TMI Blog2024 (2) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... AT:- The assessee is indicating a value in the invoices which is inclusive of the Commission received on which service tax is duly paid. From the clarifications issued in the above circular, it is amply clear that the Appellant in this case is required to pay service tax on the commission received from the print media for publishing of advertisements and also for release of advertisements in TV and FM Radio - the Commission earned by the Appellant is taxable only to the extent charged and included in the gross value and not the entire gross amount indicated in the invoice. Since the Appellant has discharged VAT and Service Tax on the relevant portions of Sale or Service, as the case may be, demand of Service Tax in respect of sale transactions is not legal and so cannot be sustained. The lower adjudicating in Para 17 of the impugned order computed the differential value from the Appellant s financial statements without analysing in detail whether the Appellant was indulging in making and preparation of the advertisements involving conceptualization, visualization and designing. As such, inference drawn and findings are devoid of merits - The advertising materials like glow si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the appellant demanding Service Tax and proposing penalties which is blatantly against the provisions of law. The impugned orders are set aside - Appeal allowed. - HON BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) AND HON BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) APPEARANCE : For the Appellants : Shri S. Murugappan, Advocate For the Respondent : Shri N. Satyanarayanan, Assistant Commissioner / A.R. ORDER [PER MR. VASA SESHAGIRI RAO] Service Tax Appeal Nos. ST/40707/2013, ST/40404/2015 and ST/40575/2015 have been filed by Mr. P. Ramesh, Proprietor, M/s. Ad-Inn Advertising Services assailing the Orders-in-Original No. 53/2012 dated 31.12.2012, No. 05/2014 dated 28.11.2014 and No. 12/2014 dated 08.12.2014 passed by the Commissioner of Central Excise, Salem Commissionerate confirming demands of Service Tax of Rs. 9,64,532/-, Rs. 2,47,58,873/- and Rs. 1,97,32,946/- under the Category of Advertising Service for the periods 01.07.2006 to 31.07.2008, 01.04.2007 to 31.03.2011 and 01.04.2011 to 31.03.2012 respectively and confirming recovery of CENVAT credit erroneously taken to the tune of Rs. 2,34,067/-, Rs. 6,81,675/- and Rs. 6,64,138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other audio or visual representation made by light, sound smoke or gas. The Department was of the view that scope of above definition of taxable service is also wide enough to cover any service rendered in any manner in relation to advertisement and therefore it appeared that products of Ad-inn are advertisement as defined under Section 65(2) of the Finance Act and they were liable to pay Service tax on the taxable value under the category of Advertising Agency service. 3. On scrutiny of records, it was noticed that during the period from 01.04.2006 to 31.03.2008, the Appellant had rendered taxable services valued at Rs. 12,66,78,223/- out of which they had declared and paid Service Tax on the taxable value of Rs. 3,34,09,844/- only and differential taxable value of Rs. 9,32,68,379/- had not been declared in the ST-3 returns and had escaped Service Tax assessment. Service Tax on the value of Rs. 9,32,68,379/- worked out to Rs. 1,14,35,610/- which was liable to be recovered under proviso to Section 73(1) of the Finance Act in as much as there was suppression of facts with an intention to evade payment of appropriate service tax. 4. Further, it appeared that the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 76, 77 and 78 of Finance Act, 1994. Further, it was proposed to recover CENVAT credit of Rs. 6,64,138/- erroneously availed, invoking Section 73(1) of the Finance Act, besides proposing to levy interest under Section 75 and to propose penalties under Sections 76, 77 and 78 of Finance Act, 1994 read with Rule 15 of CCR. 5.2 After due process of law, the Adjudicating Authority vide Order-in Original No. 53/2012 dated 31.12.2012, confirmed demand of Rs. 99,64,532/- and Rs. 2,34,067/- in Show Cause Notice dated 03.11.2011 and imposed equal penalty under Section 78 of the Act read with Rule 15(3) of CCR besides imposing penalties under Section 77 and levying interest under Section 75 of the Finance Act, 1994. Aggrieved, the appellant is on appeal before this forum in ST/40707/2013. 5.3 Similarly the demands in Show Cause Notices dated 11.10.2012 and 12.07.2013 were fully confirmed by the lower authority as proposed in the said Notices and Penalty imposed Under Section 78 read with Rule 15 of CCR and besides imposing penalties under Section 77 and levying interest under Section 75 of the Finance Act, 1994. Aggrieved by the above Orders, the appellant is on appeal before this f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire figures in the Profit and Loss Account could not be taken as a taxable income through advertisement service, without carrying out any investigation and without causing any verification of the documents. The Appellant produced a lot of evidence which was not admitted by the lower authority. 