TaxTMI 
TaxTMI 
2024 (2) TMI 196
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.... 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/- during the said periods, under proviso to Section 73(1) of the Finance Act, 1994 by invoking the extended period and also levy of interest under Section 75 and imposition of penalties under Sections 77(e) and 78 of the Finance Act, 1994. 2.1 Brief facts of the present appeals are that Ad-Inn Advertising, a Private Limited Company w.e.f. 23.01.2007 was engaged in rendering taxable services under the category of Advertising Agency service to various clients. Earlier to till 23.01.2007, Ad-Inn Innovative Advertisers was doing into business activities as a proprietary concern and Mr. P. Ramesh was its proprietor. Same operation was continued except for change in the constitution. 2.2 The appellants are undertaking basically, the following advertising services:- i. Taxable services such as conducting events, road shows, promotional activities, designing and erection of hoarding, etc., ii. Exempted services, wall painting, etc., ....
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....,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 Appellant had taken CENVAT credit of Rs. 2,34,067/- during the period 2006-07 and 2007-08 based on invoices raised by various broadcasters which were in relation to broadcasting of advertisement for their clients. The department was of the view that such services do not qualify as input services for the Appellant and therefore the CENVAT credit availed was inadmissible under the provisions of CENVAT Credit Rules, 2004(CCR). Therefore, it appeared that the CENVAT credit availed erroneously was liable to be recovered under Rule 14 of CCR read with Section 73(1) of the Finance Act. 5.1 A Show Cause Notice No. 03/2011 dated 03.11.2011 was issued to the Appellant by the Commissioner of Central Excise and Service Tax, Madurai proposing (i) to demand the Service Tax of Rs. 1,14,35,610/- on Advertising Agency Service for the period from 01.04.2006 to 31.03.2008 besides proposing to levy interest under Section 75 and to propose penalties under Sections....
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....d 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 forum in appeals ST/40404/2015 and ST/40575/2015. 6.1 Ld. Advocate Shri S. Murugappan representing the Appellant submitted that prior to Show Cause Notice No. 3/2011 dated 03.11.2011, a demand notice was issued for the period from 2002-2006 invoking extended period and since the facts were known to the Department, the other three notices alleging suppression are not sustainable since the department was already aware of the issue in view of the following Supreme Court judgements: (i) Nizam Sugar Factory Vs. Collector of central Excise, AP reported in [2008 (9) STR 314 (SC)] (ii) ECE Industries Limited Vs. Commissioner of Central Excise, New Delhi reported in [2004 (164) ELT 236 (SC)]. 6.2 It was averred that all facts of rendering of services either taxable or non-taxable was intimated to the department by way of filing of periodical ST-3 returns and therefore the notices were hit by limitation as there was no....
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....turing 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 without the activities relating to making or preparation of an advertisement like designing, visualising, conceptualising, etc. there is no liability to pay service tax on the charges made thereon. 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. The Hon'ble Supreme Court, in the above case, reported in [2009 (14) STR 449 (SC)] held as follows:- "2. Having heard learned counsel on both sides, we are of the view that an important question of law does arise in this case, namely, whether an assessee comes within the definition of the word 'advertising agency' as defined in Section 65(3) of the Finance Act, 1994 as amended. 3. However, on perusing the record, we find that material documents, particularly, orders and purchase materials, books of accounts et....
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....,728/- 7,89,279/- In this regard, the decision of the Hon'ble Supreme Court in the case of Image Creative Pvt. Ltd. Vs. Commissioner of Service Tax [2008(9) STR 337(SC)] was cited, wherein it was held that payments of service tax and VAT are mutually exclusive. It was submitted that in numerous cases, it was decided by various forums that when sales tax was paid no service tax liability arises. 6.9 The Ld. counsel has also argued that the Appellant while collecting advertisements for display in newspapers, charge their clients/ customers for the whole amount and remit the same to newspapers after retaining some amount towards commission on which Service Tax was paid and duly declared in the ST-3 returns filed by them and in this connection relied on the judgements in Adwise Advertising Pvt. Ltd. [1998 (97) ELT (35) (Mad.)] and Spring Advertising Pvt. Ltd. [2014 (36) STR 883 (Tri.-Mum.)] This activity of the Appellant was purely as a pure agent. Without considering that the Appellant had rightly discharged Service Tax liability, the lower authority has held that there was no mention about any such commission in the invoices. Further, the advertisement in print med....
