2018 (3) TMI 109 - AT - Service Tax

CENVAT credit - advertising agency service - inputs/capital goods - Held that - Admittedly, the display panels stainless steel box, power meter, electrical equipment, steel framework, mobile toilets, police booth are all clearly items which are specifically will fall under input used by the provider of output service. These cannot be considered as immovable capital goods. As such, there could be no legal or factual basis for denial of credits on such electrical equipments, display panels, stainless steel box, power meter, steel framework, mobile toilets, police booth which are essential materials for display of advertisement by the appellant. All the items which are now disputed for credit are essentially used to create such structures for display of advertisement. In fact many of these items are themselves used for display without any further elaborate fabrication. In such situation, there could be no reason for denial of credit holding that these items cannot be considered as inputs for such output service. Time limitation - Held that - there is no allegation of willful suppression or mis-statement with intention to evade payment of tax - extended period and penalty cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of credit availed by the appellant under the category of capital goods/inputs during the financial years 2006-2007 to 2010-2011.
2. Dispute regarding denial of credit on various items like BQS, free-standing panel supporting structure, electrical equipments, steel framework, police booth, stainless steel box for advertisement, mobile toilets, power meter, Renault air water winding device.
3. Applicability of Cenvat Credit Rules, 2004 in the case.
4. Interpretation of the definition of "advertisement" and "advertising agency" under Section 65(2)/(3).
5. Allegation of willful suppression or misstatement with intention to evade payment of tax by the appellant.

Analysis:
1. The appellant, an advertising agency, availed Cenvat credit on various items used for advertising services. The dispute arose when the Revenue alleged that certain items were ineligible for credit. The Tribunal noted that items like display panels, stainless steel box, power meter, etc., essential for providing advertising services, cannot be denied credit. These items are inputs used by the appellant in their output service of displaying advertisements, and the impugned order denying credit on these items was set aside.

2. The Revenue contended that certain structures, like BQS, were immovable capital assets and not duty paid, hence not eligible for credit. However, the Tribunal observed that the BQS structures were not immovable in nature, being mainly made of stainless steel tubes and materials. The structures were movable and had been relocated in the past, indicating their non-immovable nature. As the inputs used to create these structures had suffered duty and were used for displaying advertisements, denial of credit on this basis was found unjustifiable.

3. The Tribunal analyzed the legal provisions related to advertising agencies and advertisements, emphasizing the importance of structures and items used in creating displays for advertising services. It was established that the disputed items were crucial for creating structures for advertisement display, and therefore, denying credit on these items was unwarranted.

4. Regarding the allegation of willful suppression or misstatement by the appellant, the Tribunal noted that the data for proceedings against the appellant was based on the ST-3 returns filed periodically. As there was no evidence of intentional evasion of tax, the demand for an extended period and penalty on the appellant could not be sustained.

5. Ultimately, the Tribunal found the impugned order lacking merit and set it aside, allowing the appeal in favor of the appellant. The judgment highlighted the essential nature of the disputed items for providing advertising services and the lack of legal justification for denying credit on these items.