2023 (9) TMI 301 - AT - Service Tax

Recovery of Service Tax - foreign exchange outflow on RCM basis - credit card was used to make payments to Facebook by way of foreign exchange and the amount used in this credit card has been reimbursed by BPVL - HELD THAT - In the present case, the Department has failed to establish that the service was imported by the Appellant and was used for business purpose. The Department has not rebutted the fact that this was used by Mr. Y. Ravindra Reddy. Again, strangely, Mr. Y. Ravindra Reddy has not been made co-noticee in the entire proceedings. There is no allegation that BPVL which is a private limited company has used the services of Facebook and made the payment indirectly through the credit card of the present Appellant. The entire premise under which the SCN has been issued is flawed and the Department could not have issued SCN to an individual without properly connecting the usage of the credit card expenses for business purposes by him. The Impugned Order is legally not sustainable - Appeal allowed.

Summary

Issues involved: Recovery of Service Tax on foreign exchange outflow on RCM basis due to credit card usage for Facebook transactions.

Summary:
1. The Appellant, as the Managing Director of a company, faced a Show Cause Notice seeking to recover Service Tax on foreign exchange outflow due to credit card usage for Facebook transactions. The Appellant claimed the credit card was used by a friend for his business, and all expenses were reimbursed by the friend. The CA certificates supported this claim, showing no role of the Appellant in importing services from Facebook.

2. The Appellant's CA presented ledger accounts and CA certificates to prove the friend's responsibility for the expenses, which were not considered by the Lower Authorities. The Appellant argued that the appeal should be allowed based on this evidence.

3. The Respondent reiterated the Lower Authorities' findings, stating that the Appellant failed to prove an agreement with the friend regarding credit card usage and payments. The Respondent justified the confirmed demands.

4. After hearing both sides and examining the documents, the Tribunal proceeded with the case.

5. The Tribunal found that the Department lacked evidence linking the Facebook transactions to the company or the Appellant. The expenditure was solely for the friend's transactions, with no proof of business purpose. Issuing the Show Cause Notice to the individual without proper connection to business usage was deemed flawed. The Department failed to establish the Appellant's liability for Service Tax.

6. Consequently, the Tribunal ruled the Impugned Order legally unsustainable and set it aside, allowing the appeal with any consequential relief as per law.