2017 (9) TMI 262 - AT - Service Tax

Business Auxiliary Service - The dispute in the present case relates to a portion of consideration received by the assessee/appellant from various Govt. authorities while undertaking the work of advertisement for such departments - Held that - the activities of the appellant assessee should have been covered under one single category for tax purpose. Admittedly, their payment of service tax under advertisement agency service has been accepted by the Revenue, on part of the bill. The service tax being demanded now under BAS, is not legally tenable. The demand has been confirmed on the ground that the appellant assessee is not an advertising agency and are merely canvassing for the work by another advertising agency. If that being the case, the question of payment of service tax by the appellant-assessee and the acceptance of the same by the Revenue under the category of advertising agency is not correct. The whole consideration received by the appellant-assessee has to be either taxed under advertising agency or as a canvassing work (BAS) since full money has been collected from the Govt. Departments on a single bill. The dual approach by the Revenue is not legally sustainable. Appeal dismissed - decided against Revenue.

Issues:
1. Contesting liability of service tax by the assessee/appellant.
2. Contesting non-imposition of penalty by the Revenue.
3. Taxability of 10% charges received by the assessee/appellant from various Govt. Departments.

Analysis:
1. The case involves a dispute regarding the liability of service tax confirmed by the impugned order. The appellant, a society created by the Government of Chhattisgarh for advertisement activities, contested the service tax demand on 10% charges received from Govt. Departments. The lower authorities held these charges as taxable under Business Auxiliary Service (BAS) as per a Master Circular. However, the appellant argued that the consideration received should not be taxed under two categories - advertising agency and BAS - as they provided a single service to Govt. departments. The Tribunal found the demand under BAS not legally tenable, as the appellant was accepted as an advertising agency for part of the bill. The dual approach by the Revenue was deemed unsustainable, leading to setting aside of the impugned order in favor of the appellant.

2. The second issue pertains to the contestation by the Revenue regarding the non-imposition of penalty on the assessee/appellant. The penalties under Sections 76, 77 & 78 were waived by the lower authorities. However, the Tribunal did not find merit in the Revenue's appeal, as the primary issue of tax liability was decided in favor of the appellant. Consequently, the appeal by the Revenue for penalty imposition was dismissed.

3. The key issue in the case was the taxability of the 10% charges collected by the assessee/appellant from various Govt. Departments. The Revenue argued that these charges were essential for executing advertisement work through an advertising agency and hence subject to service tax under BAS. However, the Tribunal observed that the appellant had discharged service tax under the advertising agency category for the actual advertisement expenses. The additional 10% charges were collected for the services rendered in engaging another agency, making it a single service provided to Govt. departments. Therefore, the demand for service tax under BAS was deemed legally unsustainable, leading to the allowance of the appellant's appeal and the dismissal of the Revenue's appeal.

In conclusion, the Tribunal set aside the impugned order, allowing the appellant's appeal while dismissing the Revenue's appeal. The decision clarified the tax treatment of the 10% charges collected by the appellant and emphasized the importance of consistent categorization for tax purposes based on the nature of services provided.

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