By TIOL News Service

MUMBAI, JULY 15, 2014: THE appellant is engaged in the manufacture of petroleum products. They engaged the services of four advertising agencies for preparing the advertisements for their products. These advertising agencies further engaged the services of Times Global Broadcasting Co. Ltd. for broadcasting the advertisements.

The broadcasting company paid service tax in respect of taxable service provided by them and recovered the amounts from the advertising agencies. The advertising agency also raised invoices in favour of the applicant.

The appellant availed credit in respect of the service tax paid on the taxable service of broadcasting done by Times Global Broadcasting Co. Ltd.

The Revenue objected to this availmenton the ground that the broadcasting company had not provided service directly to the appellant.

The CCE, Mumbai-II confirmed the demand of Rs.3.62 crores with penalties and interest and, therefore, the appellant had to knock the doors of the CESTAT.

After hearing the application for stay, the Bench had held that the applicant had made out a prima facie case for waiver of pre-deposit of dues in view of the Trade Notice No. 114/96, dated 1-11-1996 of the Mumbai-II Commissionerate which is based on letter F. No. 341/43/96-TRU, dated 31-10-1996. Inasmuch as the Stay petition was allowed. We had reported this as 2013-TIOL-419-CESTAT-MUM.

Paragraph 4 of the said T.N. reads -

"4. 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 undertakes the making or preparation of advertisement or gets it done through another person. However, the amount paid, excluding their own commission, by the advertising agency for space and time in getting the advertisement published in the print media (i.e. Newspapers, periodicals etc.) or the electronic media (Doordarshan, private TV Channels, AIR etc.) will not be includible in the value of taxable service for the purpose of levy of service tax. The commission received by the advertising agency would, however, be includible in the value of taxable service."

The appeal was heard recently.

The appellant referred to the aforementioned T.N. (calling it as Board Circular)& submitted that it is the product of the appellant which is being advertised by the broadcasting company and the broadcasting company issued invoices specifically mentioning advertiser as the applicant. Therefore the services have been rendered to the appellant and hence credit cannot be denied. It is also submitted that subsequent to the present demand, three more show-cause notices were issued vide notices dated 6.7.2012, 9.4.2013 and 18.1.2013 proposing to deny Service Tax credit on the Broadcasting Services availed by the appellant for the period April, 2011 to December, 2012 and all these notices were adjudicated by the same Commissioner who vide Order No. 12-14/RN/COMMR/M-II/2013-14 dated 30.9.2013 dropped the proceedings by holding that Broadcasting Services availed by the appellant is an input service and the appellant has borne the tax incidence of such services availed and therefore, they are rightly entitled for benefit of credit of Service Tax paid. This order, according to the appellant, has been accepted by the department as they have not challenged the same . In view of the above, the impugned order holding a contrary view is clearly not sustainable in law, the appellant submitted.

The Revenue representative chose to stick to the allegations leveled in the SCN. He submitted that the broadcasters were engaged by the advertising agencies; the appellant has not received the broadcasting service directly but through the advertising agency; therefore it cannot be said that the applicant engaged the broadcasters for advertisement in the electronic media; that the credit of service tax paid by the broadcasting agency is available to the advertising agency engaged by the applicant and not to the applicant; that Circular dated 1.11.1996 is not relevant because broadcasting service was not taxable when the said circular was issued. In short,the appellant is not eligible for the CENVAT Credit of Service Tax paid on broadcasting service.

The bench extracted paragraph 4 of the Circular/T.N.dated 1.11.1996 and concluded thus -

“7. We observe that there is no dispute in the present case that the broadcasting of advertisement has been done on behalf of the appellant and the bills have also been raised on the appellant and the appellant has borne the incidence of Service Tax on the broadcasting service. Further, while passing the order dated 30.9.2013, the adjudicating authority has caused verification of the transactions undertaken by the appellant in respect of broadcasting services and advertising agency services. After verifying that the appellant had availed both the services and has also borne the incidence of Service Tax, he came to the conclusion that the appellant is rightly eligible for the benefit of the CENVAT Credit of the Service Tax paid on broadcasting service. The same ratio shall apply for the previous period also. Therefore, we do not find any merit in the impugned order….”

In fine, the order was set aside and the appeal was allowed.

Oily issue: The Committee wisdom comes to the limelight.

(See 2014-TIOL-1246-CESTAT-MUM)