TMI Blog1997 (10) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... was introduced. Initially, it was imposed on telephone services. By amendments made in 1996, the levy of service tax was extended to courier, pager and advertising services. Certain provisions of the Act are reproduced in the Writ petition and the more relevant section is Section 65(16) of the Act which defines taxable service and Clause (d) thereon. It reads as follows :- "to a client, by an advertising agency in relation to advertisements in any manner." Section 67 stipulates the method for arriving at the value of taxable service. As regards advertising agency, Section 67(d) is relevant and it reads as follows : "In relation to service provided by an advertising agency to a client, shall be the gross amount charged by such agency from the client for services in relation to advertisements." The petitioner analysis the said section and has stated that the service tax is on the service provided by the advertising agency, the value shall be the gross amount charged by the agency, the gross amount is that which is charged by the agency from the client and gross amount is charged for the service in relation to advertisements. The levy of service tax on advertising servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amount charged from the client for rendering services in relation to the advertisements. The commission paid by the newspaper is only an income and it has nothing to do with the services rendered to the client and, therefore, the instruction goes beyond the scope of the Act. It is said that while the Section seeks to levy tax on the gross amount charged from the client, the impugned letter seeks to include the commission which is received by the advertising agency from newspapers, magazines, Doordarshan, AIR etc. and, therefore, it is wholly without jurisdiction. 4. In the counter-affidavit filed on behalf of the respondents, which is sworn to by the Assistant Commissioner in the Office of the Commissioner of Central Excise, Coimbatore, he challenges even the maintainability of the writ petition. It is said that the writ petition was filed only on the basis of the mere apprehension and the petitioner has not so far been aggrieved by the mere issuance of a letter or instructions. The petitioner is not an aggrieved person according to the respondents, to be an aggrieved person, the order must be adverse or prejudicial to the petitioner, which alone can give cause of action for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt published or broadcasted. The commission received by the advertising agency is on account of getting the advertisement displayed and levy in question is a service tax on service-charges relating to an advertisement and not on the cost of advertisement. There is no repugnancy between the clarification and the section imposing tax. The clarification issued by the respondents is with regard to the value of the taxable service, which is contemplated under Section 67(d), and the method to arrive at the value of the taxable service alone has to be clarified. It is not by clarification, the new tax is imposed, nor is it violative of Article 265 of the Constitution of India. Therefore, they prayed for the dismissal of the writ petition. 5. A reply affidavit has been filed by the petitioner, wherein, it is stated that the petitioner charges amounts from the client towards preparation of the advertisements in the print media in terms of charges for composing, block making, art work, etc. and when the advertisement is released in a particular newspaper or journal, a commission is paid by the concerned newspaper/journal to the advertising agency. This forms part of the income of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to insist for a commission higher than what they are entitled to. 8. The argument of the learned Counsel for the petitioner is that part of the gross amount which concerns the advertisement is liable to the service tax and not the commission paid by the publishers. Clause 4 of the impugned letter dated 6-11-1996 reads thus : "The Commission received by the advertising agency would, however, be includable in the value of taxable service." This goes beyond the scope of the Act. 9. In this connection, we have to take into consideration Section 67(d) of the Finance Act. The Finance Act of 1994 (as amended by Finance Act of 1996) is appended to the additional typeset of papers. Section 65 of the said Act denies what is meant by "Advertisement" and "Advertising Agency". Section 67 of the Act deals with the valuation of taxable services for charging service tax and Section 68 deals with collection and recovery of service tax. The `Advertising Agency' as defined under Section 66, Clause (sic) (1A) means : "any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the scope of Explanation was considered by their Lordships. The relevant portion of Paragraph 32 reads thus : "....An explanation is different in nature from a proviso for a proviso excepts, excludes or restricts while an explanation explains or clarifies. Such explanation or clarification may be in respect of matters whose meaning is implicit and not explicit in the main section itself. In Hiralal Ratanlal v. State of U.P. (1973) 1 SCC 216 (225); AIR 1973 SC 1034 (1040), it was ruled that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named that provision as an Explanation. In all these matters courts have to find out the true intention of the Legislature. In D.G. Mahajan v. State of Maharashtra , (supra) this Court said that legislature has different ways of expressing itself and in the last analysis the words used alone are respository of legislative intent and that if necessary an Explanation must be construed according to its plain language and `not an any a prior consideration'." 13. Reliance was also placed by le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e client for services in relation to advertisements ." [Emphasis supplied] The gross amount received from the client includes 15% is not disputed. Learned Counsel only submitted that this 15% is the commission which the Agency receives from the publishers. While considering the service tax, the Authorities have only to consider what is the actual amount received by the Agency from the client, and how the Agency appropriates is not their concern. That is a matter between the publisher and the agent. The taxing Authorities are not concerned with the arrangement between the publisher and agency. It is not disputed that if there is no advertising agent, and the client directly deals with the publisher, there will be no deduction in the gross amount that is payable by the client. When the advertising agent receives the gross amount, he receives it as the agent of the publisher. The consideration for that service by the agent with his client is the gross amount actually received. Merely because the publisher permits the agent to retain a portion of that amount, it cannot be said that it is not in respect of the services in relation to the advertisement. 17. The said argument is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons under the Act. 19. Since the commission is also included in the gross amount received by the Agency from the client for services in relation to the advertisement, the argument that the Instructions go against the statute, is not correct. Even without the impugned sentence, i.e., `The commission received by the advertising agency would, however, be includible in the value of taxable service', the matter is not going to make any difference. It is only by way of abundant caution, such a sentence has been incorporated, and that is not going against the provisions of the Act. 20. Learned Counsel for petitioner also relied on certain Sections of the Act and contended that it is only the Central Government that has the Authority to interpret the Section to remove the difficulties. I do not think that there is any difficult in interpreting the Section, for, the wordings are very clear. Section 95 of the Excise and Customs Act has also no relevance in this connection. In view of the interpretation given to Section 67(d) of the Finance Act, I do not think the impugned letter dated 31-10-1996 is ultra vires the provisions of Article 235 of the Constitution of India, nor is it ag ..... 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