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.... credit of service tax paid on input services. The services rendered by the Appellant pertained to Advertisement Services and the input services were telephone services, maintenance, management and repair services, Broadcasting Service, Courier Service, Insurance service, etc. Of the activities, it was alleged in the impugned order that the Appellants were acting as pure agents and hence not eligible to avail the credit of Service Tax paid to the channel operators and FM operators. The Appellants were advertising agencies and they avail the services of broadcasting agencies and hence the services of broadcasting were an input service. At no point of time they acted as pure agent for clients as the prevailing relationship between them was service provider-client relationship. There was no restriction in the CENVAT Credit Rules that the input and output service could fall under one and the same category. Nowhere in the Rules, it was prescribed that further work should be done to qualify a service as an input service. At no point of time, the appellant were acting as intermediaries and hence the Appellants were rightly eligible to avail credit of Service tax paid by them on input serv....
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.... considered the submissions and evidences on record. 9. The following issues arise for decision in this appeal: i. whether the services rendered by Ad-inn in those transactions where they had not paid service tax but had paid only VAT and where they paid neither service tax nor VAT, are taxable under the category of 'Advertising Agency' as defined under Section 65(3) of the Act; ii. whether credit of service tax taken by Ad-inn in respect of broadcasting of advertisement which are not their input services, is admissible under CCR, and iii. whether the demand is time barred and extended period of limitation can be invoked in this case for the reason that demand of tax for a part period from 04/2006 to 06/2006 was already covered in the Show Cause Notice issued earlier. 10.1 We find from appeal records that the Appellant was registered with the department for Advertising Agency service and were paying service tax on conducting events, road shows, promotional activities and hoardings and also on commission earned on advertisements in newspapers, TV, FM and were also filing ST-3 returns periodically, declaring therein the total Revenue earned during....
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....into force on 01.11.1996. We find it relevant to refer to CBEC Instructions issued vide F.No. 341/43/96-TRU dated 31.10.1996 to clarify as to how the same has to be computed as follows:- "It is further to be clarified that in relation to advertising agency, the service tax is to be computed 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 such 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 T.V. 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." We fin....
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.... 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 strengthened in view of the definition of `taxable service' as defined under Section 65(16) of the Act. As per the said Section, `taxable service' so far as advertising agency is concerned, is stated as `any service provided to a client, by an advertising agency in relation to advertisements in any manner' [Emphasis supplied]. This also strengthens the argument put forward by respondent." 10.7 In writ appeal on the same issue, a 2 member bench of the Hon'ble High Court Chennai dismissed the Writ Appeal and confirmed the above judgement which has been reported in [2001 (131) E.L.T. 529 (Mad.)]. The relevant portion of order of the bench has been reproduced below:- "11. There can be no dispute that there is such a specific lang....
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.... on behalf of the state. 13. The learned senior Counsel for the appellant then relied on the law laid down by the Apex Court in Adwise Advertising v. Union of India and Others - (AIR 1994 SC 2416). The judgment is stated only for the purpose of canvassing that circulars of the Central Board of Direct Taxes cannot detract from or override the provisions of the Act. We have absolutely no difficulty on this proposition, but, we have to point out that even if this can be said to be a circular under the Act, it does not have the effect of overriding or detracting from any of the provisions of the Act. The judgment is, therefore, of no use to the learned Counsel" The above judgement was again reiterated by the Hon'ble Madras High Court in [2006 (2) STR 239 (Mad.)]. 10.8 Following the CBEC instructions and the judicial precedents above, we are of the considered opinion that 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. 11.1 We find that the lower authority in the impugned order has held in Para 13.1 that there is no difference between the description o....
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....f India & Anr. [(2003) 3 SCC 239] has expressly been overruled by a Three Judge Bench in Bharat Sanchar Nigam Ltd. (supra) stating : "78. But if there are no deliverable goods in existence as in this case, there is no transfer of user at all. Providing access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate. Of course the toll payer will use the road or bridge in one sense. But the distinction with a sale of goods is that the user would be of the thing or goods delivered. The delivery may not be simultaneous with the transfer of the right to use. But the goods must be in existence and deliverable when the right is sought to be transferred. 79. Therefore whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. To the extent that the decision in State of U.P. v. Union of India held otherwise, it was, in our humble opinion erroneous." 35. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The Appeal is allowed. N....
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....ng and preparation of the advertisement is the most important and difficult part as it involves conceptualisation, visualisation and designing. The printed material is only a product. To produce the product, several input services are required and these services are rendered by Advertisement Agencies. In the present case, the appellants merely undertake the screen printing of the advertisement hoarding. In other words, they are not part of any creative activity. The actual advertisement agencies develop the concept for the advertisement and provide service to the concerns for developing the designs for the purpose of advertising their products. It can also be appreciated that in any advertisement, various agencies may be involved. The appellant is getting the work order for making items such as vinyl stickers, corrugated light boxes, PVC balloons, vehicle tyre stepney covers along with the art work given. The appellant merely manufactures the products as per the instructions and specifications of the job undertaken. Moreover, the appellant is not carrying out any exhibition of advertisement. It is seen that the appellants who merely manufacture screen printed products as per the di....
