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TMI Blog2024 (3) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit and Loss Account of the appellant. From the invoices raised by the print media on the appellant and by the appellant on their clients it is evident that normally appellants were getting discount of 15% from the print media, and they were in turn passing certain discounts to their clients while billing them. In certain cases it may be that no discount has been passed and on the basis of the those document both show cause notice and impugned order presume that commission earned by the appellant is 15 %. This fact is not established either by the figures in the balance sheet nor evidenced by the invoices of the print media on appellant and the appellant on their clients. Thus the manner in which the demand has been computed by the impugned order and the Show cause Notice/ Statement of Demand are at variance and do not inspire confidence. In fact the actual discount should have been worked out on the basis of receipts and payments which are available in the audited balance sheet. Classification of Services - HELD THAT:- It is evident that North Eastern Railway (NER) has raised an advertisement order upon the appellant specifying the category of the advertisement and newspapers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MEMBER (JUDICIAL) AND HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) For the Appellant : Shri Dharmendra Kumar, Chartered Accountant For the Respondent : Shri Sandeep Pandey, Authorised Representative ORDER SANJIV SRIVASTAVA: This appeal is directed against Order-in-Original No. LKO/EXCUS/000/COM/ST/012-013/2016-17 dated 24/11/2016 passed by Commissioner of Central Excise & Service Tax, Lucknow. By the impugned Order following has been held:- ORDER 1. The demand to the extent of Rs. 1,02,51,252/- (One Crore, two lacs, fifty one thousand two hundred and fifty two) raised against SCN No. 08/Commr/LKO/ST/2015-16 dated 06.05.2015 is confirmed and shall be recovered from the party. Interest at appropriate rate under Section 75 of the Finance Act, 1994 also be recovered from M/s Anu Image Makers Advertising Co. Pvt. Ltd. 54 Harzratganj Lucknow. 2. I impose Penalty of Rs 1,02,51,252/- (One Crore, two lacs, fifty one thousand two hundred and fifty two) under Section 78(i) of Finance Act, 1994. 3. I impose penalty of Rs 10,73,910/- under Section 76 of F.A. 1994 as was applicable for the period 2007-08. 4. I impose penalty of Rs 10000/- under Section 77(i) of Finance Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to sub-section (1) of Section 73 of the Finance Act, 1994. (ii) Interest under Section 75 of the Finance Act, 1994 should not be demanded from them on the confirmed amount of demand; (iii) Penalty should not be imposed under Section 76 of the Finance Act, 1994, for their various acts of omission and commission, as discussed in earlier paras; (iv) Penalty should not be imposed under Section 77 of the Finance Act, 1994, for their various acts of omission and commission, as discussed in earlier paras; (v) Penalty should not be imposed under Section 78 of the Finance Act, 1994, for their various acts of omission and commission, as discussed in earlier paras; 2.5 Subsequently, a statement of demand dated 07.04.2016 was issued to the appellant under Section 73 (1A) of the Finance Act, 1994, asking them to show cause as to why- (i) An amount of service tax amounting to Rs 20,91,205/- including Ed. Cess and S.H. Ed. Cess for the period 201415 should not be demanded and recovered from them under Section 73(1) of Finance Act, 1994 for violation of section 68 of the Act ibid read with section 66/66B ibid and rule 6 of Service tax Rule, 1994. (ii) Interest should not be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in print media'. * When these services are covered by the specific category of services then the classification under specific category will prevail over general category that of 'Business Auxiliary Services'. * Newspaper Agencies sold their space for advertisement in their print media at a discount to the appellant, which ranges from 10% to 15% of advertisement tariff as his advertisement from the invoices issued by the said news paper agencies. Appellant in turn sold that spaces to various advertisers at the tariff notified by the newspaper agencies 10% or 15% at the discount received by them from news paper agencies, was a trade discount and not commission from the newspaper agencies to the appellant. Activity undertaken by the appellant is neither promotion of sale nor marketing of goods or promoting the provision of the services to their client. Sale of space by the appellant to their client is an independent transaction and purchase of the same other than the purchase of the space by them from the newspaper agencies. From the records of the appellant. * it is evident that net margin between sale of space and purchase of said space ranges between 3.78% to 7.24%. * Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause(a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause(b) it shall be classified under the sub-clause which occurs first among the sub clause which equally merit consideration.] Party is an advertising agent therefore as per above clause (a) services provided by the party falls under the category of "Advertising Agency Service" But at the same