Customs, Excise and Gold Tribunal - Mumbai
Zee Telefilms Ltd. And Star India (P) ... vs Commissioner Of Central Excise ... on 13 February, 2006
Equivalent citations: 2006(110)ECC582, 2006ECR582(TRI.-MUMBAI), 2006[4]S.T.R.349
ORDER S.S. Sekhon, Member (T)
1.1 These appeals, filed against a common Order-in Appeal No. BR/07 to 08/m-IV/2005 dated 25.1.2005 passed by the Commissioner of Central Excise (Appeals), Mumbai - IV are being disposed by this common order. By the impugned Order, the Commissioner (Appeals) upheld the demand of Service Tax, on the amounts received for activities undertaken for the principals. (who are broadcasting agencies not having office in India) as an 'advertising agency' service provider.
1.2 The details of the impugned order are tabulated below:
Particular M/s. Zee Telefilms M/s. Star India Date of SCN 28.12.2001 1.12.2000 and 21.11.2001 Period of dispute 1.11.1996 to 15.7.2001 1.11.1996 to 31.3.1999 1.4.1999 to 15.7.2001 Amount of Service Tax Rs. 14,75,89,500/-
Rs. 7,66,13,907/-
demanded Penalty Rs. 14,75,89,500 + Rs. 500 +Rs. 1,000 + (Rs. 200 for Rs. 7,66,13,907/- + Rs.
every day of delay till the 500+ Rs. 1,000+ date of payment of service (Rs. 200 for every day of tax) delay till the date of payment of service tax) Interest Under Section 75 - not Under Section 75 - not quantified quantified.
2.1 Activities undertaken by M/s. Star India Pvt. Ltd. (hereinafter also referred to as the appellants) are recorded in Para 13 of the impugned order-in-appeal & the relevant portion is extracted below:
(1) By M/s. Star India Pvt. Ltd. as per agreements entered into between M/s. Star Advertising Sales BV of Netherlands and M/s. star India Pvt. Ltd. [the Appellant No. 2] and agreement between M/s. Satellite television Asian Region ltd., Hongkong and M/s. Star India Pvt. Ltd. [the Appellant No. 2] a. to solicit and book advertisements and forward by facsimile or telex each advertiser's requisition for telecast of its advertisements to STAR.
b. The representative shall provide STAR with ready to broadcast advertising materials to be included in the programme in a manner which meets the technical specification established by STAR.
c. To deliver the invoice raised by STAR TV for the advertisements telecast, collect payments from the advertising agencies/ clients remit the same to STAR TV with necessary permission from Reserve Bank of India.
d. Submit periodical report to STAR TV on the market and representative advice with regard to the market.
e. Conducting credit investigations of advertisers.
f. Render such information, advisory and supervisory services in matters of research and promotion as may be practicable and reasonable for representative or its research and promotion organization.
g. Co-operate fully with STAR TV in promoting and advancing its standing as television advertising medium;
h. Assisting representative in acting as an advertising representative for STAR for discharging the aforesaid responsibilities, the representative should be paid commission of 15% of "Net Billed Advertising", actually collected by it or recovered by STAR for advertisements solicited by the representative during the term of agreement.
2.2 Nature of activities undertaken by Zee Telefilms (hereinafter also referred to as ZTL) for Asian Broadcasting (hereinafter referred also as ATL). The activities undertaken by the appellants are recorded in Para 13 of the impugned, order-in-appeal (Star India). The relevant portion is extracted below:
1. By M/s. Zee Telefilms Ltd. as per agreement entered into between M/s. Asia today ltd. Mauritius and M/s. Zee Telefilms Ltd. [the Appellants No. 1] a. ZTL shall supply the programming and dubbed programming in languages specified by ATL on a video suitable for the channel and capable of broadcasting.
b. Programming shall be either produced by ZTL or purchased by ZTL or the rights thereto otherwise licensed by ZTL.
