2016 (8) TMI 190 - AT - Service Tax

Demand of service tax under Reverse charge mechanism - sponsorship service - Held that - M/s Punjab State Sports Council has issued a specific certificate that the amount has been paid by the appellant as the donation for organising the games and no contrary evidence has been produced by the Revenue. In that circumstance, the appellant has made out a case of complete waiver of pre-deposit. Accordingly, we waive the pre-deposit of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeal. - stay granted.

Summary

Issues:
1. Confirmation of service tax under Reverse Charge Mechanism for sponsorship service.
2. Allegation of appellant sponsoring games organized by Punjab State Sports Council.
3. Dispute regarding the nature of payment made by the appellant - donation or sponsorship.
4. Appellant seeking waiver of pre-deposit for entertaining the appeal.

Issue 1: Confirmation of service tax under Reverse Charge Mechanism for sponsorship service:
The appellant was alleged to have sponsored games organized by Punjab State Sports Council, leading to a demand of service tax amounting to ?72,100 under the category of 'sponsorship service.' The matter was adjudicated, and the demand of service tax along with interest and penalties was confirmed under the provisions of Section 77 & 78 of the Finance Act.

Issue 2: Allegation of appellant sponsoring games organized by Punjab State Sports Council:
The appellant, engaged in manufacturing distillers, had issued three cheques to the Punjab State Sports Council for organizing games. It was claimed that the appellant's payment was for sponsoring the games, allowing them rights to display their logo and hoardings at the event site. This allegation led to the issuance of a show cause notice for payment of service tax under the Reverse Charge Mechanism for 'sponsorship service.'

Issue 3: Dispute regarding the nature of payment made by the appellant - donation or sponsorship:
The appellant contended that they did not acquire rights to display their logo or hoardings at the event site. The Punjab State Sports Council issued a certificate stating that the amount paid by the appellant was a donation for organizing the games, not a sponsorship payment. The appellant argued that this donation exempts them from liability to pay service tax under the 'sponsorship service' category.

Issue 4: Appellant seeking waiver of pre-deposit for entertaining the appeal:
The appellant sought a waiver of pre-deposit to proceed with the appeal before the Tribunal. The appellant's counsel presented the certificate from the Punjab State Sports Council to support the claim that the payment was a donation. The Revenue, however, argued that the payment was for sponsoring the games, as reflected in the balance sheet where the amount was categorized as an advertisement expense.

In the judgment, the Tribunal considered the submissions from both parties. It noted that the Punjab State Sports Council had issued a certificate confirming the payment as a donation for organizing the games, and no contrary evidence was presented by the Revenue. Consequently, the Tribunal found in favor of the appellant, granting a complete waiver of the pre-deposit of the entire amount of service tax, interest, and penalties. The recovery of the said amounts was stayed during the pendency of the appeal.