2014 (5) TMI 650 - AT - Service Tax

Demand of service tax - Sale of space or time for advertisement service to several advertising agencies but failed to obtain registration, file returns or remit service tax on the consideration received for rendition of the taxable service - Held that - A bona fide belief is a belief entertained by a reasonable person. The appellant is a public authority and an instrumentality of the State and should have taken care to ascertain whether it was liable to tax in terms of the provisions of the Act. There is neither alleged, asserted nor established that there is any ambiguity in the provisions of the Act, which might justify a belief that the appellant/service provider,was not liable to service tax. It is axiomatic that no person can harbour a bona fide belief that a legislated liability could be excluded or transferred by a contract. The appellant was clearly and exclusively liable to service tax on rendition of the taxable service of sale of space or time for advertisement . This liability involved the non-derogable obligation to obtain registration, file periodical ST -3 returns and remit service tax on the consideration received during the period covered by such ST-3 returns. These were the core and essential obligations the appellant should have complied with. These orders do not transfer the substantive and legislatively mandated liability to service tax from the appellant who is the service provider to the advertisers, who are the service recipients. The liability of advertisers bear the burden of service tax, in terms of agreement between the parties, is the conclusion of the High Court. The decision cannot be interpreted or understood as shifting the liability or inherence of service tax, under the provisions of the Act, on the service recipient. It is a well settled position that legislation is not rejected or amended by private agreement. - demand of service tax with interest and penalty confirmed - Decided against the assessee.

Summary

Issues:
1. Failure to obtain registration, file returns, or remit service tax on the taxable service provided.
2. Dispute regarding liability for service tax between the appellant and recipients of the service.
3. Invocation of extended period of limitation for issuing show cause notice.
4. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.

Issue 1: Failure to comply with service tax obligations
The appellant, a public authority providing taxable services, failed to obtain registration, file returns, or remit service tax on the consideration received for providing the service of 'sale of space or time for advertisement.' The Anti-Evasion Branch conducted investigations and issued show cause notices covering the period from January 2006 to August 2008.

Issue 2: Dispute over liability for service tax
The appellant contended that under agreements with advertisers, the liability for service tax was to be borne by the recipients of the service. However, the adjudication order confirmed a significant demand for service tax, interest, and penalties. The appellant's argument that the liability was transferred to the recipients was rejected as the appellant was primarily liable for service tax obligations.

Issue 3: Extended period of limitation
The appellant argued that the extended period of limitation for issuing the show cause notice was unjustified due to a bona fide belief that the liability for service tax was transferred to the recipients. The tribunal held that the appellant, being a public authority, should have been aware of its tax liabilities and that no ambiguity in the law justified a belief that the liability could be transferred by contract.

Issue 4: Imposition of penalties
The appellant cited a Supreme Court judgment and Delhi High Court orders to support the contention that the liability for service tax had shifted to the advertisers under the agreements. However, the tribunal clarified that private agreements cannot alter legislatively mandated tax liabilities. The appeals were dismissed, confirming the appellant's liability for service tax, interest, and penalties, subject to providing evidence of any tax already remitted.

This detailed analysis of the judgment highlights the key issues involved in the case and provides a comprehensive overview of the tribunal's decision on each issue.