2011 (5) TMI 702 - AT - Service Tax

Advertising agency Refund - Revenue claims having received specific information that the appellant was suppressing the value of services rendered by the appellant - demand of Service Tax and Education Cess (sic. under) sub-section (2) of Section 73 of the Finance Act, 1994 by invoking extended period of limitation - information received by the department is stated to be very specific, it is seen that the SCN proposed demand based on the figures reported in the balance sheet of the company under the head Commission/Discount/Incentives without investigating the true nature of the service and its taxability - appellant submitting that the entire records of the assessee were seized by the department and are in possession of the department and so necessary verification may be done from the seized records. They also submitted that the correctness of the service tax liability as certified by the Chartered Accountant was the adjudicated vide O-in-R issued by Deputy Commissioner, in the matter of a refund claim filed by the appellant on the basis of Chartered Accountant s certificate - no verification report as desired by Tribunal in its order dated 7-12-10 was produced by Revenue. Further DR was not able to explain what further verification was required after sanction of refund - appeal is dismissed as unsubstantiated and not pursued diligently

Summary

Issues:
1. Service tax liability for advertising agency services.
2. Interpretation of balance sheet figures for taxable services.
3. Penalties imposed for alleged suppression of taxable value.
4. Verification of Chartered Accountant certificate.
5. Barter agreement and its impact on taxable value.
6. Lack of clarity in the case documentation.

Issue 1 - Service Tax Liability:
The appellant, an advertising agency, faced a service tax demand based on alleged suppression of service value. Investigations and a search led to a Show Cause Notice (SCN) confirming the demand. The Commissioner (Appeals) later recalculated the tax liability considering the amount already paid. The Committee of Commissioners reviewed the order, leading to the current appeal.

Issue 2 - Balance Sheet Interpretation:
The appellant contested the assumption that balance sheet figures represented taxable service value. The Commissioner (Appeals) accepted certificates from a Chartered Accountant, certifying service tax payments. The appeal raised concerns about the accuracy of these certificates and the inclusion of non-taxable commission amounts in the balance sheet figures.

Issue 3 - Penalties for Suppression:
Penalties under various sections were imposed on the appellant for alleged suppression of taxable service value. The Commissioner (Appeals) upheld penalties related to delayed tax payments but set aside others, citing lack of intent to evade tax. The appeal challenged these penalties, highlighting discrepancies in the Chartered Accountant's certificate and the Commissioner's judgment.

Issue 4 - Verification of Certificate:
The Tribunal directed the adjudicating authority to verify the Chartered Accountant's certificate. The appellant expressed confusion over the need for further verification, citing a previous order sanctioning a refund based on the certificate. However, no verification report was produced, leading to the dismissal of the appeal due to lack of substantiation.

Issue 5 - Barter Agreement Impact:
The case involved a barter agreement with a company, raising questions about the taxable value of services exchanged. Details of the agreement, involving cash and product payments, were scrutinized. The lack of clarity on the nature of services rendered under this agreement added complexity to the assessment of taxable value.

Issue 6 - Lack of Clarity in Documentation:
Throughout the case, from the SCN to the final appeal, a lack of clarity persisted regarding the taxable nature of advertising services, interpretation of balance sheet figures, and the impact of the barter agreement on tax liability. The Tribunal noted the confusion but dismissed the appeal due to unsubstantiated claims and lack of diligent pursuit by the department.

In conclusion, the judgment addressed various issues related to service tax liability, penalties, balance sheet interpretation, verification of certificates, and the impact of a barter agreement on taxable value. The lack of clarity in documentation and the dismissal of the appeal highlighted the challenges in resolving complex tax disputes.