time party is a commission agent too. In this regard it should be kept in mind that party is not getting any consideration in lieu of services provided to the advertiser. What they get is the commission from the media. Therefore as per above state clause (b) services provided by the party falls under the category of BAS as commission gives them their essential character. Therefore I found that demand of Service Tax from the party under B.A.S is correct & proper. I found that by the Finance Act 2012, radical changes have been made in the Finance Act, 1994 by providing that service tax is payable on all services rendered in taxable territory except for "neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 66D & therefore is taxable; whatever it may be as per definitions applicable upto 30.06.2012 Now I come to 2nd issue .... On going through the above submission made by the party, I found that the following issues are to be considered:- 1. Whether services in respect of advertisement at DAVP rate are exempted. 2. Whether Commission accrued on work of screen printing is taxable or not. 3. Whether gross amount of Commission accrued in respect of advertisement ate commercial rates or net income from said commission is taxable. Party has inter-alia stated that difference between taxable value shown in the balance sheet & Service tax returns is due to exclusion of the amount of work done at DAVP rates, we were not paying service tax on the advertising agency service rendered at DAVP rates, DAVP is a Commercial concern & is not liable to service tax which was clarified by the Boards vide its letter dated 31.10.96, PRO Eastern Railways Gorakhpur vide letter dated 31.10.2012 has clarified that no service tax is to be paid on print media advertisement published at DAVP rates. I found that party in attempt to justify short payment of service tax on services provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y appoints the 1st day of November 1996, as the date on which said Act shall came into force. I found that this notification effects levy of service tax on "advertising agency service" w.e.f. 01.17.96 and has no other impact on SCN issued against the party. Party has stated that they are discharging service tax on actual portion of commission which they retain with them from the total discount of 15% as per CBEC clarification issued vide F. No. 341/43/96-TRU dated 31.10.96. In this regard I observe that para 4 of said letter relates to valuation of taxable service of advertising agency service which is read under. "It is further to be clarified that in relation to advertising agency, the service tax is to be computed on the gross amount charged by the advertising agency from the client for services in relation to advertisements. This would, no doubt, include the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly under takes the making or preparation of advertisement or gets it done through another person. However the amount paid, excluding their own commission by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced copy of invoice M/s SPMLL-7170 dated 31.08.2009 raised by radio mantra. This invoice is raised to party & not against BSNL as claimed by the party. In this invoice advertising agency commission of Rs 6750/- @ 15% has been deducted under the name & style of 'agency discount credit' before charging service tax on the sale of time slot for advertisement, which is to be collected and paid by Radio Mantra. The said deduction is proper as on this amount of commission, service tax is to be paid by party not by Radio Mantra. Therefore this invoice also proves that the service tax on such commission is to be paid by the party not otherwise. Further party vide his letter dated 18.04.2015 has submitted some copies of invoices raised by them. I found that on the invoices service tax @ 1.54% has been charged. At no point of time service tax rate was 1.54%., actually 1.94% is 15% of 10.3%, which is the applicable rate of service tax at the time of issuance of such invoices. This type of practice is normally used by the provider of such services, on which abatement of certain percentage is available. From this it is evident that party was well aware that 15% of value is taxable & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or time slot for advertisement. I found that service provided by the party i.e. BAS do not fall in any of the category given in Section 66D & accordingly are not exempt from service tax even after introduction of negative list" 4.3 On Computation of Demand From impugned order it is evident the demand has been worked out by the Commissioner on the basis of assumption that the total commission received by the appellant during entire period of dispute was on the activities shown as ―Press Release & Job Work Paid‖ was 15% of the amount paid for such activities. In the impugned order the demand has been worked out in the table as indicated below: Period Amount shown as "Press Release & Job Work Paid" in the balance sheet (85%) Actual Commission accrued, amount of Col. 2/85* 15 (15%) Rate of Service Tax Including Ed. Cess & H. Ed. Cess Service Tax payable Service Tax Paid Differential Service Tax liability 1 2 3 4 5 6 7 2007-08 56258831 9928029 12.36% 1227104 36161 1190943 2008-09 75280893 13284863 12.36% 1642009 158849 1483160 2009-10 70516209 12444037 10.30% 1281736 46962 1234774 