c. ZTL shall identify ATL against all claims, liabilities or losses arising in relation to any alleged infringement of copyrights, broadcasting or other rights, in relation to the programming.
d. ZTL shall retain the copyrights and all broadcasting and other intellectual property rights.
e. ZTL will be solely responsible for providing the programming and dubbed programming and if any their party provide any sponsored programme.
f. ZTL shall deliver programming and dubbed programming to ATL, CIF Hong Kong.
g. ZTL shall maintain records relating to performance of the agreement which may be reviewed and audited by ATL or its professional accountants on reasonable notice and at all reasonable times.
h. ZTL shall obtain any required registration and approvals from Government of India's various departments and Associations for production, development and acquiring rights of programme software including feature films, serials, music and entertainment programmes and for export thereof.
i. ATL shall pay to ZTL all costs plus an amount equal to 10% of the total amount of the cost for the 1st five years of the agreement and thereafter 15% of the total amount of the costs. [Costs shall include all amounts expended by ZTL in producing and delivering programming and dubbed programming.] j. ZTL shall collect information relating to the advertisers wanting to advertise their products and services on any of the channels and ZTL shall convey such details and information forthwith to ATL to enable them to sell advertisements and sponsorship on the channels and collect advertisements from advertisers in India and dispatch the same to ATL.
k. ZTL shall potential advertisers with information regarding advertising on any of the channels.
I. In case of the advertisers holding Exchange Earners Foreign Currency Accounts, ZTL will ensure that, all advertisement materials, video tapes, cassette with respect to such advertisements on any channels are directly dispatches by the advertisers to ATL. ZTL will follow up and assist such advertisers in complying with any formalities required under the India Laws, and obtaining any applicable consents necessary to enable the advertisers to dispatch the advertisement material directly to ATL and to directly remit the due advertising revenue to ATL.
m. In case of advertisers other than those opting to pay from EEFC Account, ZTL shall collect the advertisement materials, video tapes, cassettes, etc and dispatch the same to ATL. In case of such advertisers ZTL shall collect and hold advertisement revenue in trust and remit the due amount after obtaining RPI permission.
II. By M/s. Zee Telefilms Ltd. as per the agreement entered into between M/s. Expand Fast Holdings Ltd and M/s. Zee Telefilms Ltd [the Appellant No. 1].
a. ZTL shall collect information relating to advertisers wanting to advertise their products and services on the channels and ZTL shall convey such details and information forthwith to EXPAND.
b. ZTL shall provide potential advertisers with information regarding advertising on MUSIC ASIA, ALPHA TV MARATHI, ALPHA TV GUJARAT, ALPHA TV BANGLA 7 & ALPHA TV PUNJABI channels.
c. ZTL shall ensure that all advertisement materials, video tapes, cassettes with respect to such advertisements on the channels are directly dispatches by the advertisers to EXPAND in Singapore.
d. ZTL shall be paid a fee equal to 8.5% of the sum equivalent to the advertisement tariff otherwise payable by the advertisers calculated by reference to the appropriate rate card.
2.3 Extract of the relevant statutory provision of Chapter V of Finance Act, 1994 relating to advertising agency service, as they exist, at the material time are:
(i). Section 65(2) defines "advertising agency" as under:
advertising agency" means, any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisements and includes an advertising consultant.
(ii) Section 65 (48) defines "taxable service" as under:
taxable service" means any service provided.
(e) to a client, by an advertising agency in relation to advertisements in any manner.
(iii) Section 67 of the Act defines value of taxable services for charging service tax, as under:
For the purpose of this Chapter, the value of taxable services,-
(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.
