2009 (2) TMI 99 - AT - Service Tax

Appellant are a subsidiary in India of U.K. company (BBC) and their functions are securing advertisement for airtime sales on BBC World Channel, and collecting airtime revenue for BBC, for which they get commission from BBC - when the same person i.e. the Appellant are providing the broadcasting service, as defined under Section 65(15) of the Act, to their clients in India and also the Business auxiliary service, as defined under Section 65(19) of the Act, to BBC, U.K., the latter cannot be treated as an input for the former therefore, Marketing and Bill collection under BAS for principal cannot be treated as input service credit not admissible impugned order rejecting of adjustment of excess paid tax against short payment, is justified because as per Rule 6(3) of STR, adjustment can be done only when Service tax paid at higher rate or value assessee s appeal is dismissed

Issues Involved:
1. Recovery of allegedly wrongly availed/utilized service tax credit.
2. Recovery of allegedly short-paid service tax.
3. Imposition of penalty under Sections 76 and 77 of the Finance Act, 1994.

Detailed Analysis:

1. Recovery of Allegedly Wrongly Availed/Utilized Service Tax Credit:

The primary issue concerns the recovery of service tax credit amounting to Rs. 34,11,859/-. The Appellant, a subsidiary of BBC Worldwide Ltd., U.K., was engaged in securing advertisement airtime sales and collecting revenue for BBC, for which they received a commission. They were registered under 'Broadcasting Agency Service' and later under 'Business Auxiliary Service' (BAS) when it became taxable from 1-7-03.

The Appellant argued that their services under BAS were input services for the broadcasting service, thus entitling them to service tax credit. They contended that the credit was valid even though the invoices were in the name of BBC, U.K., as they were acting on behalf of BBC.

However, the Tribunal rejected this argument, stating that the Appellant, by virtue of their activities, were considered a 'Broadcasting Agency or Organization' under Sections 65(15) and 65(16) of the Act. Thus, their services under BAS could not be treated as input services for their broadcasting services. The credit was disallowed as the invoices were not in the Appellant's name, and the Appellant's role as an agent did not alter their status as a broadcasting service provider.

2. Recovery of Allegedly Short-Paid Service Tax:

The second issue was the alleged short payment of service tax amounting to Rs. 1,09,628/- during April 2003. The Appellant claimed that this amount was adjusted against excess service tax paid during March 2002 - March 2003, as per Rule 6(3) of the Service Tax Rules, 1994.

The Tribunal upheld the Commissioner's decision, noting that Rule 6(3) allows adjustment only if the excess payment is due to services not provided and the amount, including service tax, is refunded to the client. The Appellant failed to demonstrate that the excess payment met these conditions. Thus, the adjustment was not permissible, and the short payment demand was confirmed.

3. Imposition of Penalty under Sections 76 and 77:

The final issue involved the imposition of penalties. The Tribunal found that the circumstances warranted penalties under Section 76 for the short payment of tax and under Section 77 for the delayed filing of ST-3 returns. Given the significant amount of wrongly availed service tax credit and the six-month delay in filing returns, the penalties were deemed justified.

Conclusion:

The Tribunal dismissed the appeal, confirming the service tax demand of Rs. 1,09,628/-, disallowing the service tax credit of Rs. 34,11,859/-, and upholding the penalties under Sections 76 and 77 of the Finance Act, 1994. The Appellant's arguments regarding their registration status and the adjustment of excess service tax were rejected based on the definitions and provisions of the Service Tax Act and Rules.

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