2019 (4) TMI 1687 - AT - Service Tax

Valuation - Advertising agency services - inclusion of Discount of about 15% received by the appellant in assessable value - HELD THAT - CBEC in its circular dated 23.8.2007 has very categorically clarified that the activity of merely canvassing advertisement for publishing on commission basis will not fall under the category of advertisement agency service and since the Show cause notice has demanded the Service Tax under the category of Advertising agency services falling under section 65 (105)(e) and therefore the demand of service tax under the category of Advertising agency services is without jurisdiction and the Department has wrongly classified the activity of the appellant. Time Limitation - HELD THAT - Invoking the extended period of limitation under section 73 of Finance Act, 1994 does not appear to be legally sustainable, as the department since very beginning was aware of the activity undertaken by the appellant and only on the advise of the department, he has taken the registration under the category of Advertising agency services and since as CBEC has clarified that the kind of activity undertaken by the appellant does not qualify to be classified under the category of Advertising Agency Service‟, demanding duty under the Advertising Agency Service‟ becomes legally not sustainable - thus it cannot be alleged that the appellant have suppressed, mis-declared any fact from the department, with intent to evade Service Tax - invocation of extended period not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services for Service Tax liability.
2. Applicability of extended period of limitation under section 73 of Finance Act, 1994.
3. Taxability of discounts/incentives received by the appellant from print media.

Analysis:

Issue 1: Classification of services for Service Tax liability
The appellant, registered under "Advertising agency services," canvasses potential advertisers for newspaper advertisements. The department alleged the discount received by the appellant from newspapers as taxable towards advertisement services. The appellant contended that the demand was under a wrong classification as per Circular No. 96/7/2007-ST, clarifying such services fall under Business Auxiliary Services, not Advertising agency services. The Tribunal agreed, citing the Circular, and held the demand under Advertising agency services was without jurisdiction.

Issue 2: Applicability of extended period of limitation
The Tribunal found the demand under the extended period of limitation legally unsustainable. The appellant had sought clarification from the department before registration, and the department advised registration under Advertising agency services. Since the CBEC clarified the activity did not qualify as Advertising agency service, invoking the extended period of limitation was deemed legally unsustainable.

Issue 3: Taxability of discounts/incentives
The Tribunal referred to precedents where discounts/incentives received by the appellant were held non-taxable under Advertising agency services. The discounts/incentives were not considered charges for services but incentives received for the business provided to print media. Consequently, the Order in Appeal was set aside, and the appeal was allowed based on the precedents and the incorrect classification of the appellant's activities.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented, and the Tribunal's findings based on legal provisions and precedents.