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TMI Blog2024 (3) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... impose Penalty of Rs 1,02,51,252/- (One Crore, two lacs, fifty one thousand two hundred and fifty two) under Section 78(i) of Finance Act, 1994. 3. I impose penalty of Rs 10,73,910/- under Section 76 of F.A. 1994 as was applicable for the period 2007-08. 4. I impose penalty of Rs 10000/- under Section 77(i) of Finance Act, 1994 for non submission of list of records & accounts. 5. I impose penalty of Rs 1,50,000 ( Rs 10000*15 ST-3 returns) under Section 77(2) of Finance Act 1994 for not filing proper ST-3 returns in violation of provision of Section 65 & 70 of the Finance Act, 1994 ibid. 6. The demand to the extent of Rs 20,91,205/- (Rs twenty lacs ninety one thousand two hundred and five) raised against statement of demand No. 07/ADC/LKO/ST/201617 dated 07.04.2016 is also confirmed & shall be recovered from the party. Interest at appropriate rate under section 75 shall also be covered. 7. I also impose penalty of Rs. 2,09,120/- under section 76 read with section 78(B)of the Finance Act, 1994. 8. I also imposed penalty of Rs 20,000/- (Rs 10,000/- for each return) under section 77(2) for non filing of ST-3 return for the period 2014-15." 2.1 Appellants are registered wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax amounting to Rs 20,91,205/- including Ed. Cess and S.H. Ed. Cess for the period 201415 should not be demanded and recovered from them under Section 73(1) of Finance Act, 1994 for violation of section 68 of the Act ibid read with section 66/66B ibid and rule 6 of Service tax Rule, 1994. (ii) Interest should not be levied and recovered at applicable rate on the above amount of service tax including Ed. Cess and S.H. Ed. Cess under Section 75 of Finance Act, 1994. (iii) Penalty should not be imposed upon them under Section 76 Finance Act, 1994 for non-payment of service tax in accordance with the provisions of Section 68 of Finance Act, 1994 read with section 66/66B ibid and rule 6 of Service tax Rule, 1994. (iv) Penalty should not be imposed upon them under Section 77(2) of Finance Act, 1994 for non filing of service tax return." 2.6 Show cause notice and the statement of demand have been adjudicated by the impugned order referred in para-1 above. Aggrieved appellant has filed this appeal. 3.1 We have heard Shri Dharmendra Kumar learned Chartered Accountant appearing for the appellant and Shri Sandeep Pandey learned Authorised Representative appearing for the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale of space by the appellant to their client is an independent transaction and purchase of the same other than the purchase of the space by them from the newspaper agencies. From the records of the appellant. * it is evident that net margin between sale of space and purchase of said space ranges between 3.78% to 7.24%. * Whereas department has estimated income of appellant on the business of sale of space for advertisement in print media at 15%. During the same period this fact has laid to this demand. * The issue involved in the present case has been considered by Hyderabad Bench of this Tribunal in the case of M/s Varadhi Advertisers Pvt. Ltd. Final Order No. A/3061330168/2023 dated 04.07.2023 and has been settled in favour of the assessee. * In view of the above, the appeal needs to be allowed. 3.3 Arguing for the revenue learned Authorised Representative reiterates the facts recorded in the impugned order. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 Commissioner has in the impugned order framed following issues for consideration: 1) Whether party is indulged in providing "business Aux ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n gives them their essential character. Therefore I found that demand of Service Tax from the party under B.A.S is correct & proper. I found that by the Finance Act 2012, radical changes have been made in the Finance Act, 1994 by providing that service tax is payable on all services rendered in taxable territory except for "negative list" of service specified in Section 66D. Thus w.e.f. 01.07.12 service tax has become leviable on all the services which satisfy the definition of service inserted with effect from that date, except those specified under 66D. Accordingly vide circular No. 161/12/2012 dated 06.07.2012 accounting code for the purpose of payment of service tax under the negative list based comprehensive approach to taxation of service effective form 01.07.2012 [all taxable services - 00441089] was prescribed. However subsequently vide circular No. 165/16/2012 dated 20.11.2012 a list of 120 description of services for the purpose of registration & accounting code corresponding to each description of service for payment of tax was provided. But is was specified in the circular itself that description of taxable services given are solely for the purpose of statistical anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax