2018 (1) TMI 1172 - AT - Service Tax

Classification of services - Advertising Agency Service - commission received from the publishers for the disputed period along with interest, if any - Held that - the activities of the appellant would fall not under Advertisement Agency Service but only under Business Auxiliary Service - Impugned order to the extent that it confirms the demand of differential tax liability on services rendered on commission received for canvassing advertisements will not be sustainable since the said service will not be taxable under Advertising Agency Service and therefore since that has not been demanded under BAS, the entire proceedings to that extent will not sustain and therefore is set aside. Demand of interest on delayed payment upheld as the appellant is not contesting this interest liability. Appeal allowed in part.

Summary

Issues:
1. Classification of services under "Advertising Agency Service" or "Business Auxiliary Service"
2. Demand of differential service tax liability
3. Imposition of penalty under Section 76 of the Finance Act
4. Demand of interest on belated payment

Analysis:

1. Classification of services under "Advertising Agency Service" or "Business Auxiliary Service": The case involved a dispute regarding the classification of services provided by the appellant. The Commissioner (Appeals) upheld the classification as "Advertising Agency Service" but the appellant argued that their services fell under "Business Auxiliary Service." The appellant relied on a circular issued by the CBEC to support their contention. The Tribunal, after examining the circular and the arguments presented, concluded that the services provided by the appellant should be classified as "Business Auxiliary Service" and not "Advertising Agency Service." Therefore, the demand of tax liability under "Advertising Agency Service" was found unsustainable.

2. Demand of differential service tax liability: The show cause notice issued to the appellant demanded payment of differential service tax liability for the period in question. The original authority confirmed these demands, but the Commissioner (Appeals) modified the order, holding the appellant liable to pay service tax only on the commission received from publishers. The Tribunal, after considering the arguments from both sides, set aside the demand of tax liability under "Advertising Agency Service" as the services were rightly classified under "Business Auxiliary Service."

3. Imposition of penalty under Section 76 of the Finance Act: The original authority had imposed a penalty under Section 76 of the Finance Act, which was set aside by the Commissioner (Appeals). Since the Tribunal found in favor of the appellant regarding the classification of services, the penalty imposed by the original authority did not sustain.

4. Demand of interest on belated payment: The appellant did not contest the demand of interest on belated payment of commission under "Advertising Agency Services" for a specific period. The Tribunal acknowledged this and did not interfere with the demand of interest, which was found to be sustainable.

In conclusion, the Tribunal allowed the appeal based on the classification of services under "Business Auxiliary Service" instead of "Advertising Agency Service," setting aside the demands related to tax liability and penalty under the latter. The demand of interest on belated payment was upheld as it was not contested by the appellant.