2018 (6) TMI 791 - AT - Service Tax

Advertising agency service - The appellants were providing services of display of bus panel advertisements etc. directly to clients or other agencies, Directorate of Advertisement and Visual Publicity (DAVP), Govt. organizations etc. without discharging service tax liability on service charges realized and without filing periodical ST-3 returns - Held that - There cannot be demand of service tax liability in respect of the value of the services provided to other advertising agencies and hence that part of the impugned order which upheld the said demand is required to be set aside. Penalty - Held that - The issue in dispute was very much mired in litigation as evidenced by the litigations on the issue - the imposition of penalties in this case is unjustified and requires to be set aside. Appeal allowed in part.

Summary

Issues:
1. Dispute over service tax liability for services provided to other advertising agencies.
2. Interpretation of the definition of taxable service in relation to advertisement agency.
3. Imposition of penalties under Section 78 of the Finance Act 1994.

Analysis:

1. The case involved a dispute regarding the service tax liability for services provided by M/s. Iswarya Publicities Pvt. Ltd. to other advertising agencies. The Commissioner (Appeals) set aside the penalty imposed under Section 76 of the Finance Act 1994 but upheld the demand for service tax, interest, and penalties for the period from 01.07.2003 to 31.03.2006. The appellants challenged this decision before the Appellate Tribunal.

2. The appellants contended that services provided to other advertising agencies should not attract service tax liability, citing CBEC Circular No. 341/43/96 and previous tribunal decisions. They argued that they were only liable for services provided directly to clients, not to intermediary agencies. The Tribunal referred to the definition of advertising agency service and clarified that service tax liability does not extend to services provided to other advertising agencies based on the circular and legal interpretations.

3. Regarding the penalties imposed under Section 78 of the Act, the appellants claimed they were unaware of the service tax implications and operated under a genuine belief that their activities were not taxable. They cited various tribunal decisions supporting their position. The Tribunal considered the litigious nature of the issue and the reasonable cause for the appellants' confusion, ultimately setting aside the penalties under Section 80 of the Act.

4. After hearing both sides and reviewing the records, the Tribunal modified the impugned order. They set aside the demand for service tax in relation to services provided to other advertising agencies, upheld the demand for services provided directly to clients and government agencies, and waived all penalties imposed under Section 78. The appeal was partly allowed, providing consequential reliefs as necessary.

In conclusion, the Appellate Tribunal clarified the service tax liability for services provided to other advertising agencies, upheld penalties on services provided directly to clients and government agencies, and set aside all penalties imposed on the appellants due to reasonable cause and genuine confusion regarding tax implications.