Custom, Excise & Service Tax Tribunal
Cce, Chandigarh vs M/S Reliant Advertising on 9 May, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 9.5.2013
Service Tax Appeal No. 95 of 2008
[Arising out of Order-in-Appeal No. 567/CE/CHD/07 dated 14.11.2007 passed by the Commissioner (Appeals), Central Excise, Chandigarh]
For Approval & Signature :
Honble Mr. Justice G. Raghuram, President
Honble Mr. Sahab Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
CCE, Chandigarh Appellant
Vs.
M/s Reliant Advertising Respondent
Appearance:
Shri B.B. Sharma, D.R. - for the appellant
Shri Gagan Kohli, Advocate - for the respondent
Coram : Honble Mr. Justice G. Raghuram, President
Honble Mr. Sahab Singh, Member (Technical)
F. Order No. 56072/2013 dated 9.5.2013
Per Justice G. Raghuram :
The appeal by the Revenue against the Order-in-Appeal dated 14.11.2007 passed by the Commissioner (Appeals), Customs & Central Excise, Chandigarh reversing the Order-in-Original dated 28.6.2007 of the Additional Commissioner, Central Excise, Chandigarh.
Facts in Brief
2. On receiving information that the respondent/assessee was recovering service tax from its clients; had suppressed value of the advertising services provided by it and had deposited only a portion of the amount as service tax, a search of the assessees office premises was initiated by the Central Excise Commissionerate, Chandigarh, in February, 2006. A scrutiny of the ST-3 returns filed by the assessee, recording of a statement of the partner of the assessee on 23.8.2006; and analysis of the bills resumed during search operation and analysis of the balance sheet of the assessee followed.
3. A Show Cause Notice dated 16.10.2006 was issued setting out a demand of service tax of Rs. 7,11,804.78 and Rs.3692.90 as education cess thereon in respect of the period 1.4.2001 to 31.12.2005; penalties under Sections 76, 77 and 78 of the Finance Act, 1994 and interest under Section 75, as prima facie recoverable from the assessee.
4. After the due process of hearing the adjudication order was passed confirming the service tax demand and interest as proposed in the Show Cause Notice. In the adjudication order, it is recorded that activities of the petitioner constitute the taxable service of advertising agency; that the rate of service tax applicable from time to time was applied in accordance with the rate of tax for the relevant periods. Penalties as proposed in the Show Cause Notice were however dropped exercising the power and discretion under Section 80 of the Finance Act, 1994, on the assumption that the failure of the assessee to remit service tax was on account of a bona fide mis-construction of the taxing provisions.
5. Aggrieved, the assessee preferred an appeal which was allowed by the appellate order dated 14.11.2007. The appellate Commissioner relying on the judgment of this Tribunal in Euro RSCG Advertising Ltd. Vs. CST Bangalore 2007 (7) STR 277 (Tri.-Bang.); and the CBEC Circular No. 64/13/2003-ST dated 28.10.2003, concluded that the amounts received by the appellant are not exigible to service tax as advertising service agency. Revenue contests this conclusion of the appellate Commissioner in the appeal before us.
6. Section 65(2) of the Finance Act 1994 (hereinafter the Act) defines advertisement as including any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas. Sub-Section (3) of Section 65 defines advertising agency as meaning dny person engaged in providing any service connected with the making, 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 in 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 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 petitioner falls within the taxable service of advertising agency, defined in Section 65(105)(zzzm).
10. The adjudication authority has noted that the assessee failed to disclose in the ST-3 returns filed by it, the totality of receipts as per its balance sheet and this constituted suppression of material facts, legitimating invocation of the extended period of limitation, under Section 73 of the Act.
11. The ld. Counsel for the assessee in predicates the assessees defence to Revenues appeal on the decision of the Tribunal in Euro RSCG Advertising Ltd. and the Boards Circular No. 64/13/2003-ST dated 28.10.2003, which received favourable resonance in the order of the Commissioner and against which Revenue is in appeal before us.
12. We are therefore required to consider whether the decision of this Tribunal in Euro RSCG Advertising Ltd. is relevant to the issues before this Tribunal in this appeal; and whether Board Circular dated 28.10.2003 is applicable; and whether it proceeds to lay down a correct interpretation of the relevant legislative provisions.
13. In Euro RSCG Advertising Ltd., ld. Division Bench of this Tribunal has recorded that the appellants (therein) provided advertising services to their various clients and in order to do so, got in touch with media for booking of time slots on various satellite channels for their clients and as per industry practice the broadcasting agency provides 15% discount from their Tariff rate to the appellant. It is this discount on the tariff rate provided by the broadcasting agency that the appellant passes on to its clients and that 15% was brought to tax as income on which service 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 in so far 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.
14. Board circular dated 28.10.2003 purports to clarify the position regarding advertising agency service. Paragraph 4 of the circular states that activities such as canvassing involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear in the newspaper etc. would be liable to service tax under the category, Advertising. The clarification in para 4 is in continuation of the clarifications in para 2, which states that canvassing may merely involve contacting potential advertisers and persuading them to give advertisement to a particular newspaper/periodical/magazine without making and preparation of the advertisement namely, drafting of the text, preparation of layout etc. The Circular clarifies that where no other inputs are involved, the service would be space selling and that would per se not fall with the definition of advertising agency. We are not persuaded to accept the hyper technical interpretation of provisions of Section 65(105) (zzzm) as elucidated in Boards Circular dated 28.10.2003. The relevant statutory provision admits of no ambiguity. It clearly enacts that any service provided to any person by any other person in relation to sale of space or time for advertisement [as defined in explanation (1) to clause (zzzm)], would constitute the taxable service. The clarification issued by the Board which facially conveys an implication that mere sale of space or time would not constitute the service provided an advertising agency service fails to bring out the true import of the taxing provision.
15. On the above analysis, as the grammatical meaning of the taxing provision is in conformity with its legal meaning, the activity of the petitioner as delineated in the adjudication order, would fall within the net of service tax as spelt out in Section 65(105)(zzzm).
16. The contrary conclusion by the appellate authority, founded on to the decision of this Tribunal in Euro RSCG Advertising Ltd. which is distinguishable on its distinct facts and the Boards circular dated 28.10.2003 (which we find does not really clarify the position), is therefore unsustainable.
17. Ld. Counsel for the respondent/assessee has contended that since no penalty as proposed in the Show Cause Notice was imposed in the adjudication order, invoking the provisions of Section 80, invocation of the extended period of limitation is also unsustainable. This contention does not commend acceptance by this Tribunal. The adjudication authority clearly recorded a finding that failure of the assessee to disclose the position inconformity with the position in its balance sheet, in the ST-3 returns filed amounts to suppression of the correct taxable value from the department; that this position is fortified by the figures in the balance sheet of the assessee admitted by Ms. Shaifali Singh, in her statement recorded on 23.8.2006. Since there is a suppression by the assessee, rationally concluded by the adjudication authority, invocation of the extended period of limitation is legitimate. The adjudication order is thus impeccable and warrants no interference. The appellate authority erred in reversing the adjudication order.
18. For the aforesaid reasons, we allow Revenues appeal set aside the order in appeal dated 14.11.2007 and restore the adjudication order dated 28.6.2007, but without costs.
(Justice G. Raghuram) President (Sahab Singh) Member (Technical) RM 1