6.5 It was submitted that every service rendered is not subject to levy of Service Tax and only taxable service is subject to levy of Service Tax. In this regard the Ld. Counsel would take us through the decision in the case of Zodiac Advertisers Vs. Commissioner of Central Excise in which the Hon ble Tribunal, Bangalore held that in the absence of any creativity relating to preparation, making and display undertaken by the Appellants, mere manufacture of products as per instructions of the service receiver would not bring them under the definition of Advertising Agency . It was held by the Hon ble Tribunal that mere manufacturing the product as per instructions and specifications of the job work would not amount to rendering the service which can fall in the category of Advertising Agency . Applying the analogy of the decision taken in this case, when the matters are just printed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut forth by the Appellant had just confirmed the demands. 6.7 Ld. Counsel also submitted that the Appellant prepares banners either on cloth or flex and the matter for the banners will be supplied by their clients and they have designed the banners or matters. The Appellant also supplies caps, banners to clients which were bought out and supplied and is a sale of material for which appropriate sales tax was discharged. 6.8 It was further submitted that for the same activity sales tax/ service tax was not leviable. That except for the matters which involve service tax, they have paid sales tax as follows (in respect of SCN No. 3/2011): Value Rate of Tax Tax Paid Re-sale tax 3,60,06,800 1% 360068 Sales Tax 15,88,770 10% 158877 Sales Tax 10,05,470 12% 120654 Sales Tax 47,58,833 3% 142765 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order in order to establish that the Appellant has not evaded any Service Tax, which has been extracted below:- Year 2006-07 2007-08 Amount as per Profit and Loss Account 98477310 40839396 Taxable Value Advertising on Paper 18497927 6064776 Advertising non-paper 18654956 10892041 Exempted(Wall painting ) 13553543 0 Sales 43532728 23792585 Total 94239154 40849402 From the above, it can be inferred that during the year 2006-07, the total value of the Appellants business was Rs. 9,84,77,310/- and of which the sale value was Rs. 4,35,32,728/- and exempted service value was Rs. 1,35,53,343/- representing the charges received for wall painting. The value of advertisements made through pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other advertising agencies to provide the output services and hence they are eligible to avail the service tax paid on the said service providers. In many cases, it was decided by various forums like CESTAT and High Court and Supreme court that when Service Tax was paid, the service providers during the course of executing a work or service are entitled to avail the credit of the service tax paid. 6.13 The Ld. Counsel placed reliance on the further following judicial pronouncements: - (i) ECE Industries Limited Vs. Commissioner of Central Excise, New Delhi [2004 (164) ELT 236 (SC)] (ii) Synergy Audio Visual Workshop Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore [2008 (10) STR 578 (Tri.-Bang.)] (iii) Hi-tech Publicities Vs. Commissioner of central Excise, Madurai [2018 (9) GSTL 119 (Tri.- Chennai)] (iv) Ajanta Fabrication Vs. Commissioner of C.Ex, Meerut [2006 (4) STR 605 (Tri.- Del.)] (v) Maket Chase Advertising Vs. Commissioner of C.Ex, Madurai [2008 (10) STR 598 (Tri.-Chennai)] (vi) Star Neon Signs Vs. Commissioner of Central Excise, Chandigarh [2006 (2) STR 588(Tri.- Del)] (vii) William LEA (India) Pvt. Ltd. Vs. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paration, display or exhibition of advertisement and includes an advertising consultant; (iii) Taxable Service means any service provided or to be provided to any person by any advertising agency in relation to advertisement in any manner. (iv) 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. 10.3 We find from case records that the Appellants:- (i) has not discharged service tax but paid sales tax in respect of printing of cloth and flex banners, leaflets, broachers, stickers, tin sheets, tags, posters, invitations, coupons, signage, backlit, frontlit, nonlit, arch, foam sheet, hand bills. (ii) has not paid either sales tax or service tax in respect of banners, cloth board and wall painting undertaken. (iii) Service Tax was being paid on the amount of commission earned in respect of space booking in newspaper advertisements and release of advertisements in TV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67(d) of the Finance Act. With reference to the above instructions of the CBEC, we find it relevant here to discuss the observations of the Hon ble High Court in Adwise Advertising Pvt. Ltd. Vs. Union of India reported in [1998 (97) E.L.T. 35 (Mad.)], as given below:- 15. I do not think the said submission is correct even though at the initial stage, I was also of the same view. But, ongoing deeper into the Section, and, taking into consideration the practice of the Advertising Agency, I feel that the impugned instruction is only in the nature of a clarification, and it does not go against the intention of the Legislature. The reasons are given below. 