2024 (12) TMI 1028 - AT - Service Tax

Confirmation of demand of service tax - Director s fee - Liability vis- -vis sponsoring the cookery event - Demand on account of difference in the amount shown in ledger and one shown in the ST-3 returns - Demand confirmed on testing analysis and certification charges - reverse charge mechanism - imposition of penalty on the appellant. Service tax on Director s fee - HELD THAT - The service tax demand vis- -vis the Director s fee has duly been acknowledged. Hence it is not required to dwell into the said adjudication. Resultantly, the order confirming the demand of service tax of Rs. 1236/- stands upheld. Liability vis- -vis sponsoring the cookery event - HELD THAT - Admittedly, the cookery event at Sehore, Gwalior was sponsored by the appellant displaying the appellant s company logo and trading name. The adjudicating authority below have observed that the appellant was given exclusive or priority booking rights. Sponsoring prices/trophy for the competition and all other expenses incurred towards organizing of the said event were borne by the appellant that too that with intent to obtain commercial benefit by bringing their name or product or services in public image to public attention by associating with the said event. No evidence is produced by the appellant to falsify the said observations. The said activity clearly falls under the scope of sponsorship services which invites the service tax liability. Hence there are no infirmity when this demand of service tax of Rs. 29,301/- has been confirmed against the appellant. Demand on account of difference in the amount shown in ledger and one shown in the ST-3 returns - HELD THAT - The amount of consideration paid for receiving legal consultancy services is taxable under reverse charge mechanism and the 100% service tax is to be paid by the service recipient in terms of Entry No. 5 of Notification No. 30/2012-ST dated 20 June 2012. Hence the total amount paid by the appellant to his lawyers is liable to service tax and the liability is to be discharged by the appellant under RCM. There is appellant s own admission that the amount of notary charges and stamp charges also found the part of consultancy fee. Otherwise also the services of notary are also liable to service tax. It is only the purchase of stamp papers that can be excluded but there is no evidence on record bifurcating the said amount from the amount of the legal fee paid by the appellant for obtaining legal consultancy services. Hence there are no reason when this demand of service tax of Rs. 5020/- has also been confirmed against the appellant. Demand confirmed on testing analysis and certification charges - HELD THAT - Apparently testing/analysis has been done in foreign laboratories. As per Rule 4(a) of Place of Provision Rules, 2012 the Place of provision will the place of provider of service. In the present case place of service provider is outside taxable territory whereas appellant is in taxable territory. The plea taken is that the laboratory was existing in appellant s premises but there is no evidence for the same. The service received is otherwise taxable. Hence it is held that the appellant was liable to pay service tax under reverse charge mechanism. Hence the demand of service tax amounting to Rs. 1,69,771/- is also upheld. Invocation of extended period while issuing the SCN - HELD THAT - N/N. 30/2012 makes the service recipient of legal consultancy service liable to pay service tax on the amount of consultancy fee paid ignorance of law cannot be the defence. Hence the only possible outcome of still not paying the service tax is the intent to evade the tax. The appellant was relying on TRU circulars but those circulars apparently are not extending any exemption to the appellant. The plea of bona fide belief is also not available to the appellant - the extended period of limitation has rightly been invoked. There are no infirmity has been found in the order under challenge while confirming the impugned demand of service tax. The impugned order in appeal is, therefore, upheld - Consequent thereto, the appeal is hereby dismissed.

Summary

Issues:
1. Recovery of service tax on payments made to directors under reverse charge mechanism.
2. Liability for service tax on testing, analysis, and certification charges paid to service provider outside India.
3. Discrepancy in payment to advocates for legal services and recovery of service tax.
4. Recovery of service tax on amount paid for organizing an event without discharging the liability for sponsorship services.
5. Validity of the demand for service tax, interest, and penalties.

Analysis:

(A) Recovery of Service Tax on Payments to Directors:
The appellant admitted the mistake of not discharging tax liability on a portion of the amount paid to directors as sitting fees. The order confirmed the demand for service tax of Rs. 1236/- on the acknowledged amount, which was upheld.

(B) Liability for Service Tax on Event Sponsorship:
The appellant contested the demand for service tax on sponsoring a cookery event, citing circulars to deny liability. However, the tribunal found that the appellant's sponsorship activities fell under sponsorship services, attracting service tax. The demand of Rs. 29,301/- was confirmed.

(C) Discrepancy in Payment to Advocates and Recovery of Service Tax:
The appellant argued that the difference in ledger and ST-3 returns was due to notary charges and stamp paper expenses, not legal consultancy services. However, the tribunal held that the entire amount paid to lawyers, including notary charges, was liable for service tax. The demand of Rs. 5020/- was upheld.

(D) Recovery of Service Tax on Testing, Analysis, and Certification Charges:
The tribunal upheld the demand for service tax of Rs. 1,69,771/- on testing and certification charges paid to a service provider outside India. The appellant's argument regarding the location of the laboratory and lack of evidence was dismissed.

(E) Validity of Demand and Invocation of Extended Period:
The tribunal found no infirmity in confirming the service tax demands, interest, and penalties. It held that the appellant's actions indicated a misrepresentation to evade tax, justifying the invocation of the extended period for issuing the show cause notice. The appeal was dismissed, upholding the impugned order.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the tribunal's findings and decisions on each issue.