2015 (11) TMI 1041 - AT - Service Tax

Cenvat Credit - input services - event management services - Services are not related to their output services being Advertisement agency service - Undervaluation of service - Held that - The service of advertising agency as pointed out from the definition includes exhibition display etc. It has to be noted that the period is prior to 1.4.2011 when the definition of input service had a wider ambit. The activities as explained and borne out from records establish that event management services availed by appellant is related to the output service of providing advertisement services. Again the denial of credit on the ground that they are not registered for event management services is not tenable. The payment of service tax is not disputed. The grounds on which credit has been denied is too flimsy and feeble. Therefore I hold that event management services being input services would be eligible for credit. Levy of penalty for short payment of service tax - Held that - In a few cases in which the commission received was more than 15% the appellants omitted to pay service tax for the higher amount of commission received. It occurred only by mistake because generally the commission received is 15% and service tax was being paid on 15%. The learned counsel submitted that the short payment occurred only with regard to 18 cases and on coming to know about it the appellant deposited the tax with interest even before the issuance of show cause notice. A penalty of 48, 705/- is imposed alleging suppression under Section 78 of the Finance Act 1994 which has been upheld by the impugned order. - appellant has put forward a plausible explanation for the failure to pay. I find that it is a fit case for invoking the provisions of Section 80 of the Finance Act which provides that no penalty shall be imposable if the assessee establishes there was reasonable cause for the failure. I hold that the penalty imposed is not justified and has to be set aside - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of credit on service tax paid for event management services.
2. Short payment of service tax due to undervaluation of commission received in print media advertisement service.

Analysis:

Issue 1: Admissibility of credit on event management services
The primary issue revolves around whether the appellant is eligible to claim credit for service tax paid on event management services. The appellant, engaged in advertisement agency services, availed credit for event management services, which the department contended were unrelated to their registered output services. The appellant argued that event management services were essential for their output services, as they procured spaces for advertisement through these services. The appellant's activities, including participation in events and exhibitions, were deemed related to their output service of providing advertisement services. The Tribunal held that event management services qualified as input services eligible for credit, despite the appellant not being separately registered for such services. The denial of credit based on lack of separate registration was deemed unfounded, and the Tribunal ruled in favor of the appellant.

Issue 2: Short payment of service tax on undervalued commission
The second issue pertains to the alleged short payment of service tax amounting to &8377;48,705 due to undervaluation of commission received in print media advertisement services. The department claimed that the appellant underpaid tax by valuing commission at 15%, despite receiving higher commissions in some cases. The appellant explained that the underpayment occurred inadvertently, as they typically received a 15% commission and mistakenly paid tax on that amount. Upon realizing the error, the appellant promptly rectified the underpayment before the issuance of the show cause notice. The Tribunal found the appellant's explanation plausible and invoked Section 80 of the Finance Act, which provides relief from penalty if a reasonable cause for failure is established. Consequently, the penalty imposed under Section 78 of the Finance Act was deemed unjustified and set aside. Both issues were resolved in favor of the appellant, leading to the setting aside of the impugned order and allowing the appeal with any consequential reliefs.

In conclusion, the Tribunal's judgment in the case addressed the admissibility of credit on event management services and the issue of short payment of service tax due to undervalued commission. The detailed analysis provided clarity on the appellant's eligibility for credit and the circumstances surrounding the underpayment of tax, ultimately resulting in a favorable outcome for the appellant.