which was clarified by the Boards vide its letter dated 31.10.96, PRO Eastern Railways Gorakhpur vide letter dated 31.10.2012 has clarified that no service tax is to be paid on print media advertisement published at DAVP rates. I found that party in attempt to justify short payment of service tax on services provided by them is trying to twist the meaning & misinterpret the language used in above said letters. Board's letter dated 31.10.96 (F.No. 341/43/96-TRU) is regarding clarification on scope of service tax on advertising, Courier & pager services. Para 10 of said letter read as under- A point has been raised whether Directorate of Audio & Visual Publicity (DAVP) in the Ministry of information & Broadcasting is liable to pay service tax on services rendered by it to the different Departments of the Central Govt. in relation to Govt. Advertisement. It is clarified that DAVP not being a 'commercial concern' is not liable to pay service tax. Clarification is in r/o services provided by DAVP not by any "Advertising Agency". Department of DAVP is not being liable to pay service tax not being a commercial concern. Party is a commercial concern & this clarific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under takes 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. news papers, 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. As discussed earlier party has stated that they were engaged in merely collection of material for publication without making, preparing, displaying, exhibiting or canvassing and has been observed that party is not getting any amount in r/o this activity, therefore the consideration for services provided by the party is only the commission earned from media. I observed that commission of 15% is being retained by the party & 85% of the amount collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4%., actually 1.94% is 15% of 10.3%, which is the applicable rate of service tax at the time of issuance of such invoices. This type of practice is normally used by the provider of such services, on which abatement of certain percentage is available. From this it is evident that party was well aware that 15% of value is taxable & intentionally has not paid due tax. Regarding party's submission that service tax paid shown in SCN is less than actually paid. I found that the party has paid penalty and interest & same has not been considered in computing short paid service tax which is correct. Regarding quantification of demanded service tax. I found that taxable amount has been arrived out from the figure of income from operation shown in profit and loss account @ 15%, As the figures shown in income from operation is the net amount received by the party after deducting the undue discount (against the terms and condition of accreditation policy framed by INS) it do not represent total amount of commission retained/accrued to party, Actually the correct quantification of service tax should be as under ....... From above discussion, I came to conclusion that gross commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ed. Cess & H. Ed. Cess Service Tax payable Service Tax Paid Differential Service Tax liability 1 2 3 4 5 6 7 2007-08 56258831 9928029 12.36% 1227104 36161 1190943 2008-09 75280893 13284863 12.36% 1642009 158849 1483160 2009-10 70516209 12444037 10.30% 1281736 46962 1234774 2010-11 88810242 15672396 10.30% 1614257 56537 1557720 2011-12 102004125 18000728 10.30% 1854075 208270 1645805 2012-13 98960961 17463699 12.36% 2158513 89082 2069431 2013-14 10426469 18400142 12.36% 2274258 2274258 2014-15 96537898 17036100 12.36% 2105662 2105662 Total 122229994 14157614 595861 13561753 Though the impugned order computes the demand as indicated in the table above we find that show cause notice and statement of demand, computes the demand in the following manner: Period Amount shown as "Press Release & Job Work Receipt" in the balance sheet 15% of value Received Rate of Service Tax Including Ed. Cess & H. Ed. Cess Service Tax payable Service Tax Paid Differential Service Tax liability 1 2 3 4 5 6 7 2007-08 59874357 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd impugned order presume that commission earned by the appellant is 15 %. This fact is not established either by the figures in the balance sheet nor evidenced by the invoices of the print media on appellant and the appellant on their clients. Thus the manner in which the demand has been computed by the impugned order and the Show cause Notice/ Statement of Demand are at variance and do not inspire confidence. In fact the actual discount should have been worked out on the basis of receipts and payments which are available in the audited balance sheet. 