3.1 On considering the matter on record and the submissions, it is found:
(a) Once a phrase or expression is defined in a statute, that definition alone will entirely apply whenever that phrase or expression is employed in the body of the statute. Even the definition should be understood in the context of phrase defined. Purpose of definition is not to contradict or supplant it altogether after considering these submissions in light of the following decisions:
(i) In Hotel And Catering Industry Training Board V. Automobile Proprietary Limited (1968 (3) All.E.R.399 (at page 402 (E), Lord Denning speaking for the Court of Appeal explained as under:
It is true that "the industry" is defined ; but a definition is not to be read in isolation. It must be read in the context of the phrase which is defines, realizing that the function of a definition is to give precision and certainly to a word or phrase which would otherwise be vague and uncertain - but not to contradict it or supplant it altogether
(ii) In I.L.M. Cadija Umma and Anr. v. Don Manis Appu A.I.R. 1939 Privy council 63 (at page 65), the principle was explained as under:
A phrase having been introduced and then defined, the definition prima facie must entirely determine the application of the phrase; but the definition must itself be interpreted, in case of doubt, in a sense appropriate to the phrase defined and to the general purpose of the enactment.
(iii) In Hariprasad Shivshankar Shukla v. A.D. Divelkar AIR 1957 SC 121, a railway company was taken over by the Govt. of India. The railway company served a notice on its workmen to terminate the services of all workmen. The Supreme Court held that in ordinary acceptation, retrenchment connotes that the business itself is being continued but the portion of the staff or labour is discharged as surplusage. In view of the above ordinary acceptation, the Supreme Court held that the termination of service of all workmen as a result of the closure of business cannot be properly described as retrenchment as defined in Section 2(00). From the above settled position for interpretation of a Definition clause it is clear i.e. find what is the ordinary accepted version of the expression defined, thereafter find whether the said ordinary accepted version fits in with every requirement of definition clause. Then, the definition is not to be taken to as destroying the essential meaning of the term defined. A definition merely employing apt and readily intelligible words. Keeping this in mind, it is to be held that Ordinary accepted version of words "advertising agency" would be an Agent who acts for a producer of goods or services, planning, designing and managing producer of goods or services of advertisement i.e. an Agents office, which plans, designs and manages advertising for other companies as per Dictionary of marketing (third edition) by Bloomsbury. It has to be an organization which specializes in providing services such as media selection, creative work, production and campaign planning to clients. Circular dated 16.8.1999 describes services of an advertising agency as designing, visualizing, conceptualizing etc. 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 the charges made thereon.
Therefore, the definition of 'advertising agency' cannot be read literally and out of context, if done so then every person some way connected with an advertisement will be advertising agency. That cannot be and is not the coverage of the Service Tax envisaged. In the present case, one cannot ignore term being defined i.e. 'advertising agency' and proceed to levy service tax on
(i) any commercial concern
(ii) providing service connected with making, preparation, display or exhibition of advertisements.
If the definition is read in isolation and in an all encompassing manner out of context, then any person/company employing cameraman connected with shooting of advertisement film will become an advertising agency. A caterer supplying tea and biscuits during the production of advertising film will also become a person connected with preparation of advertisement and became an advertising agency. Similarly, a lawyer advising whether advertising film will be violating copyright law or other laws relating to obscenity etc would be treated as advertising agent. Similarly a broadcaster (on radio or television) of an advertisement will become an advertising agency, or a cinema hall flashing an advertisement or newspaper/magazine publishing an advertisement will become an advertising agency. Such absurdities, from an interpretation have to be avoided, the term 'service connected with' used in the definition of "Advertising Agency" is to be understood in context of and in a restrictive manner.
(b) Circular No. F.No. 341/43/96-TRU dated 31.10.1996 by Board, issued simultaneously with the introduction of Service Tax on 'advertising agency' by Finance Act, 1996 explains the scope of advertising agency services as under:
8.... In this connection, it is relevant to note that taxable service is a service provided to a client by an advertising agency in relation to advertisement in any manner. Client is the advertiser....
Therefore, advertiser being a person who wants to advertise his goods or service alone can be treated as client. In the present case, the appellants have no contract or agreement with an advertiser. The appellants agreement is with foreign broadcasters/agencies. The appellants render service to such foreigners and get paid by them. They can never be said to be rendering a service to producer of goods or services.
