TaxTMI 
TaxTMI 
2024 (2) TMI 196
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.....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., iii. sales related activity, i.e., printing of wall posters, bills....
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....he 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 76,77 and 78 of Finance Act, 1994. and (ii) to recover the CENVAT Credit of Rs. 2,34....
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....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 suppression involved. The notices were issued based on financial data available in the Balance Sheet which were availabl....
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.... 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 etc., were not placed before the Tribunal/Adjudicating Authority despite being called upon to do so. There is a specific finding to that effect in the High Court's Order impugned....
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....ax 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 media is exempted and not taxable. 6.10 It was submitted that wall painting of advertisements at the behest of customers was not taxable as no creativity is involved therein in the light of the decision in the case of Dhanushree Publicity Vs. Comm....
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...., 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 services. The Appellant, in the case of advertisement through FM/Visual media, at the behest of their clients were availing the services of FM and TV channels including satellite channels and charged service tax along with charges for broadcasting the advertisement. As it was a part of their advert....
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....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 the period, exempt and taxable services, Service Tax paid on taxable services. 10.2 In order to discuss the issues involved in these appeals, it is expedient to reproduce the definitions of "Advertisement", "Advertising Agency" and "Taxable Service" as defined in the Finance Act, 1994. (i) As per Section 65(2) of the Finance Act, the term "Advertisement" includes any notice, circular, labe....
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....he 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 find that 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. 10.6 The above Circular was disputed in writ petition regardi....
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....er 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 language but, we cannot ignore firstly the total difference in the taxable service as provided by Section 67(a), (h) and (k) on one hand and Sec. 67(d) on the other. The very nature of those services is different and again, where the language of Sec. 67(d) of the Act, itself is clear and beyond any ambiguity so as to include any kind of commission earned by the advertising agency as a part of the gross amount charged by that agency from its clients then, there would be no question of our looking to the other provisions of the same Act....
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....verriding 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 of the service for which service tax was paid and for which sales tax only paid and method of invoicing is confusing. Exact nature of service rendered has not been furnished either in those invoices or in copies of purchase orders produced by them. It was held that in respect of Hoardings, the Appellant has been found to pay service tax and VAT and in respect of cloth banners only VAT has been paid and in respect of invitations neither VAT/ Service tax has been paid and in respect of wall paintings no service tax has been paid. It was also observed th....
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....f 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. No costs." 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. 11.3 .1 In the case of Zodiac Advertisers Vs. Commissioner of Central Excise reported in [2006 (3) STR 538 (Tri.-Bang.)] 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 being them un....
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....roducts. 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 directions of the advertiser, cannot be called as an Advertisement agency in the absence of any creative activity and services relating to preparation, making and display of advertisement on his part. To be called as an 'advertising agency', all the activities mentioned in the definition should be carried out by the person. We can provide one analogy. There is always a difference between a fashion designer and a tailor. A fashion designer may not do the actual stitching. He or she may provide all creative input in designing garments. A tailor simply executes the design. In our view, there is no evidence to show that the appellant is under....
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....esigning, 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 printing a readymade advertisement from the advertisers and publishing the same in the directory. Their activity is similar to those carried out by newspapers or periodicals, as such this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc., then they will be liable to pay service tax on charges made thereon." The submission is that the above clarification leaves no room for doubt that 'making or preparation of advertisement' means activities like designing, visualizing, conceptualizing etc. and not the physical activi....
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....nts. 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 rendered by advertising agency was of a composite nature, it was held as follows:- "5.6. In the circumstances, we are certainly not enthused by the attempt of the department to straightjacket the appellants into the category of 'Advertising Agency Service'. This is not to say that activity provided by appellants does not fall under any taxable category listed out during the period of dispute in the Finance Act, 1994, but advertising agency service itself they certainly are not. 5.7 It is interesting to note that while the S.C.N. at para 4.1 allges that appellants have provided composite service to Reader's Digest which have element of taxable service in the category of 'advertising agency service'....
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....dvertising 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. Accordingly, we find no merit in the impugned order in confirming service tax liability against the appellant. Apart from the above, we also note that the issue has been clearly covered by the Board circular dated 1-11-1996 and the decision of Hon'ble Madras High Court in Adwise Advertising Pvt. Ltd. (supra) discussed earlier in this order. As such, the appellant will succeed in the appeal with reference to the demand of service tax." 11.3.7 On the issue of wall painting service undertaken whether can be subjected to service tax or not, the decision rendered in the case of Dhansree Publicity Vs. Commissioner of Central Excise reported in [2008 (10) STR 209 (Tri.-Del.)] it was held as follows:- "8. In the present case, the matt....
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....fidavit 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 consideration received towards Retreading charges to avoid tax burden. The verification of invoices of the Appellant for the period from Jan.-2007 to March-2007, the officers noticed that the Appellant have shown material cost, patch cost and misc. charges i.e. Labour charges separately in their invoices. However, on the follow-up action the customers of the Appellant revealed that they have neither purchased nor received raw materials intended for Retreading and they had paid only the Retreading charges for carrying out the Retreading activity." The invoices which the appellant assessee has also brought on record by way of illustration show the breakup of the gross value received. There is again no contest to the same. Leaving aside the question that the case now project....