2023 (2) TMI 609 - AT - Service Tax

Valuation - inclusion of the fixed cost component - appellant had only paid the Service Tax on the variable cost which was nothing but the cost received from the advertising agency - case of Revenue is that appellant had excluded the fixed cost collected from the advertising agency which was nothing but the slot fee payable to the television channels for telecasting the programme and that therefore it was sought to be recovered - extended period of limitation - revenue neutrality. HELD THAT - Section 73(1) of the Finance Act 1994 prompts for issuing a Show Cause Notice for the recovery of Service Tax not levied or paid or short-levied or short-paid or erroneously refunded; but however neither in the Show Cause Notice nor even in the impugned Order-in-Original do we see any allegation as to the Service Tax not levied or not paid or short-levied or short-paid or erroneously refunded. Further there is also no dispute either in the Show Cause Notice or in the impugned Order-in-Original of the fact that the advertising agency had remitted the Service Tax component to the Government Exchequer. Section 73(1) could be invoked when the conditions prescribed in the proviso thereunder are satisfied - From a perusal of the Show Cause Notice or even the Order-in-Original it is not found that the concerned authorities have justified the issuance of Show Cause Notice by invoking the extended period of limitation but for a mere allegation that there was suppression. It is very much the settled position of law that allegations howsoever strong cannot take the place of proof. When therefore the Government is not deprived of its dues that is to say when for a particular service on which the Service Tax was liable to be paid the same has been paid it makes no difference as to who has paid the tax. The appellant has claimed that the advertising agency has paid the applicable Service Tax on the impugned service which has not been disputed either by the advertising agency or even by the Revenue and this is precisely the reason for the Revenue not to urge that the Service Tax was not paid but for only quoting Section 73(1). It is worthwhile here to note the observations at paragraph 9.3 of the Order-in-Original wherein the Adjudicating Authority himself has acknowledged that the Service Tax having been paid by the advertising agency the appellant could enjoy the facility of CENVAT Credit. The appellant has to succeed on both the legal grounds and the Revenue has not justified the invoking of the extended period of limitation and also not been able to dislodge that it is the case of revenue neutrality. Appeal allowed.

Summary

Issues Involved:
Whether the Revenue is correct in demanding Service Tax from the appellant on the fixed cost component?

Detailed Analysis:
1. Service Tax Liability on Fixed Cost Component:
The main issue in this case is whether the Revenue is justified in demanding Service Tax from the appellant on the fixed cost component. The appellant, engaged in producing tele-serials and programmes for television channels, was paying Service Tax under the category of "Sale of Space or Time for Advertisement." The dispute arose when the Revenue alleged that the appellant did not pay the appropriate amount of Service Tax on the fixed cost component, specifically the slot fee paid to television channels for telecasting the programmes. The appellant argued that they only paid Service Tax on the variable cost received from advertising agencies and not on the fixed cost. The Revenue contended that the fixed cost, i.e., the telecast fee, was collected by the appellant along with Service Tax and hence the appellant was liable to pay Service Tax on the fixed cost as well.

2. Extended Period of Limitation and Revenue Neutrality:
Another crucial aspect of the case was the invocation of the extended period of limitation for issuing the Show Cause Notice. The Adjudicating Authority justified the extended period by alleging that the appellant withheld information regarding the collection of fixed costs, leading to a deliberate act of non-disclosure. However, the appellant argued for revenue neutrality, stating that the advertising agency had paid the applicable Service Tax on the service provided, which was not disputed by either the agency or the Revenue. The Tribunal emphasized that the payment of Service Tax by the advertising agency established a revenue-neutral situation, and the Revenue failed to justify the extended period of limitation based on mere allegations of suppression.

3. Legal Grounds and Conclusion:
The Tribunal carefully analyzed the contentions of both parties and concluded that the appellant should succeed on legal grounds. It was observed that the conditions for invoking Section 73(1) of the Finance Act, 1994 were not met as the Service Tax on the service provided was remitted by the advertising agency to the Government Exchequer. The Tribunal held that the appellant was entitled to succeed, setting aside the impugned order and allowing the appeal with consequential benefits, if any, as per law.

In summary, the judgment revolved around the dispute of Service Tax liability on the fixed cost component, the invocation of the extended period of limitation, and the concept of revenue neutrality in tax matters. The Tribunal ruled in favor of the appellant, emphasizing the importance of justifying legal actions and upholding neutrality in revenue collection.