2016 (12) TMI 603 - AT - Service Tax

Demand of ₹ 9,84,842/- - services rendered to an advertising agency - for the period 1997-98 to 2000-01 - Held that - we find considerable merit in the submissions of the learned counsel. The Department has clarified the matter to the Advertising Associations in Bangalore and Chennai. In the event, the demand of ₹ 9,84,842/- involving service tax on the amounts billed by the appellants, not to the final clients, but only to the advertising agency is required to be set aside, which we hereby do. Demand of ₹ 2,63,977/- - for the period 1997-98 to 2000-01 - incorrect calculation of the tax liability worked out from gross receipts as per Income Tax return and P & L account of amounts received by the appellant from ultimate clients who have been directly billed by the appellant - Held that - it is felt proper to remand the matter back to the original authority, only for the limited purpose of examining the assessee s/appellant s contention that the amount constitutes gross receipts including service tax paid thereon by the clients and secondly that they have already discharged the tax liability accrued to them on the billed amounts. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Taxability of services rendered to an advertising agency by the appellant.
2. Correct calculation of tax liability based on gross receipts from ultimate clients.

Analysis:

Issue 1: Taxability of services to advertising agency
The appellant was demanded an amount for the period 1997-98 to 2000-01 on the premise that the services provided to an advertising agency constituted taxable services falling under the category of advertising agency service. The appellant contended that the demand was not sustainable, citing clarifications issued by the Department to Outdoor Advertising Associations in Chennai and Bangalore. These clarifications stated that if hoarding companies lease their hoardings to advertising agencies, who then bill the ultimate clients, the advertising agencies are liable to pay service tax on the gross amount. However, if the hoarding companies directly bill the clients, they become liable for the service tax. The appellant also relied on tribunal decisions supporting their case. The Tribunal found merit in the appellant's submissions and set aside the demand of &8377; 9,84,842 involving service tax on amounts billed to the advertising agency.

Issue 2: Correct calculation of tax liability
Another demand of &8377; 2,63,977 was confirmed for the same period based on the incorrect calculation of tax liability from gross receipts. The appellant argued that the amount in the Profit & Loss account already included service tax paid by clients, and therefore, taxing the entire amount again was unjustified. The Tribunal, considering the appellant's contentions, decided to remand the matter back to the original authority to examine whether the amount constituted gross receipts inclusive of service tax paid by clients and whether the appellant had already discharged the tax liability on the billed amounts. The Tribunal ordered a reexamination of this issue.

In conclusion, the Tribunal set aside the demand of &8377; 9,84,842 related to services provided to the advertising agency and remanded the matter concerning the demand of &8377; 2,63,977 back to the original authority for further examination. The appeal was disposed of accordingly.