(c) Such "Broadcasting service" became a Taxable Service, when specifically levied, by Finance Act, 2001, with effect from 16.7.2001. Boards Circular dated 9.7.2001, issued clarified this position as under:
5.... In case of foreign satellite TV channels, their head office may be located outside India. However, they have their branch offices or subsidiary companies located in India. In some, case, they have appointed agents. These branch offices/subsidiary companies/agency act on behalf of these channels, selling time slots and recovering service charges and remitting the same to their head office/holding company/principals as the case may be. In such cases, these branch offices/subsidiary companies, agencies are rendering the services in relation to broadcasting and therefore, they are liable to pay the service tax and comply with all other procedural formalities relating to service tax.
Finance Act,2002 carried out a retrospective amendment effective from 16.07.2001 by amending the definition of broadcasting agency or organisation as under:
Section 65(15)... in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner.
When the legislative body by the scope of the term 'Broadcasting Agency' has itself described the activity of appellant's herein as selling of time slots of advertisement for the foreign broadcaster or obtaining sponsorships for programme of the foreign broadcaster & the appellants as a representative of foreign broadcaster, therefore, they cannot claim themselves or become liable to be an "Advertising Service Provider, to Service Tax since Advertising Service Providers definition has not been shown to have undergone a change after 16.7.2001. That the levy on 'Broadcasting Services' is a fresh coverage of Service Tax levy with effect from 16.7.2001 & not a special carving out from "Advertising Service" coverage thereunder earlier is not disputed. Thus neither the appellants, who are a time slot seller covered under Service Tax net with effect from 16.7.2001 only. In fact, they have been paying service tax under the heading "Broadcasting service" with effect from 16.7.2001. CESTAT, has also held vide decision reported at 2004 (166) ELT 34 (Tri-Del), in appellant's case that their activities, are liable to Service Tax under the heading "broadcasting agency" with effect from 16.7.2001 and value of taxable service would be the entire amount received from an advertiser excluding the commission retained by an advertising agency, if they are a 'Broadcasting Agency' after 16.7.2001 they were so even earlier to that date as there is no change/alteration in the activity they are/were engaged prior & post 16.7.01.
(d) The appellants rely on the Circular dated 18.10.2001 wherein it was clarified as under:
3... Since the amount received by the broadcaster is net of the commission or discount paid to the advertising agency, service tax will be payable on this amount. However, such abatement towards, commission/discount shall be allowed only when the same is clearly indicated in the invoice/bill raised by the broadcasting agency on the advertising agency. It will be relevant to mention here that on the commission/discount received by the advertising agency, service tax is separately leviable under the category of advertising services.
That the appellants have been registered as 'Broadcasting Agency' and are paying service tax on the amount received net of commission paid to advertising agency such as Lintas, Ulka, Hindustan Thompson etc. Therefore in the facts herein, & relying upon in Glaxo Smithkline Pharmaceuticals Ltd. reported at 2005 (188) ELT 171 (Tri-Mum) when it was held as under:
When an existing Tariff definition remains the same, then the introduction of new Tariff entry would imply that the coverage under the new Tariff for purpose of Tax is an area not covered by the earlier entry. The new entry is extension of the scope of coverage if Service Tax and not carving out a new entry, from the erstwhile entry of "Management Consultancy Service.
(Emphasis supplied) The activities carried on by the appellants were specifically covered by the definition of "broadcasting agency" with effect from 16.7.2001 while the definition of 'advertising agency' remains the same. Therefore, coverage under the new category is an area not covered by the earlier category of 'advertising agency'. Therefore, for the period prior to 16.07.2001, the appellants cannot be an advertising agency & subsequent to that a Broadcasting Agency since their activities have not changed.
(e) Activity of flashing of advertisement in electronic media or publishing of advertisement in print media itself is not liable to service tax as 'advertising agency' In this connection relevant portion of Circular dated 31.10.1996 referred supra as found to read as:
4.... However, the amount paid excluding their 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 TV channels, AIR etc.) will not be includible in the value of taxable service for the purpose of levy or service tax.
