2014 (1) TMI 511 - AT - Service Tax

Export of service during the period 1.3.2003 to 19.11.2003 - Advertising Agency Service - Held that - Notification 6/1999-ST had exempted all taxable services from the whole of the Service Tax leviable thereon under Section 66 of the Finance Act, 1994 where the services were provided to any person and the consideration therefore was received in India in convertible foreign exchange. This Notification was withdrawn from 1.3.2003. Subsequently Notification 21/2003-ST dated 20.11.2003 has been issued which provides exemption from payment of service tax in respect of taxable services provided to any person in respect of which payment was received in India in convertible foreign exchange. During the period 1.3.2003 to 20.11.2003 there is no exemption in respect of export of service. The applicant relied upon the Board s Circular. We find that Section 93 of the Finance Act, provides that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally or subject to such conditions as may be specified in the notification, taxable service of any specified description from the whole or any part of the service tax leviable thereon. Appellant has provided taxable service to the Foreign Service recipient in respect of advertisement which is displayed in India. Therefore the appellants are liable to service tax for the period 1.3.2003 to 19.11.2003 - appellants are liable to pay service tax for the period 1.3.2003 to 19.11.2003 in respect of services which are claimed to be exported service - while confirming the demand of service tax, penalty waived u/s 80.

Summary

Issues:
1. Inclusion of reimbursable expenses in the assessable value of taxable service for service tax payment.
2. Exemption from service tax for export of services during specific periods.
3. Application of judgments and circulars in determining service tax liability.

Analysis:

Issue 1: Inclusion of Reimbursable Expenses
The appellants contested the demand for service tax on "Advertising Agency Service" for the period from 1.4.2000 to 31.3.2004, arguing that prior to 1.07.2001, they paid service tax on the assessable value inclusive of reimbursable expenses, but post that date, they excluded such expenses. The appellants relied on a decision by the Larger Bench in the case of Sri Bhagvathy Traders vs. CCE to support their belief that reimbursable expenses should not be included in the assessable value. The Tribunal concurred that the issue was settled by the Larger Bench and set aside penalties imposed prior to this clarification.

Issue 2: Exemption for Export of Services
Regarding the exemption from service tax for export of services, the Revenue argued that during the period from 1.3.2003 to 19.11.2003, there was no specific exemption notification in place. The appellants claimed that despite the withdrawal of Notification No. 6/1999-ST, the export of service continued to be exempt based on CBEC Circular NO. 56/5/2003 ST. However, the Tribunal held that without a specific notification under Section 93 of the Finance Act, the export services were not exempted during the mentioned period, and the appellants were liable to pay service tax for services provided to foreign recipients with advertisements displayed in India.

Issue 3: Application of Judgments and Circulars
The Tribunal emphasized that the decision in Sri Bhagvathy Traders case settled the issue of including reimbursable expenses in the assessable value. Additionally, the Tribunal differentiated the case at hand from the precedent of SGS India Pvt. Ltd., highlighting the distinction in service provision and recipient location. The Tribunal also clarified that the absence of a specific exemption notification under Section 93 of the Finance Act meant that the export services were not exempt during the relevant period. Therefore, the appellants were held liable for service tax during that period. The Tribunal set aside penalties imposed prior to the clarification on reimbursable expenses and granted the appellants cum-tax benefits.

In conclusion, the appeal was disposed of with the Tribunal upholding the demand within the normal period of limitation while finding the demand beyond the normal period unsustainable due to the settled issue on reimbursable expenses. The decision emphasized adherence to specific exemption notifications and legal provisions in determining service tax liability.