2018 (10) TMI 92 - AT - Service Tax

Classification of services - Photography services or not? - Collection Centre for collection of exposed photo films received from various clients for getting some processed from different colour labs - Board s Circular dated 27.12.2001 - extended period of limitation. Held that - Board s Circular dated 27.12.2001 has clarified the issue that the collection centre who merely collects the exposed film from their clients and gets it developed from other processing lab, will not be covered by the Photography Services - Though the appellant was having a photography studio but such activity is of merely collecting and getting the negative processed from photo labs and further handing over the same to the customers. Extended period of limitation - Held that - Having been held as a non taxable service by above circular of the Board, there could be a bona fide belief on the part of the assessee not to pay service tax on the said activity - The appellant themselves approached the Board for clarification and as such it cannot be said that there was any mala fide on their part so as to justifiably invoke the longer period of limitation - demand raised against them is hit by the bar of limitation. However, smaller portion of demand (for appellant s activity of enlargement of negatives, which is taxable) may fall within the period of limitation, which the learned advocate has agreed to pay - matter remanded to the Original Adjudicating Authority for quantification of the demand falling within the period of limitation - appeal allowed by way of remand.

Summary

Issues:
1. Whether the activity of running a collection center for collecting exposed photo films and getting them processed from different color labs falls under the category of taxable photography services liable to service tax.
2. Whether the demand raised against the appellant is within the period of limitation.
3. Whether penalties imposed under various sections of the Finance Act are justified.

Analysis:

Issue 1:
The appellant was engaged in enlarging photographs negatives and running a collection center for processing exposed photo films. The Revenue contended that the collection of exposed films for processing constituted a taxable photography service liable to service tax. The Original Adjudicating Authority confirmed the demand, interest, and penalties under different sections of the Finance Act. The appellant argued that the activity did not fall under photography services based on a Board Circular and subsequent clarifications. The Tribunal noted the Circular exempting collection centers merely collecting and processing films from being classified as photography services. As the appellant sought clarification from the Board and there was no evidence of mala fide intent, the demand was considered to be beyond the limitation period.

Issue 2:
The Tribunal found that while a portion of the demand fell within the limitation period, the appellant agreed to pay that amount. The impugned order was set aside, and the matter was remanded to the Original Adjudicating Authority for quantification of the demand within the limitation period. Due to the absence of mala fide intent on the part of the appellant, the penalties imposed under various sections of the Finance Act were deemed unjustified and subsequently set aside.

Conclusion:
The Tribunal ruled in favor of the appellant, determining that the activity of running a collection center for processing exposed photo films did not constitute taxable photography services. The demand was found to be beyond the limitation period, with a portion agreed upon for payment. Penalties imposed were set aside due to the absence of mala fide intent. The appeal was disposed of accordingly, providing relief to the appellant.