Relevant extract from the Circular F.No.345/4/97-TRU dated 16.8.1999 is reproduced below:
It has been decided that in the 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 activities are 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 the charges made thereon Circular No. 78/08/2004-S.T. dated 23.3.2004 in this connection is as under:
4. Similarly, in case of FCT, selling the time allotted to a producer does not fall within the purview of "advertisement service" since this activity is not connected to making, preparation, display or exhibition of advertisement. This is akin to providing space in a newspaper or magazine for publishing an advertisement and has nothing to do with actual presentation of the advertisement.
As also the CESTAT in the following decisions has repeatedly held that the display of advertisement as such is not liable to service tax under the heading of "taxable service";
(iii) CCE v. Team UPD 2005 (179) ELT 469
(iv) CCE v. Team UPD
(v) The Madras High Court in Advertising Club V. CBEC reported at , noted as under:
... The decision as to how and in what format the advertisement should be, how it should be projected, at what point of time it should be flashed, in which areas it should be exhibited or the manner in which it should be drafted and exhibited has got nothing to do with the press media or electronic media. That would be the task of "advertising agency" alone. Therefore, when we consider the situation where a client goes to the press media and asks for flashing of the advertisement and such advertisement is flashed in the media, this cannot be deemed to be a service provided by that media to such a client. Similarly, when a person approaches the electronic media and flashes an advertisement on the radio or television, as the case may be, the radio or television simply would flash the advertisement as per the instructions of the person concerned but such person will not get the advantage of the expertise of the advertising agency The draft Circular F.No. 341/43/2005-TRU dated 10.10.2005 declared & claimed to be a comprehensive circular on levy of Service Tax on the service of an 'advertising agency'. It was sought to be issued in supersession of above circulars dated 31.10.1996, 16.8.1999 and 28.10.2003. The draft circular sought to levy service tax on actual activity of display of advertisement as explained in para 3 of the draft circular. In this view, the agents, as in this case, for the activity of display, which is not Advertising activity, will not be covered by the levy as proposed by the Revenue.
(f) Finance Bill, 2006 has proposed to insert a new heading of taxable service sale of space or time for advertisement service, excluding sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation'. The new levy, clause, excludes broadcasting agency or organization, since it is already taxed separately. This demonstrates the activity of selling of space or time for advertisement service, was never considered as service included under advertising agency'.
(g) (i) When the principal's business is not advertisement, but only broadcasting by sale of time slots or space, it would be erroneous to suggest that the activity of the appellants, before us, who are mere representative of the principals for sale of time slot, be considered as "advertising agency" service.
(ii) It would be also wholly incorrect to call the appellants principal as client. The appellants are only a representative and foreign broadcaster is a principal. They are not a client of the appellant. Therefore, the appellants' activity cannot be described as service to a client.
(h) The Ld. Jt. CDR strongly relied on the decision of Authority for Advance Ruling No. AAR/30/2005 dated 13.12.2005 in the case of M/s. Google Online India Pvt. Ltd. (herein after referred to as Google) it is not found to be relevant in the present case for the reasons.
(i) The appellants do not provide any service in relation to making, preparation, display of advertisements. In the case of Google, it was found on the facts that Google was providing service of making, preparation of advertisement in addition to display of advertisement. The relevant portion of the decision in Google case is extracted below:
4... In this additional comments, the Commissioner states that the applicant will not only be providing the value added service to its clients who advertise with it with respect to display or exhibition of an advertisement but will also be providing service with respect to preparation of an advertisement ; its sales representatives personally help the clients design the advertisement in case the proposed expenditure is more than $ 4000 a month as could be seen on the website http://services.google.com/ads inquiry/en. When a client or an advertiser is spending more than $30 in a month, the applicant has "jumpstart" offer where the campaign is personalized and the applicant helps to create the campaign via e-mail (see http://adwords.google.com/select/jumpstartwelcome?). Thus it is clear that through jumpstart offer and with the help of sales representative, the applicant would be trying to create a platform to provide service of an advertising agency to its advertiser. Whether the advertisers actually avail the facility or not is not an important factor, what is important is the fact that the applicant would be providing service of preparing advertisement campaign which is enough to make it chargeable to service tax (Emphasis supplied)
(ii) The appellants herein have merely provided the services of selling of time slots, obtaining of sponsorships etc. for the foreign broadcasting agencies and not the advertisers. The advertisers are not proved to be the clients of the appellants.
