2022 (3) TMI 555 - AT - Service Tax

Taxability - services of advertisements of the advertisers and broadcasting or telecasting them - circular No. 341/43/96-TRU dated 31.10.1996 - Return / refund of money deposited as service tax - Unjust enrichment - HELD THAT - Undisputedly, the appellant is involved in only the third activity of carrying the advertisements in its channels. CBEC Circular No. 341/43/96-TRU dated 31.10.1996 clarified that the amount paid for space and time in getting the advertisement published in the print or electronic media would not be included in the value of taxable service rendered by the advertisement agency and accordingly the service tax was payable only on the commission received by the advertisement agency. In the present case, it is true that no service tax was chargeable on the activity of the appellant, viz., carrying the advertisements in its broadcast and telecast. Therefore, the Government cannot collect service tax. It is also true that Section 73A(2) which mandated that any person who collects any amount as representing service tax to deposit it with the Government also did not exist at the relevant time. Thus, the Government had no authority to demand the amount. Had the appellant collected the amounts from its customers as representing tax as a matter of precaution, it could have paid it as tax under protest. Once, it is decided that no tax is payable, the appellant could have repaid the customers and claimed a refund. If the appellant had claimed refund without returning the amounts in part or whole to its customers, such refund would have been sanctioned under section 11B and the amounts would have been credited to the Consumer Welfare Fund under Section 11B of the Central Excise Act as applicable to the provisions of Service tax by Finance Act, 1994. Section 11B, including the provision of refunds being credited to the Consumer Welfare Fund were applicable during the period of dispute - Neither the Government nor the appellant has any right over the amounts collected from the customers as representing service tax in the absence of any legal provisions. The appellant is directed to return the amount collected by it, under the garb of its liability to pay service tax when actually it was not liable, to all those customers from whom it was collected that too within a period of two months - the order under challenge confirming the demand with interest and imposing penalty upon appellant is hereby set aside - Appeal allowed.

Summary

Issues Involved:
1. Taxability of the service provided by the appellant.
2. Applicability of Section 73A(2) of the Finance Act, 1994.
3. Doctrine of unjust enrichment.
4. Imposition of interest and penalty.

Detailed Analysis:

1. Taxability of the Service Provided by the Appellant:
The appellant, engaged in broadcasting services through Doordarshan Kendra, was carrying advertisements but not creating them. The Central Board of Excise and Customs (CBEC) Circular No. 341/43/96-TRU dated 31.10.1996 clarified that the amount paid for space and time in print or electronic media would not be included in the value of taxable service rendered by the advertisement agency. The impugned order acknowledged this clarification, and the Hon’ble Madras High Court upheld its validity in M/s. Adwise Advertising Pvt. Ltd. [1998 (97) ELT 35].

2. Applicability of Section 73A(2) of the Finance Act, 1994:
The appellant collected amounts as service tax from advertisers during September 2002 to March 2003, but Section 73A(2), which mandates depositing such collected amounts with the Government, was introduced only in 2006. The appellant argued that this section could not be applied retrospectively. However, the Tribunal held that irrespective of the non-existence of Section 73A(2) at the relevant time, the collection was prohibited by Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by the authority of law.

3. Doctrine of Unjust Enrichment:
The doctrine of unjust enrichment was discussed extensively. The Tribunal noted that the appellant had collected amounts as service tax without any authority and retained them, resulting in unjust enrichment. The principle was established in various cases, including Mafatlal Industries Ltd. vs. Union of India [1997 (5) SCC 536] and Indian Council for Enviro Legal Action vs. Union of India [1996(5) SC 281]. The Tribunal emphasized that the appellant should not profit from amounts collected under the mistaken belief of tax liability.

4. Imposition of Interest and Penalty:
The Adjudicating Authority confirmed the demand of ?36,92,874/- along with interest and imposed penalties under Sections 76 and 77(1) of the Finance Act, 1994. The appellant contended that since no service tax was payable, the imposition of penalty and interest was unjustified. The Tribunal set aside the order confirming the demand, interest, and penalties but directed the appellant to return the collected amounts to its customers within two months or deposit them in the Consumer Welfare Fund if the customers could not be traced.

Conclusion:
The Tribunal allowed the appeal but directed the appellant to return the collected amounts to the customers or deposit them in the Consumer Welfare Fund, emphasizing the principle of unjust enrichment and the constitutional mandate against unauthorized tax collection. The compliance report was to be furnished within 15 days after the two-month period.