2018 (3) TMI 1241 - AT - Service Tax

Advertising Agency Service - the appellant undertakes the activity of painting of different brands of tea in the walls of houses belonging to different persons. For undertaking such activities the appellant collects certain amount from the clients and paid the same to the house owners - The department entertained the view that the charges received by the appellant should be considered as gross value for the purpose of computation of the service tax liability under the taxable category of advertising agency service - Held that - the amount of rent actually collected by the appellant from its client were paid to the house owners and the appellant never gained anything out of such rent amount received from the client. Thus the amount of rent should not form part of gross value under Section 67 of the Finance Act 1994 for computation of the service tax liability - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of gross value for service tax liability in the case of advertising agency services involving payment to house owners.

Analysis:
The appeal was filed against an order by the Commissioner of Customs, Central Excise (Appeals), Jaipur. The appellant provided advertising agency services and also engaged in painting different tea brands on house walls, for which they collected charges from clients and paid to house owners. The department considered these charges as part of the gross value for service tax calculation under advertising agency services. The appellant contended that they had discharged the service tax liability for the advertising agency services and the charges paid to house owners were merely passed through from clients to house owners, as evidenced by sample invoices.

After hearing both parties, the Tribunal examined the case records and found that the rent collected from clients was indeed paid to house owners without the appellant gaining any benefit from it. Therefore, the Tribunal concluded that the rent amount should not be included in the gross value calculation for service tax liability under Section 67 of the Finance Act, 1994. As a result, the impugned order was deemed to lack merit, and the appeal was allowed in favor of the appellant. The judgment was dictated and pronounced in open court by the Tribunal members.