(iii) If it is viewed that the Google's decision lays down that display of advertisement itself is service as an advertisement agency, then that view is not correct & consistent with circulars of CBEC referred to in the earlier; in the conclusion or decision in Google's case, the above circulars of CBEC as relied by us, do not appear to be considered. Also the legal position that circulars are binding on the department was not argued or considered in Google's case.
(iv) The decision in the case of Google does not deal with the crucial aspect of who would be a client for an advertising agency.
(v) Advance Ruling Authorities ruling in Google's case is binding only on the parties to the said ruling. Therefore, by virtue of such a stipulation of law it cannot be or act as a binding precedent, in deciding the present case of the appellants who were not parties in that case. Rather, the decision of Madras High Court in Advertising Club v. UOI and the decision of CESTAT referred to in para 2 of circular dated 28.10.2003 would be binding precedents on this Bench. In the above view, we are not able to follow the Google's decision arrived at by the Advance Ruling Authority.
(I) (i) Circular dated 28.10.2003 issued by Central Board for Excise and Customs clarifies as under:
2. The term canvassing may merely involve contacting potential advertisers and persuading them to give advertisement to a particular newspaper/periodical/magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper/periodical/magazine. Such a service is known as "space selling". In such cases, since the agency undertakes the job of merely bringing the order for an advertisement and does not undertake any further activity, it would not fall within the definition of Advertising Agency and will not be subjected to Service Tax.
3. On the other hand, 'canvassing' may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, informing the general layout of the advertisement that would finally appear in such newspaper etc. In such cases the term 'canvassing' would certainly fall within the phrase 'any service provided in any manner connected to making, preparing, displaying and exhibiting and would be taxable service'.
(Emphasis supplied) Para 2, of this circular, is relevant to the facts of the present case. It recognizes an agent merely procuring an order for advertisement for a principal namely print media is not an advertising agency. The appellants' activity being only this and nothing more, therefore, cannot bring them & classify them to be an Advertising Agency.
(ii) This circular dated 28.10.2003 only clarifies that if the canvassing agency also draft the text of the advertisement or prepares the layout for the advertisement etc. he would be liable to service tax, and may be applicable to bring in actors like Google under the levy on an 'Advertising Agency' but not the appellants herein who do not draft/design the texts or proved to have indulged in such activity. Preparation of an advertisement for television broadcast is a very sophisticated and specialized job, involving huge cost as also lots of efforts as compared to making of classified advertisements for newspapers and as a practice the advertisers appoint the export advertising agency to make advertisement films.
(j) (i) Vide para 13 of the impugned order of the Commissioner (Appeals) has summarized the activities of Zee Telefilms. Clauses (a), (b), (c), (d), (e), (f), (h), (i) relied upon by the department, to prove that the appellants carried on the activities over and above selling of time slots are considered. These clauses relate to the procurement/production of television programmes such as serials, daily soaps, films etc. for broadcasting on television channels owned by the foreign broadcasting agencies. Zee Telefilms also thus act as an agency/representative for procurement/production of television programme for foreign broadcasting agencies as procurer is another side of a canvasser. The activity referred to in Clause (j) of the said agreement only talks about the activity of gathering the information of the potential advertisers so that the time slots can be sold to then. Such activities could be data/or Management Information Systems & could be business Auxiliary Service or Marketing Service or other relevant Commercial Services, it can not be an Advertising Agency Service which is the subject of levy herein. An information provided to principal broadcaster about its potential market has nothing to do with advertising. Activity referred to in Clause (k) of the said agreement is making the sales pitch to the potential customer and providing the potential advertisers about the type of programmes shown on the channels, their TRPs etc. This only informs prospective advertisers/ad agency's about the programme and thus explains the Broadcast programme of the principal to the customer. Activities referred to in Clause (I)&(m) of the agreement relate only to physical activity of transportation/dispatch of media containing "ready advertisements". It only provides, that, if the advertiser chooses to pay out of EEFC account, the advertiser should directly dispatch the media containing advertisement, as also amount directly to the foreign broadcasting agency and Zee Telefilms would guide them for such dispatch. Such activity surely has nothing to do with making, preparation or display of the advertisements at best it is providing Transport Assistance'. Thus, we do not find any reason to arrive at, that any clause of the agreement enjoins preparation of Advertisements or Advertising Material in any manner to being in the levy of Service Tax in this case.
