ST - Appellant getting eminent speakers for their annual summit through agency abroad - foreign agents are event managers - ST payable under reverse charge: CESTAT
By TIOL News Service
NEW DELHI, SEPT 11, 2017: SERVICE TAX demands with reference to (a) Event Management Service (HT Annual Summit) as recipient of such service from foreign service providers (b) Internet Telecommunication Service (c) Management Consultancy Service (d) Business Support Service and (e) Interest on delayed payment of service tax in respect of services provided to associated enterprises were confirmed against the appellant.
While demands on other counts were contested both on merit as well as on limitation,liability of service tax on Internet Telecommunication Service is not contested.
After considering the elaborate submissions made, the CESTAT observed thus -
Event Management Service:
+ We have examined the terms of agreement entered into by the appellant with M/s.The Harry Walker Agency, M/s. Washington Speakers Bureau. It is clear that the appellants are not having any transaction directly with the eminent speakers, who are to give speech in the Annual Summit organized by the appellant.
+ Arranging such eminent speakers is one of the important ingredients of event management. In this aspect, the agents in foreign countries ensured the availability of persons to such event, for a fee. Such fee is a total gross amount to be paid by the appellant to the agent.
+ The claim of the appellant is that such agents are acting as representative of the speaker and as such should be considered as one of the same, with no separate role in between. We are not in agreement with such proposition.
+ It is clear that the agency which are arranging for prominent speakers have their own arrangement with such speakers. The details of the same are not revealed. The appellants get the services of such speakers through the agents. In such arrangement, we find that the activities of the foreign agents is covered by the statutory scope of event manager.
+ As correctly contended by the Revenue, it is not necessary an event manager should undertake all the activities mentioned in the statutory definition for a tax liability.
+ The arguments of the appellant against such tax levy is not sustainable.
Management Consultancy Services:
+ The Original Authority fell in error in not reading together all the conditions mentioned under sub-rule (2) of Rule 5. It is clear that to be "Pure Agent", the provider of service has to make payment to the third party on behalf of the principal (service recipient) and such arrangement should be on actual basis with prior knowledge, in terms of the agreement.
+ Conditions No.(iii) read with (iv) will make it clear that if the appellant is making payments as authorized by the service recipient on actual basis then such expenses shall not form part of the taxable value.
+ We allow the claim of the appellants against the tax liability on these grounds.
Business Support Service:
+ The appellant's claim is that as a nodal group company, they have incurred certain expenses in common pool account and thereafter, proportionately, the said expenditure was shared with other group companies. Receipt of this account cannot be taxed under "BSS".
+ We are in agreement with the submission of the appellant. The appellants did not provide any infrastructure support service using any of their infrastructure or providing any service to other group companies. The infrastructure facilities were commonly shared and the third party was paid by the Nodal Company (appellant). Thereafter the said expenditure was apportioned with other group companies, who availed the same service.
+ We find there is no sustainable case of tax liability against the appellant in such arrangement. [Reliance ADA Group Pvt. Ltd. - 2016-TIOL-603-CESTAT-MUM relied upon]
Interest on delayed payment of service tax in respect of services provided to associated enterprises:
Notification 19/2008-ST dated 10 May 2008 -
In the Service Tax Rules, 1994,-
(iii) in rule 6,- (a) in sub-rule (1), after the third proviso, the following Explanation shall be inserted, namely:-
" Explanation .- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called ‘Suspense account' or by any other name, in the books of account of a person liable to pay service tax.";
+ Appellants argued that such explanation can have only prospective effect and should cover only such book entries or payments made after 10.05.2008.
+ We note that admittedly the appellants made entries of taxable considerations in their books of accounts. These entries relate to the period prior to the date of the said amendment.However, the appellants discharged the service tax liability much belatedly in Jan. 2009 and March 2010 and March 2011. These tax payments were with reference to entries made prior to 10.05.2008.
+ Following the ratio in the decisions of Tribunal in Sify Technologies - 2011-TIOL-123-CESTAT-MUM and Gecas Services India Pvt. Ltd. - 2014-TIOL-1079-CESTAT-DEL we find that for entries made prior to 10.05.2008, no interest liability will arise.
Limitation:
+ The concept of reverse charge was much debated and litigated.
+ The service tax liability was held to be enforceable on reverse charge basis only w.e.f. 18.04.2006.
+ In such a situation, it will not be correct to allege willful mis-statement, suppression or fraud against the appellant to demand tax for the extended period. The demand for normal period in terms of Section 73 can only be sustained. For the same reason, no penalty can also be imposed on the appellant with reference to such demand.
Conclusion:
++ Appellants are liable to pay service tax under the category of "Event Management Service" for the period covered within the normal limitation.
++ The demand of service tax in respect of Management Consultancy Service and Business Support Service and interest liability for entries with reference to associated enterprise are found not sustainable.
The appeals were disposed of.
(See 2017-TIOL-3287-CESTAT-DEL)
