The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on artwork charges.
The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the terms of the agreement are that the appellant will bear the artwork charges, Foreign Bank charges, Agent commission charges. It is clear from these terms that the Artwork charges were received by the buyer abroad and he charges the said amount to the appellant. It was paid by the appellant as per the terms and conditions of sale and there is no evidence that he was the recipient of the services of the design charges.
The appellant/assessee is a proprietorship concern and is engaged in the manufacturing of various paper products, including paper boxes, bags, and gift sets, as well as handicraft items. The Appellant is registered as a 100% Export Oriented Unit.
During the period 01.04.2007 to 31.03.2012, the Appellant had exported goods manufactured by him and had received consideration in foreign currency from buyers. As the Appellant was exclusively engaged in the export of goods, therefore the appellant had not sought registration under service tax.
The show cause notice has alleged that the appellant had paid in foreign currency for the artwork charges and design and development charges.
The tribunal noted from the perusal of sample purchase order of the client M/s TESCO, that the terms of the agreement are that the appellant will bear the artwork charges, Foreign Bank charges, Agent commission charges. It is clear from these terms that the Artwork charges were received by the buyer abroad and he charges the said amount to the appellant. This was paid by the appellant as per the terms and conditions of sale and there is no evidence that he was the recipient of the services of the design charges.
The tribunal observed that even if appellant is legally required to pay the amount of service tax under reverse charge mechanism, then the appellant would be entitled to avail CENVAT credit of the amount of service tax so paid and utilize it against payment of duties in respect of its clearances of final products. This would clearly render the situation to be revenue neutral and hence extended period cannot be upheld.
Case Details
Case Title: M/s. Artifacts India Versus Commissioner of Central Excise (Appeals), Delhi- II
Case No.: SERVICE TAX APPEAL NO.55777 OF 2014
Date: 30.05.2025
Counsel For Petitioner: CA A.K.Batra
Counsel For Respondent: Anand Narayan, Authorised Representative
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