2014 (1) TMI 666 - AT - Service Tax

Valuation of service - Inclusion or otherwise of charges for display of advertisement in the assessable value of the services provided by the appellant - Held that - amount paid by the advertisement agency for space and time and in getting the advertisement published in the print media or electronic media will not be included in the value of the taxable services for the purpose of levy of service tax. Admittedly, such circulars are binding on the departmental authorities. We further note that the Hon ble Madras High Court in the case of Adwise Advertising Pvt. Ltd. vs. Union of India 2001 (3) TMI 1 - HIGH COURT (MADRAS) observed that the amount spent for flashing an advertisement in a particular print media or electronic media, cannot be said to have been paid towards the services rendered by the advertising agency. As such, we find that prima facie, the issue stands covered in favour of the assessee, thus entitling them to unconditional stay - Decided in favour of assessee.

Summary

Issues:
1. Inclusion of charges for space in printing or electronic media in the assessable value of services for service tax liability.
2. Interpretation of Board's circular on the exclusion of charges for space and time in media from taxable services.
3. Comparison with the decision of the Hon'ble Madras High Court in Adwise Advertising Pvt. Ltd. vs. Union of India.
4. Relevance of Tribunal's order in Sercon India Pvt. Ltd. case to the present appeal.

Issue 1: Inclusion of charges for space in printing or electronic media

The appellant, an advertising agency, is involved in selling space in printing or electronic media for displaying advertisements in addition to providing services. The dispute revolves around whether the charges for this space should be included in the assessable value of services for service tax liability. The Board's circular No. 341/43/96-TRU dated 31.10.96 states that amounts paid for space and time in getting advertisements published in media are not to be included in the taxable services' value for service tax levy. The Tribunal notes the binding nature of such circulars on departmental authorities. Citing the Madras High Court decision in Adwise Advertising Pvt. Ltd. vs. Union of India, it is observed that expenses for displaying advertisements in media do not constitute payment for services by the advertising agency. Consequently, the issue appears to be in favor of the assessee, warranting an unconditional stay in their favor.

Issue 2: Interpretation of Board's circular on exclusion of media charges

The Tribunal emphasizes the significance of the Board's circular exempting charges for space and time in media from the taxable services' value for service tax assessment. This circular plays a crucial role in determining the treatment of such charges and establishes a precedent for excluding them from the assessable value. The Tribunal's reliance on this circular strengthens the assessee's position in the present appeal and supports the argument against including media charges in the service tax liability calculation.

Issue 3: Comparison with Madras High Court decision

The Tribunal draws a parallel with the Madras High Court decision in Adwise Advertising Pvt. Ltd. vs. Union of India to reinforce its stance on the treatment of expenses related to displaying advertisements in media. By aligning with the Madras High Court's interpretation that such expenses do not constitute payment for services by advertising agencies, the Tribunal bolsters the assessee's case and justifies granting an unconditional stay in their favor based on the existing legal precedent.

Issue 4: Relevance of Tribunal's order in Sercon India Pvt. Ltd. case

The Tribunal addresses the respondent's reliance on the Tribunal's order in the Sercon India Pvt. Ltd. case. However, the Tribunal clarifies that the issue in the present appeal differs from the subject matter of the earlier order. The previous order focused on splitting the assessable value into parts, including reimbursement of expenses, which is distinct from the current issue concerning charges for space in media. Therefore, the Tribunal deems the respondent's reliance on the Sercon India Pvt. Ltd. case as unwarranted and irrelevant to the present appeal, further supporting the assessee's position in the matter.