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...., on facts, we have to say that there is no evidence before us to establish that the appellants are involved in any making or preparation of an advertisement such as designing, visualizing, conceptualizing, etc., to fall under the definition of 'Advertisement Agency Service'. The demand therefore raised alleging that appellants have rendered advertising agency service is therefore unsustainable." 11.3.3 In Ajanta Fabrication Vs. Commissioner of Central Excise, Meerut reported in [2006 (4) STR 605 (Tri-Del.)] it was held as follows:- "8. The appellant's contention is that it is a mere manufacturer/maker of signage boards. It does not undertake designing, visualizing or any of the activities carried out by an advertising agency. Instead, it does the physical part of painting, writing, manufacturing etc. It is the appellant's contention that the physical preparation and re-production of advertisement material remains excluded from the levy in terms of board circular dated 16-8-99. The portion relied on may be read:- "In case of persons who are printing and publishing telephone directories, yellow pages or business directories, their activity is essentially of prin....
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.... the case of Market Chase Advertising Vs. Commissioner of Central Excise, Madurai reported in [2008 (10) STR 598 (Tri-Chennai)] it was held as follows:- "3. After considering the submissions of both sides, the appellants seem to have made out a firm case against the impugned demand of service tax. The case law cited by learned Counsel is to the effect that, for a person to be recognised as "advertising agency" as defined under Section 65 (3) of the Finance Act, he should be shown to have made or prepared advertisements. The trade notice cited by counsel clarified that, in the making or preparation of advertisements, there must be conceptualisation, visualization and designing of advertisements. This trade notice was noted by the Tribunal in the said cases and it was held that, unless these aspects of an advertisement were shown to exist, it cannot be said that any advertisement was made or prepared. In this view of the matter, the appellants cannot be held to have satisfied the requirements of 'advertising agency' defined under the Act." 11.3.5 In the case of William (LEA) India) Pvt. Ltd. Vs. Commissioner of Excise, Chennai-IV, wherein it was disputed that the service ....
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....uthority and the Revenue has accepted the findings of the Original Authority. We note that in the orders dated 2-3-2017 and 25-7-2016, the Original Authorities examined the disputed issues at great length. It is noticed that the role of the appellant as a "pure agent" in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 has been examined in full detail. The Original Authority, after recording the satisfaction of 8 conditions mentioned under Rule 5(2), held that the appellants have fulfilled all the conditions of a pure agent acting on behalf of M/s. Dabur. The Original Authorities, in both these proceedings with respect to the appellants, for later periods, categorically held that the appellants being an advertising agency and a pure agent is not liable to pay service tax on amount payable to media companies on behalf of their clients. The commission received by the appellant only would be chargeable to service tax. It is clear that on the very same set of facts the service tax liability of the appellant, as demanded in the present proceedings, have been dropped for the subsequent periods by the Original Authorities. We are in agreement with these findings.....
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....thority has in Para 15 adverted to the judgement in the case of Safety Retreading Company Ltd. Vs. CCE, Salem to hold that the Appellant is not eligible to avail the benefit of Notification No. 12/2003-ST. We are not able to agree to the findings of the adjudicating authority as the above judgement has been set aside by the Hon'ble Supreme Court in [2017 (48) S.T.R. 97 (S.C.)] wherein it was held as follows:- "13. Besides the above, the affidavit of the learned Commissioner, referred to above, proceeds on the basis that the appellant assessee is also liable to pay service tax on the remaining seventy per cent (70%) towards material costs in addition to the 30% of the retreading charges. This is clear from the following averments made in the said affidavit of the learned Commissioner: "The relevant bills showed that the Appellant had paid service tax only on the labour component after deducting 70% towards material cost on the gross tyre Retreading charges billed and received for the period from 16-6-2005. In short, they have paid service tax only on the 30% of the tyre Retreading charges received from the customers, by conveniently omitting 70% of the consideratio....
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....hannels who charged service tax along with charges for broadcasting the advertisements. As it is a part of their advertisement work, it is an input service. The only condition for availing credit on inputs / input services is that the said services should be used directly or indirectly in providing the output service and in their case, the Appellant have directly utilised the services of broadcasting agencies and other advertising agencies to provide the output services and hence they are eligible to avail the service tax paid on the said service providers. We are not inclined to agree with the findings in the impugned order that the Appellants were acting as pure agents and hence not eligible to avail the credit of Service Tax paid to the channel operators and FM operators. The Appellant is an advertising agency and so they can avail the services of broadcasting agencies and hence the services of broadcasting are an input service. At no point of time, the appellant were acting as intermediaries and hence the Appellants are entitled to avail the credit of Service tax paid by them as input services. 13. On the issue of invocation of extended period, we find that the appellant was....