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand made in the show cause notice and the impugned order is based on presumed commission of 15% whereas the actual value of sales margin is available and on the basis of the said commission works out year wise as indicated in column 5 of the table above. If the commission was even to be averaged out the same would have been only 6.67% as per the figures indicated in the SCN and impugned order on the basis of Balance Sheets/ Profit and Loss Account of the appellant. From the invoices raised by the print media on the appellant and by the appellant on their clients it is evident that normally appellants were getting discount of 15% from the print media, and they were in turn passing certain discounts to their clients while billing them. In certain cases it may be that no discount has been passed and on the basis of the those document both show cause notice and impugned order presume that commission earned by the appellant is 15 %. This fact is not established either by the figures in the balance sheet nor evidenced by the invoices of the print media on appellant and the appellant on their clients. Thus the manner in which the demand has been computed by the impugned order and the Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoice raised by the Appellant on their clients and invoice raised on the Appellant by the print media is the margin which is available to the Appellant. The Revenue claims that this margin is the commission earned by the Appellant for the services provided to the print media. From the records, no evidence has been brought in by the Department to the effect that the Appellant has been appointed as an agent by the print media. Any person can be said to be acting as an agent only when there is specific Agreement between the person engaging the agent clearly specifying the terms of activities to be undertaken by them for the principal and the consideration to be given for such activities. Only then it can be concluded that the person is acting as an agent for the principal. In this case, just because the Appellant happens to be a member of the Indian Newspaper Society and gets concessional rate for getting the advertisements published in the print media, it cannot be concluded that this discount being given is on account of any commission paid by the print media. In this case, it is seen that it is a kind of trading activity in services. The Appellant first books the space by gettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount received by the service provider from his client only is liable to service tax and not amounts received from others. The adjudicating authority has neither considered the factual position nor the legality of the entire issue. The impugned order 12/2005 dated 27-4-2005 has no merits. Since there is no service tax liability, there is no question of imposing penalty and demanding interest. Hence we set aside the same and allow the appeal with consequential relief." [Emphasis Supplied] 6. In the case of Kerala Publicity Bureau (cited supra) it is held as under: "3. The brief facts of the case are that the appellants were covered under the category of advertising agencies. The Audit found that they had collected incentives from M/s. Malayala Manorama. The Revenue has considered these receipts as extra commission and had proceeded to recover Service Tax on these amounts by invoking larger period.... 4. The learned Chartered Accountant submits that the above cited case along with the case of M/s. Euro RSCG Advertising Ltd. v. The Commissioner of Service Tax, on this very issue, was decided by this bench in assessees favour. He produced a copy of the Final Order Nos. 60 & 61/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, there is no logic in demanding service tax on the discount of 15% received by the appellant from print media. Identical issue was the subject matter of the Tribunal in the case of Euro RSCG Advertising Ltd. v. CCST, Bangalore reported in 2007 (7) S.T.R. 277 (Tribunal) = (2007) 9 STJ 56 (CESTAT Bangalore) wherein the issue was decided in favour of the appellants..." [Emphasis Supplied] 8. In the case of Poornima Advertising & Promotion Pvt Ltd (cited supra), it is held as under: "2. Heard both the sides. We find that the conclusion of the Commissioner (Appeals) that appellant is eligible for refund on merits is correct. The master circular issued by the board has clarified that merely canvassing advertisement for public on commission basis is not classifiable under the taxable service as advertising agency service. Such services are liable to Service tax under business auxiliary service. Poornima is engaged only booking of space or time. Whenever a request is received, Poornima simply books the space in the newspaper or books the time in the media and thereafter collects the amount paid to the media or newspaper. For this service provided to the client, service ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are received are in respect of the services provided under the category of advertising agency services and the amount are discounts and incentives and not as charges for services." [Emphasis Supplied] 9. In the case of Reliant Advertising (cited supra), it is held as under: "13. In Euro RSCG Advertising Ltd., ld. Division Bench of this Tribunal has recorded that the appellants (therein) provided advertising services to their