4.4 On classification of Services: Before we proceed further, we want examine the set of sample invoices produced by the appellant before us during the course of argument. The same were also produced before the adjudicating authority for his consideration:- 4.5 On perusal of the above documents, it is evident that North Eastern Railway (NER) has raised an advertisement order upon the appellant specifying the category of the advertisement and newspapers in which the same was required to be published. News Paper Agencies in which the said advertisement was published have raised the bill on the appellant for publishing the said agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Society and gets concessional rate for getting the advertisements published in the print media, it cannot be concluded that this discount being given is on account of any commission paid by the print media. In this case, it is seen that it is a kind of trading activity in services. The Appellant first books the space by getting certain discount and sells the same at a higher rate to their clients. Therefore, the discount being received by him from the print media is nothing but a profit margin and not any commission received from the print media. 7. Coming to the case law cited by the Appellant in EURO RSCG Advertising Ltd (cited supra), the Tribunal has held as under: "2. The appellants provide advertising services to their various clients. In order to provide the above services, they in turn, get in touch with media for booking of time slot on various satellite channels to their clients. As per industry practice, the Broadcasting agency provides 15% discount from their Tariff rate to the appellants......... . . . In the present case, a person or an organization who wants to advertise their product approaches an advertising agency. Therefore such a person/organizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on these amounts by invoking larger period.... 4. The learned Chartered Accountant submits that the above cited case along with the case of M/s. Euro RSCG Advertising Ltd. v. The Commissioner of Service Tax, on this very issue, was decided by this bench in assessees favour. He produced a copy of the Final Order Nos. 60 & 61/2007 dated 27-12-2006 [2007 (7) S.T.R. 277 (Tribunal)] and prays for following the ratio by allowing the appeal. He points out that the Tribunal has clearly held that what was received was not taxable service and it was not a commission. The same facts are seen in the present case and prays for allowing the appeal. . . . 6. On a careful consideration, I notice that the facts in the present case are identical to the one decided by the Division Bench in the case of M/s. Euro RSCG Advertising Ltd. and M/s. Marketing Consultants & Agencies Ltd. v. CST by Final Order Nos. 60 & 61/2007 [2007 (7) S.T.R. 277 (Tribunal)]... . . Respectfully following the ratio of the above noted judgment, the impugned order is set aside and appeal allowed with consequential relief, if any." [Emphasis Supplied] 7. In the case of McCann Erickson (India) Pvt Ltd (cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Service tax under business auxiliary service. Poornima is engaged only booking of space or time. Whenever a request is received, Poornima simply books the space in the newspaper or books the time in the media and thereafter collects the amount paid to the media or newspaper. For this service provided to the client, service charge is collected by them. In fact Poornima gets a discount from the media/newspaper and they pass on a portion of the discount to the clients and retain balance which is their remuneration for the service provided by them. The revenue is in appeal against the decision of the Commissioner that the service provided by the appellant is not an advertising agency service. According to the Revenue, the scope of the service extends not only to any service connected with advertisement but also any service connected with display or exhibition of advertisement. However, we find that the master circular issued by the Board itself is against the Revenue and the service provided by the appellants is admittedly only in respect of booking the space or time. We agree with the learned Commissioner (Appeals) that the master circular covers the case of the appellants and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Tax is exigible. This Tribunal held that there was no evidence on record to the effect that any amount was received by the appellants from the media and ruled that amounts received by the service provider is alone liable to service tax and not amounts received from others. This Tribunal (in Euro RSCG Advertising Ltd.) held that the adjudicating authority failed consider the relevant facts or the legality of the entire issue insofar as issue of cash discount and concluded that cash discount is an income from payment of bills in advance and not from the services rendered to clients, therefore the same does not attract Service Tax as advertising agency service. [Emphasis Supplied] 10. In the case of Grey Worldwide (I) Pvt Ltd (cited supra), it is held as under: "4.1 From the nature of the transactions undertaken in the present case, it is seen that the