The Supreme Court held that HT Media Ltd is not liable to pay service tax under the reverse charge mechanism on fees paid to overseas agents for arranging foreign speakers at its Leadership Summit, setting aside the CESTAT ruling.
NEW DELHI: The Supreme Court ruled that HT Media Ltd is exempt from paying service tax under the reverse charge mechanism for fees paid to overseas agents who arranged for foreign speakers at its Leadership Summit.
A Bench led by Justice JB Pardiwala and Justice KV Viswanathan overturned a previous ruling by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
The Court determined that these payments could not be categorized as “event management services” under the Finance Act, 1994, and thus did not incur service tax liability on a reverse charge basis.
The reverse charge mechanism shifts the responsibility for paying service tax from the service provider to the recipient, and is typically applied when foreign entities provide services to Indian recipients.
The case involved service tax claims for the period from October 2009 to March 2012, amounting to an approximate revenue implication of Rs 60 lakh.
The Revenue argued that fees paid by HT Media to secure agents of prominent foreign speakers for the Leadership Summit constituted “event management services” and were therefore taxable under Sections 65(40), 65(41), and 65(105)(zu) of the Finance Act.
After the tribunal upheld this demand, HT Media appealed to the Supreme Court.
Upon reviewing the relevant statutory framework regarding service tax during the specified period, the Court noted that a tax can only be imposed if the activity in question unambiguously falls within a recognized taxable category under the Finance Act. It asserted that reverse charge liability related to services sourced from outside India applies only if the underlying service is taxable under the Act.
In light of a circular from the Central Board of Excise and Customs (CBEC) concerning event management services and the pertinent legal provisions, the Court concluded that hiring foreign speakers through agents for the Leadership Summit did not satisfy the criteria to be classified as taxable event management services.
Consequently, the Court annulled the tribunal’s order and ruled in favor of HT Media, effectively terminating the service tax proceedings against the company.
The Court stated,
“In the overall view of the matter, we have reached the conclusion that the appeal deserves to be allowed,”
The petitioners were represented by advocates Ashok Dingra, Karan Bharihoke, and Sonia Gupta.
The respondents were represented by advocates VC Bharathi, Gurmeet Singh Makker, SK Singhania, PV Yogeshwaran, and Annirudh Sharma.
Case Title: HT Media Limited Vs Principal Commissioner GST