various clients and in order to do so, got in touch with media for booking of time slots on various satellite channels for their clients and as per industry practice the broadcasting agency provides 15% discount from their Tariff rate to the appellant. It is this discount on the tariff rate provided by the broadcasting agency that the appellant passes on to its clients and that 15% was brought to tax as income on which Service Tax is exigible. This Tribunal held that there was no evidence on record to the effect that any amount was received by the appellants from the media and ruled that amounts received by the service provider is alone liable to service tax and not amounts received from others. This Tribunal (in Euro RSCG Advertising Ltd.) held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these decisions, in the present case also, we hold that the demands on the amounts received from the media cannot be levied to Service Tax under BAS." [Emphasis Supplied] 11. From these case laws, it gets clarified that the issue is no more res integra. The amount of incentive received by the Advertising Agency from the print media has been under litigation and the Tribunals have been consistently holding that such incentives or discounts cannot be termed as Business Auxiliary Service. 12. On going through the case law relied upon by the Revenue, Malar Publications Ltd (cited supra), it is seen that the facts are different. There the Appellants were canvassing advertisements for the publications like Daily Thanthi, Rani Weekly etc., and were getting fixed retainership fee for their work. Therefore, the decision arrived at by the Tribunal in the case of Malar Publications Ltd is distinguishable and cannot be applied to the facts of the present case. 13. Accordingly, we hold that the confirmed demand on the ground that the Appellant was providing Business Auxiliary Services to the print media cannot legally sustain. Therefore, we allow these Appeals filed by the Appellant wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with clause (e) thereof defines a taxable service (in the context) as a service provided to any client, by an advertising agency in relation to advertisement, in any manner and clause (zzzm) of Section 65(105) defines the relevant taxable service as service provided to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but excluding sale of space for advertisement print media and sale of time slots by a broadcasting agency or organisation. Explanation (1) to Section 65(105)(zzzm) defines the expression "sale of space or time for advertisement" to include providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music album, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet; etc. 7. It is the admitted case that the assessee was not assessed to tax by the adjudication order in respect of any transaction involving sale of space for advertisement in the print media. 8. The assessee is admittedly a commercial concern engaged in providing advertisement services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved by the order, the Revenue went in appeal before the Tribunal. The Tribunal while reversing the order passed by the Commissioner (Appeals), vide order dated 9-4-2013, Annexure A.9 recorded that the assessee was not assessed to service tax on any transaction involving sale of space for advertisement in print media. It was concluded that the activity of the appellant-assessee fell within the taxable service of "advertising agency". The relevant findings read as under :- "6. Section 65(2) of the Finance Act, 1994 (hereinafter the Act) defines "advertisement" as including "any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas'. Sub-section (3) of Section 65 defines "advertising agency" as meaning any person engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant". Sub-section (105) of Section 65 read with clause (e) thereof defines a taxable service (in the context) as a service provided to any client, by an advertising agency in relation to advertisement, in any manner and clause (zzzm) of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? Have you collected service tax from your clients on all the bills raised by you? A : We received 15% commission from the newspapers on gross business with them and we collect service tax on this commission from our clients on the bills raised by us." Still further, in answer to Question No. 6 also, the correctness of the figures of turnover from advertising business was admitted. The relevant portion thereof is as under :- "Q.6 : In your balance sheets the figures of turnover by press advertisement receipt have been shown as: Year Turnover (Rs.) 2001-02 1,53,71,255.12 2002-03 1,77,07,149.35 2003-04 2,71,55,528.86 2004-05 93,18,097.73 Are these the correct figures as per your balance sheets? Answer : Yes, these are the figures of turnover of our advertising business as shown in balance sheets of our firm." Thus, service tax amounting to Rs. 7,11,804.78 and Education Cess of Rs. 3692.90 for the period 1-4-2001 to 31-12-2005 had been rightly imposed on the assessee appellant besides recovery of interest on the confirmed demand." It is noted in the show cause notice and the impugned order that appellant were paying service tax on the income earned that is net s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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