appellant is rendering advertising agency services to various clients who are the advertisers. On behalf of these advertisers, the appellant has placed advertisements in the print/electronic media. The choice of the print/electronic media is with the advertiser and not with the advertising agency, who merely coordinates between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Malar Publications Ltd is distinguishable and cannot be applied to the facts of the present case. 13. Accordingly, we hold that the confirmed demand on the ground that the Appellant was providing Business Auxiliary Services to the print media cannot legally sustain. Therefore, we allow these Appeals filed by the Appellant with consequential relief, if any, as per law." 4.9 We find that issue involved in the matter is squarely covered by the afore-stated decision of the tribunal. In view of the above decision we do not find any merits in the impugned order demanding service tax on the services provided by the appellant by classifying their services under the category of Business Auxiliary Services. The services provided by the appellant would have merited classification under the category of advertising agency services and the appellants were required to pay service tax under this category on the income received under this category. We refer to Clause 65 (105) (zzzm), of Finance Act, 1994 as inserted with effect from 01.05.2006 read as follows: "(zzzm) to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automated teller machines, internet; etc. 7. It is the admitted case that the assessee was not assessed to tax by the adjudication order in respect of any transaction involving sale of space for advertisement in the print media. 8. The assessee is admittedly a commercial concern engaged in providing advertisement services to a client, in relation to advertisement i.e. in relation to sale of space or time and was not charged for sale of space for advertisement in the print media. He receives requisitions for arranging advertisements either directly by an advertiser or from another advertising agency and is also engaged on occasions in passing on material received from an advertiser directly without any value addition, to the advertising medium or in some instances by making value additions by way of advertising inputs; and in case of transactions involving another advertising agency based on the advertising material so received from the principal agency to the advertising media. 9. On an interactive analysis of the provisions of Section 65(2); 65(3); 65(105)(e) and 65(105)(zzzm) read with the explanation (1) thereunder, the conclusion is irresistible that the activity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king, preparation, display or exhibition of advertisement and includes an advertising consultant". Sub-section (105) of Section 65 read with clause (e) thereof defines a taxable service (in the context) as a service provided to any client, by an advertising agency in relation to advertisement, in any manner and clause (zzzm) of Section 65(105) defines the relevant taxable service as service provided to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but excluding sale of space for advertisement print media and sale of time slots by a broadcasting agency or organisation. Explanation (1) to Section 65(105)(zzzm) defines the expression "sale of space or time for advertisement" to include providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music album, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet, etc. 7. It is the admitted case that the assessee was not assessed to tax by the adjudication order in respect of any transaction involving sale of space f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 7,11,804.78 and Education Cess of Rs. 3692.90 for the period 1-4-2001 to 31-12-2005 had been rightly imposed on the assessee appellant besides recovery of interest on the confirmed demand." It is noted in the show cause notice and the impugned order that appellant were paying service tax on the income earned that is net surplus i.e. difference of payment received and the payment made. The demand made by classifying the services provided under the category of Business Auxiliary Services on a notional value of the commission received cannot be sustained. 4.10 On the issue mentioned at Sl. No. 3,- Whether the Services provided by the Appellant would merit classification as ―Space Selling for Advertisement‖, to be put under negative list with effect from 01.07.2012: Section 66D (g) of the Finance Act, 1994, w.e.f 01.07.2012 reads as follows: SECTION 66D. Negative list of services.- The negative list shall comprise of the following services, namely :- (g) selling of space for advertisements in print media; 4.11 Clarifying the position with effect from 01.07.2012, Education Guide issued by the Board at 4.7.1 clarified as follows: "4.7.1 Sale of space of ..... 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