(k) It has been contended, by the department, that Star had authority to reject the advertising material if it does not meet with the technical specifications, stipulated by the foreign broadcasting agency. The Broadcaster to ensure that the advertisement does not contain any objectionable/obscene material etc. has to ensure that it should also be technically not deficient i.e. having defective picture and sound quality etc. Star India would refuse to send such Advertisement film to the principal. Evidently, in ensuring such quality, Star India is not rendering any extraordinary service, which an Broadcasters Agent would not be normally performing for these very services, These services are connected with Broad Casting Service which were not subject to levy of Service Tax during the period under dispute. Revenue has accepted the appellant to be Broad Casting Service provider. Revenue cannot now be permitted to call such activity by another name for an earlier period to 16.7.2001. The appellants receive from advertising agencies or advertiser the advertisement duly recorded on the media. The appellants do not make or prepare the advertisement. In fact, they neither have expertise nor skill required in this regard. This is done by the advertising agency appointed by the advertiser. The advertising agency already pays service tax under the heading 'advertising agency' in connection with concerned flashing advertisement by broadcaster. Provisions of law that there can be a second levy or double levy for the same service again as an advertising agency has not been shown to us.
(l) (i) The Commissioner (Appeals) upheld the order of the adjudicating authority demanding Service Tax for extended period of limitation on the ground that the appellants failed to take registration despite repeated reminders. In view of the circulars issued by Central Board for Excise and Customs from time to time, the appellants could entertain legitimately a bona fide belief that the activities of selling time slots, obtaining sponsorship etc. was & is not liable to Service Tax under the category of 'advertising agency' therefore, they were not required to take Service Tax registration and to pay service tax. Hence, the demand of Service Tax beyond the period of six months to be held to be barred by limitations. In particular, the very first circular dated 31 10.1996, issued along with the levy of service tax on advertising agency, in para 8, clarified that the client is the advertiser. The appellants could therefore never imagine that service to their principal who is not an advertiser, would or could be taxed as 'advertising agency'. Also as per para 4 of circular dated 31.10.1996, flashing in electronic media is not to be considered service in connection with display of advertisement. The reason arrived by Commissioner (Appeals), that the appellants have not registered themselves, was indeed the decision of CESTAT in Padmini Products v. CCE to uphold extended period. The relevant extract of the same is reproduced below:
7. ...Now adverting to the question of time bar, we find that the authorities have issued a Trade Notice holding Agarbatties as eligible for the benefit-of exemption under Notification No. 55/75. It is pertinent to note that they have not held that the Dhoop is also eligible for the benefit of this Notification No. 55/75. The Dhoop sticks etc. we have held above are a product different from Agarbatties even though the two may belong to the same category. If the process of manufacture of the two is different, obviously, the two will have to be treated differently for the purpose of application of the benefit of notification. The clarification given in the context of Agarbatties cannot be made applicable to the Dhoop sticks etc. Inasmuch as appellants had manufactured the goods without informing the Central Excise authorities and had been removing them without payment of duty, these will have to be taken to attract the mischief of the provisions of Section 9(2) and the duty demanded for the longer time period is maintainable.
