2015 (12) TMI 1011 - AT - Service Tax

Waiver of pre deposit - foreign expenses (misc. foreign exchange) on account of advertising services/ICC payment - Held that - Appellant had not paid service tax on foreign exchange expenses amounting to ₹ 22,78,90,146/- shown as advertising services/ICC payment and that the appellant failed to provide satisfactory answer to the audit which raised the objections. The impugned order does not identify as to what was the taxable service provided. Though at one place it discusses the scope of sponsorship service, it nowhere discusses the scope of advertising agency service and as to how the impugned expenses were related to advertising agency service - it was incumbent upon the adjudicating authority to analyse as to how the impugned expenses related to services which fell in the scope of advertising agency service. No such analysis is noticed in the impugned order. It is not sustainable to presume that the impugned expenses related to advertising agency service (even if the appellant failed to give satisfactory reply in the opinion of the adjudicating authority) because the onus to sustain the allegation is on Revenue. There is not even a whisper in the Show Cause Notice also as to how the impugned foreign exchange expenses related to which taxable services. On the other hand the appellant on its own stated that the said expenses were incurred for purposes which were not taxable - appellant has made out a case for waiver of pre-deposit - Stay granted.

Issues:
1. Identification of taxable service for service tax demand confirmation.
2. Analysis of foreign exchange expenses related to advertising services/ICC payment.
3. Scope of sponsorship service and advertising agency service in relation to expenses.
4. Onus of proof on Revenue to sustain allegations.

Issue 1: Identification of Taxable Service
The appellant argued that the demand was confirmed without identifying the specific service under which the demand arose. The adjudicating authority presumed the service to be advertising agency service due to lack of explanation. However, the Show Cause Notice did not clearly specify the taxable service provided, leading to ambiguity in the order.

Issue 2: Analysis of Foreign Exchange Expenses
The appellant contended that a significant portion of foreign exchange expenses was exempt from service tax as it was related to sponsoring ICC events. Additionally, a small amount was spent on tour operator services performed entirely outside India. The expenses related to Development & Supply of Content Service were made before the service became taxable, further complicating the analysis.

Issue 3: Scope of Sponsorship and Advertising Agency Service
The Tribunal noted that the impugned order lacked an analysis of how the expenses were connected to advertising agency services as defined under Section 65(3). The absence of such analysis raised questions about the justification for presuming the expenses to be related to advertising agency services without concrete evidence.

Issue 4: Onus of Proof on Revenue
The Tribunal emphasized that the burden of proof to establish the connection between expenses and taxable services rested on the Revenue. The lack of clear evidence or explanation in the Show Cause Notice regarding the specific taxable services related to the expenses weakened the Revenue's case. The appellant's assertion that the expenses were non-taxable further shifted the burden of proof to the Revenue.

In conclusion, the Tribunal found that the appellant presented a valid case for the waiver of pre-deposit, as the adjudicating authority failed to establish a clear link between the foreign exchange expenses and the taxable services. The Tribunal ordered a stay on the recovery of the adjudicated liability pending the appeal, highlighting the importance of proper analysis and evidence in tax-related disputes.

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