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2023 (7) TMI 467 - AT - Service TaxRecovery of short paid duty aongwith education cess, interest and penalties - case of appellant is that SCN issued merely on the basis of audit objection without verifying the factual position and without seeking any clarification from the appellant - Booking of stands/displayed advertisement and sending the same to media - Outdoor and other advertisement sub-contracted by other advertising agencies - Design and production of advertisement - extended period of limitation. Advertising Agency Service - HELD THAT - The appellant admittedly is registered with Service Tax Department under the category of Advertising Agency Services. They are regularly discharging their service tax liability and are filing their ST-3 returns. However, the discharge of liability is alleged as short for the reason that the entire taxable value has not been included while calculating the tax liability - there is no denial to the fact that the appellant is providing services to another service provider i.e. another advertising agency instead of providing said services directly to the client. This Tribunal also in the case of BHAVYA ENTERPRISES (ADVERTISERS) VERSUS COMMISSIONER OF C. EX., DELHI-III 2005 (5) TMI 649 - CESTAT NEW DELHI has held that activity of space selling in print media without being engaged in making of the advertisement, is not covered in the definition of advertisement agency, hence, is not liable for service tax - there is no cogent basis of confirming the allegations of short payment of service tax merely on the basis of difference in figures noticed by the audit team. The discharge of liability with respect to the commission retained by the appellant has already been acknowledged. Demand with respect to the advertisement under works contract - HELD THAT - The adjudicating authority has nowhere denied the composite nature of certain contracts executed by the appellant. The composite work contracts were not liable to tax prior the concept came into existence in the year 2007 as has been held by Hon ble Supreme Court in the case of Commissioner of Central Excise Customs, Kerala Vs. M/s. Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT - The entire period of demand herein is prior 1st July, 2007. Otherwise also, the adjudicating authority has no where denied the discharge of sales tax liability by the appellant with respect to the composite contracts. Confirmation of demand on this ground cannot sustain as on date and thus is liable to be set aside. Extended period of limitation - suppression of facts or not - HELD THAT - The appellant was discharging the liability on the amount he was receiving as commission. Since the remaining other amount was passed over to the principal advertising agencies, the appellant was not liable to pay service tax on the said amount. The findings of adjudicating authority for including the said amount in the gross value of taxable service are already held liable to be set aside. It becomes clear that there is no short payment of tax by the appellant. The returns were otherwise being filed regularly - Resultantly, there remains nothing on record which may prove any positive act on part of the appellant to be called as an act of collusion or suppression of facts. The adjudicating authority has ignored the landmark decision of M/s. Larsen Toubro Ltd. Resultantly, it is held that extended period has wrongly been invoked by the department while issuing the show cause notice. Penalties - HELD THAT - Tburden of proving the mala fide lies with the Revenue. When there is nothing on record which displays any wilful default on part of the assessee, no circumstance arises for imposition of penalty. The order under challenge is not sustainable - Appeal allowed.
Issues Involved:
1. Short payment of service tax and education cess. 2. Demand confirmation based on audit objections. 3. Service tax liability on amounts received from principal advertising agencies. 4. Taxability of composite work contracts. 5. Invocation of extended period of limitation. 6. Imposition of penalties. Summary: Issue 1: Short Payment of Service Tax and Education Cess The appellant was alleged to have short paid service tax amounting to Rs. 55,89,455/- along with appropriate interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The audit revealed discrepancies between the amounts shown under 'Income-Sales' in balance sheets and ST-3 returns for the period 2001-02 to 2004-05, leading to a demand for Rs. 5,74,53,644/- in service tax and Rs. 6,06,980/- in education cess. Issue 2: Demand Confirmation Based on Audit Objections The appellant argued that the show cause notice was issued based on audit objections without verifying the factual position or seeking clarifications. The audit team only noticed differences in figures without considering details under 'expenditure' and 'sundry debtors' in the balance sheets. The Tribunal found that there was no cogent basis for confirming the allegations of short payment merely on the basis of differences in figures noticed by the audit team. Issue 3: Service Tax Liability on Amounts Received from Principal Advertising Agencies The appellant contended that the adjudicating authority erred in confirming the demand for service tax on amounts received from principal advertising agencies for sub-contracted advertisement work. The Tribunal observed that the appellant provided services to other advertising agencies and retained only 15% as commission, on which service tax was duly paid. The Tribunal held that the service rendered by the appellant was an activity of space selling, which is not liable for service tax as per CBEC Circular No. 64/13/2003-ST. Issue 4: Taxability of Composite Work Contracts The Tribunal noted that the adjudicating authority did not deny the composite nature of certain contracts executed by the appellant. Citing the Supreme Court's decision in Commissioner of Central Excise & Customs, Kerala Vs. M/s. Larsen & Toubro Ltd., the Tribunal held that composite work contracts were not liable to tax prior to July 1, 2007. Consequently, the demand for service tax on composite contracts was set aside. Issue 5: Invocation of Extended Period of Limitation The Tribunal observed that the demand for the period 2001-02 to 2004-05 was raised beyond the statutory period in terms of Section 73 of the Act. The extended period can only be invoked in cases of willful suppression of facts with intent to evade payment of service tax. The Tribunal found no evidence of willful suppression or collusion by the appellant and held that the extended period was wrongly invoked. Issue 6: Imposition of Penalties The Tribunal held that the burden of proving mala fide intent lies with the Revenue. Since there was no evidence of willful default by the appellant, the imposition of penalties was not justified. The Tribunal relied on the Supreme Court's decision in U.O.I. vs Ashok Kumar & Ors., holding that penalties cannot be imposed without proof of mala fide intent. Conclusion: The Tribunal set aside the order under challenge, holding that the allegations of short payment of service tax were not substantiated, the extended period of limitation was wrongly invoked, and the imposition of penalties was not justified. The appeal was allowed in favor of the appellant.
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