However, the Hon'ble Supreme Court vide its order reported at 1989 (43) ELT 195 (SC) did not uphold & set aside the aforesaid view & order of the CESTAT, observing as under:
8. ...As mentioned hereinbefore, mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act. In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellants believing that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer Knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11-A of the Act.... For the reasons indicated above, the tribunal was in error in applying the provisions of Section 11-A of the Act. There were no materials from which it could be inferred or established that the duty of excise had not been levied or paid or short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder.
The Supreme Courts decision in the case of Padmini Products would squarely cover this case & the conclusion that the demands beyond the normal period of limitation are not sustainable.
(ii) Supreme Court in Baidyanath Ayurved Bhavan Ltd. v. CCE reported at , held as under:
We find that there are four issues involved in these appeals but that three hinge on this one question: Was the show cause notice dated 27th August, 1987 beyond time?. The period in question is 23th August, 1982 to 28th February, 1986. The notice would be in time if the Revenue could invoke the extended period under Section 11A on the ground that the assessee had been guilty of fraud, misrepresentation or willful suppression. It is patent from the facts recorded by the Tribunal that there was no willful suppression, let alone fraud or misrepresentation. That the assessee was not responding to the Revenue's demand to take out a licence and submit accounts was clear and overt and the Revenue could have taken action based thereon. The show cause notice, therefore, must be held to be beyond time.
(Emphasis supplied) Thus, the department, in spite of having full knowledge, of the appellants' activities, failed to respond with provisions of law enabling them to take necessary action, within the time prescribed under Section 73(b) cannot now plead helplessness to result & involve the larger period for demands. They cover up the inaction & failure by making allegations of suppression on the appellants when none exist.
(m) When, the demand for Service Tax is not sustainable on merits & limitations, hence no interest is recoverable. Further, recovery of interest is ordered under Section 75 of the Finance Act, 1944. At the relevant time the Section read as:
Section 75 - Every person responsible for collecting Service Tax and Paving it to the credit of the Central Government in accordance with the provisions of Section 68, who fails to credit the tax or any part thereof to the account of the Central Government within the period specified in that section, shall pay simple interest at the rate of one and one half percent....
(Emphasis supplied) In the present case the appellants have not collected Service Tax amount from the customers. Hence, Section 75 cannot apply in any event.
(n) Since there is no allegation of suppression of facts, on the part of the appellants, nor which could be found by us, imposition of penalty under various provisions of Finance Act, 1944 is not called for and is unsustainable. Further, Section 78 during the relevant time read as under:
If the Central Excise Officer in the courts of any proceedings under the Chapter is satisfied that any person has, with intent to evade payment of Service Tax, suppressed or concealed the value of taxable service or had furnished inaccurate value of such taxable service, he may direct that Such person shall pay by way of penalty. In addition to service tax and interest, if any, payable by him, a sum which shall not be less than but which shall not exceed twice, the amount of service tax sought to be evaded by reason of suppression or concealment of the value of taxable service or the furnished of inaccurate value of such taxable service.
(Emphasis supplied) As the appellants are not liable to pay interest under Section 75. Hence the question of imposition of penalty under Section 78, does not arise.
(o) (i) The Appellants were under a bona fide belief that they are not liable to Service Tax under the head of 'Advertising Agency' in view or the position arrived herein above. The question involved in this case is purely a question of interpretation of law and there was no clarity. This would be a reasonable cause for non-payment of Service Tax.
(ii) Section 80 of the Finance Act 1944 provides that notwithstanding anything containing in the penal provisions of Section 76, Section 77, Section 78 and Section 79 no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure. No further proof proving is called for in this case. Hence no penalty at all could be imposed on the appellants in terms of Section 80.
3.2 In view of the findings arrived, we would set aside the duty demands as arrived, along with interest liability as also the penalties imposed. The appeals are to be allowed after setting aside the orders.
3.3 Ordered accordingly.
(Pronounced in court. 21/07/2006)