2017 (3) TMI 657 - AT - Service Tax

Advertising agency service - canvassing work - 10% charges collected from various Govt. departments along with the advertisement expenses - Business Auxiliary Service or not? - Held that - The whole consideration received by the appellant assessee has to be either taxed under advertising agency or as a canvassing work (BAS) since full money has been collected from the Govt. Departments on a single bill. The dual approach by the Revenue is not legally sustainable. Having accepted the appellant assessee as advertising agency, a portion of the consideration in the same bill cannot be taxed under BAS - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of service tax confirmed by the impugned order
2. Non-imposition of penalty on the assessee/appellant
3. Taxability of 10% charges collected by the appellant from various Govt. departments under Business Auxiliary Service (BAS)

Analysis:

Issue 1: Liability of service tax confirmed by the impugned order
The appellant, a society created by the Government of Chhattisgarh for advertisement activities, contested the service tax liability confirmed by the impugned order. The Revenue, on the other hand, contested the non-imposition of penalty on the appellant. The lower authorities held that charges received by the appellant from various Govt. Departments are liable to tax under Business Auxiliary Service (BAS) as per the Master Circular issued by CBEC. The impugned order confirmed a service tax demand of ?10,74,562, but waived penalties under Section 76, 77 & 78.

Issue 2: Non-imposition of penalty on the assessee/appellant
Penalties under Section 76, 77 & 78 were waived by the lower authorities despite confirming the service tax demand on the appellant. The appellant argued that they discharged service tax on the value of services received from Govt. departments but not on the 10% charges collected. The appellant contended that the consideration received cannot be taxed under both 'advertising agency' and 'BAS' categories as they provided a single service to the Govt. departments.

Issue 3: Taxability of 10% charges collected by the appellant under BAS
The appellant, registered with the department and paying service tax under the advertising agency service category, collected 10% charges from Govt. departments along with advertisement expenses. The Tribunal noted that the appellant engaged another agency to carry out the advertisement work and collected an extra 10% for their services. The Tribunal held that the Revenue's demand under BAS for the 10% charges was not legally sustainable. The Tribunal found that the appellant's activities should be covered under a single tax category, either as an advertising agency or under BAS, as the full amount was collected on a single bill. The dual approach by the Revenue was deemed legally unsustainable, and the impugned order was set aside, allowing the appeal by the appellant. The appeal by Revenue was dismissed.