16. I have already extracted Section 67(d) of the Act which says that, For the purposes of this Chapter, the value of taxable services, (a) to (c) (d) 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. [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the interpretation of Sec. 67(d) is absolutely clear and unambiguous. If the concerned circular had repeated something which was axiomatic, it cannot be said that the said Circular has travelled beyond the scope of Sec. 67(d) of the Act. 12. The learned Additional Solicitor General, Mr. V.T. Gopalan, Vociferously supported the circular and contended that there is nothing in the Circular which overrides the Act. He also pointed out that there was nothing binding about this circular and it can never be held to be binding on the Courts or authorities. The learned Counsel pointed out that unless such a specific case was brought in, it was futile to consider the scope of this circular. According to him, the writ petition itself was premature. The learned Counsel further argued that the very language of Sec. 67(d) of the Act was extremely to admit of any doubt. Besides this, the learned Counsel also took us to the definition of advertising agency and pointed out that a commercial concern which provided any service connected with the making, preparation, display or exhibition of advertisements would be held to be the advertising agency. The learned Counsel, therefore, argues a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial have not been separately indicated in the invoice as the Appellant renders a composite service and since value of goods sold have not been separately billed, the Appellant does not qualify to avail the exemption under Notification No. 12/2003-ST dated 20.06.2003. 11.2 In this regard, the invoice No. I-417 dated 02.06.2006 issued to M/s. Getit Infomediary Ltd. was examined and it is noticed that the Appellant has paid Service Tax on that portion of the bill relating to Hoarding /tie up charges which has been specified clearly and in respect of Flex Printing of the Hoarding, only VAT has been paid. Regarding issue at 9(i) above, we find that there are a catena of judgements wherein it was held that if VAT has been paid on the value indicated in the invoice, it tantamounts to sale on which no service tax is leviable. In the case of Image Creative Pvt. Ltd. Vs. Commissioner of Service Tax [2008 (9) STR 337 (SC)] it was held as follows:- 28. Payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the product as per instructions and specifications of the job work would not amount to rendering the service which can fall in the category of Advertising Agency . The relevant portion of the judgement has been reproduced below: 6. We have gone through the records of the case carefully. Advertisement, according to the understanding of laymen, is promotion of goods, services, companies and ideas. Modern advertisement is carried out in various ways and it is a very highly professionalised area. When a company wants to promote its product, normally, the work is entrusted to an advertisement agency. Advertisement is a highly creative work. Quite a bit of cerebral input is needed. There is conceptualisation, visualisation, designing, etc. While advertising, the intention is to influence the mind of the people who watch the advertisement. There are various ways of advertisement. Advertisement is done through books and magazines. There are ubiquitous advertisement hoardings in all the modern cities. Advertisement is done through radio and TV channels. Now let us turn to the definition of advertising agency as per the Finance Act, 1994 : Advertising agency means any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 1994. The Board s clarification mentioned in the Trade Notice is also squarely applicable. Hence, we allow the appeal with consequential relief, by setting aside the impugned order. Though the Hon ble High Court of Kerala reversed the decision of the Hon ble CESTAT, the Hon ble Supreme Court remanded the matter for de-novo proceedings to decide whether there was any conceptualisation, visualisation and designing. 11.3.2 Further, we find that in Hi-Tech Publicities Vs. Commissioner of Central Excise, Madurai reported in [2018 (9) GSTL 119 (Tri.-Chennai)], it was held that:- 7. Thus, the argument of the appellant that they simply fabricate signboards such as glow signboards, front lit boards, etc., on printed flex boards supplied by Pepsico containing the advertisement material and in the case of Indian Oil Corporation, they simply do the restickering of vinyl stickers, etc., finds support from the purchase orders. The appellants have also relied upon the Trade Notice dated 16-9-1999. In regard to activity of printing and publishing telephone directories, the Board had clarified that if no activity relating to making or preparation of an advertisemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertising material. 