TMI Blog2018 (3) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... Narsimhan, Advocate For the Respondent : Shri Tarun Kumar, AR ORDER Per : Devender Singh The brief facts of the case are that the appellant is an advertising agency. It provides advertising agency services to its customers in and outside India. An audit of the appellant was conducted and it was found that the assessee had not been paying service tax on the total sale amount as shown in their profit and loss statement. The appellant had stated that the service tax was charged only on the commission. The department also found that there was no agreement between the assessee and the recipient of the service on record and thus there was no evidence that the appellant had been authorized to act as pure agent to make payment on behalf of the recipient of its service. 2. Another issue that came up during the audit, was that during financial year 2009-10, they provided service of ₹ 35,31,947/- to their client CHI Limited based in Nigeria and contended that this amount should be excluded from the total sale value as they had exported taxable services to a place outside India. The department did not accept the assessee claim of Export of services. Accordingly, two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He relied on the following case laws: (1) Daikin Air-conditioning India P.Ltd. vs. CCE, 2017 (12) TMI 965- CESTAT-CHD (2) Yamazaki Mazak India Pvt.Ltd. vs. CCE, Pune-I-2017 (8) TMI 1050-CESTSAT-MUM (3) Paul Merchants Ltd. vs. CCE, Chandigarh-2013 (29) STR 257 (Tri.-Del.) 5. He also argued on limitation and submitted that in view of the Circular dated 31.10.1996, they were under bonafide belief that no service tax was payable by them. 6. Ld.AR reiterated the findings in the adjudication order and emphasized that in the absence of an agreement, the claim of pure agent is without any basis. He further submitted that advertising is a category three service and location of service is an important factor. 7. Heard the parties and examined the record. 8. On the first issue, we find that the appellant is providing taxable service of advertising service and the Revenue has alleged that the service tax is to be paid on the gross amount charged by the advertising agency from the client for the services. We find that the adjudicating authority while analysing the Board Circular No.341/43/63-TRU dated 31.10.1996 has completely misread the said circular. Para 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be, for flashing that advertisement. However, when an advertising agency gets some Commission , though out of the consideration received by the media, it is because that advertising agency has selected that particular media for flashing the advertisement, which is nothing but a Service by that advertising agency. In relation to the advertisement given to the client , in whose benefit the said advertisement is flashed. Therefore, we have no hesitation to hold that any commission earned by the agency even from the advertising media, if it forms a part of the gross amount charged by such agency from the clients in relation to that advertisement, could be included in the value of the taxable service. When we see the impugned circular/letter, it explains precisely this position and nothing more. Therefore, it cannot be said that such a circular/letter has the effect of enlarging the scope of Section 67(d) of the Act, as is argued. We are in agreement with the learned single Judge, who has by making a reference to Section 65(16) of the Act commented upon the Taxable Service and has pointed out that the taxable service by an advertising agency is the service provided to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted on the gross amount charged by the advertising agency from the client for services in relation to advertisements. This would, no doubt, include the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly undertakes the making or preparation of advertisement or gets it done through another person. However, the amount paid, excluding their own commission, by the advertising agency for space and time in getting the advertisement published in the print media (i.e. Newspapers, periodicals etc.) or the electronic media (Doordarshan, private TV Channels, AIR etc.) will not be includible in the value of taxable service for the purpose of levy of Service Tax. The commission received by the advertising agency would, however, be includible in the value of taxable service. 7. We observe that there is no dispute in the present case that the broadcasting of advertisement has been done on behalf of the appellant and the bills have also been raised on the appellant and the appellant has borne the incidence of Service Tax on the broadcasting service. Further, while passing the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Association of Leasing Financial Service Companies v. Union of India (supra) and All India Federation of Tax Practitioners v. Union of India (supra) in the context of constitutional validity of levy of Service Tax on certain services. This principle does not imply that Service Tax should be levied and collected in exactly the same manner as the levy and collection of tax on goods or that export of service should be understood in exactly the same manner in which the export of goods is understood. In fact the question as to what constitutes the export or import of service was neither raised nor discussed in the above-mentioned judgments of the Apex Court. As discussed in this order, the Export of Services Rules, 2005 are in accordance with the Apex Court s ruling in the above-mentioned judgments that Service Tax is a value added tax, which in turn is a destination based consumption tax in the sense that it is levied on commercial activities, and it is not a charge on the business but a charge on the consumers. There is nothing in Export of Service Rules, 2005 which can be said to be contrary to the principle that a service not consumed in India is not be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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