2024 (11) TMI 288 - AT - Service Tax

Photography services raw material costs excluded from service tax valuation under bona fide belief precedent

Rajneesh Photo Sales Versus Commissioner of Central Excise and Goods & Service Tax, Chandigarh

CESTAT Chandigarh allowed the appeal, holding that extended period could not be invoked for service tax demand on raw material costs in photography ... Demand of service tax - cost of raw material utilized in providing services was not included - invoking extended period for issuing SCNs - Commissioner (Appeals) held that value of material consumed in providing the services is not includable for the purpose of charging service tax - HELD THAT:- We note that whereas the Tribunal in the case of Sood Studio Pvt. Ltd. [2008 (11) TMI 57 - CESTAT, NEW DELHI] has held that such value is not includable, while in the case of Aggarwal Colour Advance Photo System [2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)] the Larger Bench of the Tribunal has held otherwise. The fate of the departmental appeal on the same issue before this Bench is not known. However, under the circumstances, we find that when the different benches of the Tribunal can have different opinions necessitating the constitution of a larger bench, it is quite reasonable for the appellant to have bona fide reasons to entertain an opinion that the cost of materials used in photography services is not includable. Therefore, without going into the merit of the issue, we are of the considered opinion that extended period cannot be invoked and therefore, the impugned order cannot be sustained. Moreover, the submission of the appellant that if seen in totality, the service tax paid by them is an excess of the demand, also weighs in their favour; therefore, we hold that appeal is liable to be allowed on limitation. Demand of service tax alongwith interest and penalties on the allegation that the appellant have evaded service tax on the photographic services in respect of activities undertaken by them in printing the photographs and creating photo books/photo albums - We find that the issue is no longer res integra as has been decided by the Tribunal in the case of Venus Albums Co. Pvt. Ltd. [2018 (11) TMI 754 - CESTAT CHANDIGARH]. We also find that recently this Bench in the case of Thomson Press India Ltd. [2024 (9) TMI 1546 - CESTAT CHANDIGARH] has decided the case involving identical facts in favour of the appellant-assessee. Therefore, we have no hesitation in allowing this appeal. Change the name and address of the respondent - Allow the miscellaneous application and direct the Registry to change the name and address of the Respondent from “Commissioner of Central Excise & Service Tax, Chandigarh-I” to “Commissioner of Central Goods & Service Tax, Chandigarh, Central Revenue Building, Plot No. 19, Sector 17-C, Chandigarh 160017”. Issues:1. Appeal assailing impugned orders dated 18.03.2013 and 28.06.2019 passed by the Commissioner (Appeals).2. Appeal No. ST/58178/2013: Inclusion of the cost of materials in providing photographic services and invoking extended period for issuing SCNs.3. Appeal No. ST/61058/2019: Service tax evasion on photographic services and classification of activities as manufacture.Analysis:Appeal No. ST/58178/2013:The appellant, engaged in photography services, challenged the service tax demand in two SCNs. The first SCN sought service tax on raw material cost, while the second SCN alleged evasion. The Commissioner (Appeals) upheld the demand but set aside the penalty. The appellant argued that the SCNs were time-barred and relied on precedents where extended period was deemed inapplicable. The appellant contended that the value of material used in providing services should not attract service tax. The department argued for including material costs based on a different Tribunal decision. The Tribunal noted conflicting Tribunal decisions on material cost inclusion but ruled in favor of the appellant due to reasonable doubt and excess tax paid.Appeal No. ST/61058/2019:The Revenue issued a SCN for service tax evasion on photographic services. The Joint Commissioner confirmed the demand, interest, and penalties. The appellant argued that the activities amounted to manufacturing, not services. The Tribunal cited a recent case and a Supreme Court decision supporting the appellant's position. The Tribunal found in favor of the appellant due to the established precedent and recent decisions aligning with the appellant's argument.The Tribunal allowed Appeal No. ST/58178/2013 on limitation grounds and Appeal No. ST/61058/2019 on merits. A miscellaneous application by the Revenue for changing the respondent's name and address was also allowed.