9. When an almost identical issue came before this Tribunal in the case of Star Neon Sign, the Tribunal held as under:- We find that the term advertising agency is defined in the Act and as per the definition the advertising agency is to mean any commercial concern engaged in providing any service connecting with the making, preparation, display or exhibition of advertising and includes advertising consultant. The appellants are only manufacturing the sign boards as per the requirements of their customers. Such an activity cannot be held to be advertising agency as the appellants are not rendering any advertising service. The person like the appellants cannot be called as advertising agency as they are only writing or preparing the sign boards at the behest of their customers. There is no evidence on record to show the relationship between the customers and the appellant is of advertising agency which is necessary for imposition of service tax. 10. The Tribunal also had occasion to consider the effect of the extended definition in the case of Zee Tele Films Ltd. and Star India (P) Ltd. The Tribunal held that the extended definition did not brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service , and mailing list compilation and mailing service , however as per Section 65A of the Act, essential character of service is defined from the service of advertising agency and in terms of Section 65A(2)(C) ibid. The service will merit classification as advertisement agency service . However, the adjudicating authority in para 11 of the impugned order has, after reproducing the definitions of advertisement , advertising agency and business auxiliary service , and mailing list compilation and mailing has without further justification merely concluded that service provided by appellants to Reader s Digest merits classification as taxable provided by advertising agency in relation to advertisement. 5.8. In the event, without going into further details of the dispute or quantification of tax liability, we hold that the impugned order to the contrary confirming the demand of service tax liability on the appellants under the category of advertisement agency service cannot sustain and will require to be set aside, which we hereby do. 11.3.6 In Adbur Pvt. Ltd. Vs. Commissioner of Service Tax, Delhi, reported in [2017 (5) GSTL 334 (Tri.-Del.)] it was held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which was to be advertised was already in the photographs supplied to the painter who merely painted the same matter on the walls. Similar contention that the activity of mere painting did not fall in the category of advertising agency found favour with the Tribunal in the case of Ajanta Fabrication v. Commissioner of Central Excise, Meerut (supra), in which, in the context of the activity of making hoardings, sign boards and signages, it was held that such services did not partake or include the services (designing, conceptualizing, visualizing) normally rendered by advertising agencies. Even in Zodiac Advertisers v. Commissioner of Central Excise, Cochin (supra), it was held that, making and preparation of the advertisement was the most important and difficult part as it involved conceptualization, visualization and designing. The printed material was only a product. Therefore, where mere screen printing was undertaken, it was held that, there was no creative activity. Mere manufacturing the product as per the instructions and specifications of the job work would not amount to rendering the service which can fall in the category of advertising agency . 9. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the case now projected, with regard to lack of proof of incurring of expenses on goods and materials which has been transferred to the recipient of the service provided, appears to be an afterthought, even on examination of the same on merits we have found it to be wholly unsustainable. There is no dispute that the decision as above is not relevant to the facts of these appeals. 11.5 Further, we find that the lower adjudicating in Para 17 of the impugned order computed the differential value from the Appellant s financial statements without analysing in detail whether the Appellant was indulging in making and preparation of the advertisements involving conceptualization, visualization and designing. As such, inference drawn and findings are devoid of merits in the light of various decisions rendered as discussed in above paragraphs. 11.6 After appreciating the evidence and following the judicial precedents, we are inclined to hold that the advertising materials like glow sign boards, flex printing, broachers, stickers, tags, posters, hand bills, signages, etc., which cater to the requirements of the specific customers, on which VAT is paid, is not leviable to Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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