer res integra and, therefore, idle parade of familiar judicial pronouncements in this regard (like Indian National Shipowners Assn Vs. Union of India) 2008 (12) TMI 41 - BOMBAY HIGH COURT is avoidable - Appellant also asserted that they had not paid service tax on such foreign exchange expenses shown under this head which related to purchase of materials. In the absence of any evidence to the contrary, as the onus lies on the Department, it will have to be held that Revenue is not able to establish that any more service tax is leviable under this head than what has been discharged by the appellants along with interest. Marketing Support (including Marketing Support, Advertising and Sales Promotion) - adjudicating authority has not undertaken any analysis of the appellants submissions and merely records a fiat that the appellants are liable to pay service tax in spite of taking note of the appellants submissions that they did not provide such services and merely reimbursed a part of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not expenses. Income from lease of property - adjudicating authority in subsequent paras merely reproduced the legal definitions relating to renting of immovable property service supply of tangible goods for use in India and Business Auxiliary Service and thereafter simply moved on to the next component of demand namely Income from Lease Vehicles without even a whisper of any analysis and finding about the sustainability of this component of demand relating to what is called Income from Lease of Property . This is nothing but a cavalier and careless attitude on full display. The appellants actually showed with reference to their profit and loss account that these were their expenses, which were incurred on leasing the immovable property for their use. Thus they were the recipient of the said service and therefore the question of they being liable to pay service tax is preposterous; it not being a case of import of service inviting reverse charge mechanism. It is admittedly unusual to copiously and verbatim quote paragraphs after paragraphs from the adjudication order. However, it was felt necessary in the present case to do so to drive home the point that the adjudicating authority has been highly and conspicuously non-speaking, non-reasoned, arbitrary and cavalier while passing the impugned order. Non-application of mind (on the part of the adjudicating authority) is indeed writ bold and large across the impugned order. Such orders adversely and severely impinge upon the public s trust in the public authorities and for that reason a public authority displaying such egregiously irresponsible conduct and that too while performing quasi-judicial functions deserves to the put to costs. Accordingly, we set aside the impugned order - Costs imposed - Decided in favour of assessee.

Issues Involved:
1. Travelling Expenses
2. Advertising and Marketing Expenses
3. Marketing Support
4. Income from Lease of Property
5. Income from Lease of Vehicles
6. Service Provided
7. Invocation of Extended Period
8. Best Judgement Assessment

Detailed Analysis:

1. Travelling Expenses:
The appellants contended that the travelling expenses represented the foreign travel expenses of their employees reimbursed to them and were not in relation to any taxable service. The adjudicating authority's "analysis" was a mere verbatim reproduction of the appellants' submission without any finding about the taxability. Despite noting that these expenses were on foreign trips of employees, the adjudicating authority confirmed the demand without mentioning the taxable service, which was found to be unsustainable as no evidence linked the expenses to any taxable service.

2. Advertising and Marketing Expenses:
The appellants argued that they had paid the service tax under the reverse charge mechanism for advertising and marketing expenses incurred abroad. The adjudicating authority's findings were largely verbatim reproductions of the appellants' submissions and legal provisions, lacking any genuine analysis. The appellants demonstrated that the reverse charge mechanism was not applicable before 18.04.2006 and that they had already paid the required service tax along with interest for the period 2006-07 to 2011-12. The adjudicating authority failed to provide evidence to the contrary, making the additional demand unsustainable.

3. Marketing Support:
The appellants explained that the marketing support expenses were actually reimbursements to bottlers for marketing activities, which were expenses in their hands, not income. The adjudicating authority failed to analyze these submissions and incorrectly treated the amounts as income. The appellants showed that these were expenses recorded in their profit and loss account, not services rendered by them, thus no service tax was applicable.

4. Income from Lease of Property:
The appellants clarified that the amount was an expense for leasing warehouse premises, not income. The adjudicating authority merely reproduced legal definitions without any analysis or findings, failing to counter the appellants' evidence. The appellants demonstrated that they were the recipients of the leasing service, not liable to pay service tax.

5. Income from Lease of Vehicles:
The appellants stated that the lease payments for vehicles were expenses, not income. The adjudicating authority did not address these submissions or provide any findings. The appellants, being the recipients of the leasing service, were not liable for service tax.

6. Service Provided:
The appellants argued that the services provided to International Auditors Inc., USA, were export services, and thus not taxable. They also paid service tax for services rendered to HCCBPL in India. The adjudicating authority did not address these contentions or provide relevant findings, making the demand unsustainable.

7. Invocation of Extended Period:
The adjudicating authority's reasoning for invoking the extended period was cryptic and inadequate. The Supreme Court's ruling in Collector of Customs & Excise vs. HMM Ltd. requires specific averments and findings, which were missing in this case, making the invocation of the extended period unsustainable.

8. Best Judgement Assessment:
The adjudicating authority quoted Section 72 but did not provide any methodology or reasoning for the best judgement figures. The assessment appeared arbitrary, lacking the required quasi-judicial process and opportunity for the appellants to be heard, rendering it unsustainable.

Conclusion:
The impugned order was found to be non-speaking, arbitrary, and displaying non-application of mind. The appeal was allowed, the impugned order set aside, and costs of Rs. 25,000/- were imposed on the adjudicating authority, payable to the Prime Minister's National Relief Fund within four weeks.

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