Drishty Communication Private Limited VERSUS C.C.E. & S.T.-Rajkot

SERVICE TAX Appeal No. 135 of 2012

[Arising out of OIA-72/2012/COMMR-A-/RBT/RAJ dated 17/02/2012 passed by Commissioner

of Service Tax-RAJKOT]

 

Drishty Communication Private Limited

VERSUS

C.C.E. & S.T.-Rajkot

 

APPEARANCE:

Shri Paresh Sheth, Advocate for the Appellant

Shri. Tara Prakash, Assistant Commissioner (Authorized Representative) for the

Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

HON’BLE MEMBER (TECHNICAL), MR. RAJU

FINAL ORDER NO.A / 10016 /2023

DATE OF HEARING:19.09.2022

DATE OF DECISION:05.01.2023

RAJU

 

This appeal has been filed by M/s. Drishty Communication private Ltd.

Against demand of Service Tax.

The appellants were engaged in providing services as advertising service

to get customize and were registered “The Indian Newspaper Society” (INS).

They were remitting 85% of the total amount received from their customers

on getting space/time from media agencies or news papers or various

publications. They were retaining the 15% of the remaining amount as their

commission. The appellants were paying Service Tax on the said commission

amount. A Show Cause Notice were issued to the appellant seeking to classify

the service provided by them under definition “Advertising Agency Service”

taxable service under Section 65(105)(e) of the Finance Act 1994.

Section 65 (3) of the Finance Act, 1994 which was inserted by the Finance

Act, 1996 w.e.f. 01.11.1996 reads as under:

“advertisiong agency” means any person engaged in providing any

service connected with he making, preparation, display or

exhibition of advertisement and includes an advertising

consultant;

w.e.f 01.05.2006, the term ‘person’ was substituted for the term ‘commercial

concern’. The consequences of this changes are as follows:

 “For the period prior to 01.05.2006, only services provided or

to be provided by a commercial concern(and not by any other

person) were liable to tax.

 Services provided or to be provided by any person (including

a commercial concern) on or after 01.05.2006 shall be liable to

tax.”

2.1 The notice alleged that one M/s. Surya Publicity was one of their sub

agent who had not obtained Service Tax registration and was not paying

Service Tax, as they were claiming benefit of the threshold exemption under

Notification No. 06/2005-ST dated 01.03.2005 with effect from 01.04.2005.

The appellant had consequently not charged and paid any Service Tax for the

services rendered to their sub agent M/s. Surya Publicity. The notice alleged

that although the services provided by the sub agent M/s. Surya Publicity to

their client/customers were exempted by way of said Notification, the services

provided by the appellant to M/s. Surya Publicity were not exempted as the

appellant were not exempted under said notification. Learned Counsel have

argued that the appellant has not provided any services to their client. It has

been argued that it is only the sub agent M/s. Surya Publicity which provided

the services to their client and since appellant has not provided service, there

is no question on payment of any Service Tax.

2.2 Learned Counsel also relied on the clarification issued by CBE

C vide Circular No. 96/7/2007- ST dated 23.08.2007

2.3 He also relied on the decision of Tribunal in case of Adbur Pvt. Ltd.- 2017

(5) GSTL 334 (Tri. – Del.)

 H. K. Associates – 2009 (14) STR 543 (Tri.-Del.)

2.4 He argued that the demand raised under the head of “Advertising

Agency Services” cannot be sustained. In view of the aforesaid circular and

the case laws cited above.

Learned AR relied on the impugned order.

We have considered rival submissions. We find that in the instant case

M/s. Surya Publicity was providing Advertising Services to its client. M/s.

Surya Publicity was not discharged any service tax liability as the same was

liable for the levy of Service Tax. M/s. Surya Publicity was purchasing time 

and space in the newspaper / media companies through the appellant. The

amount paid by M/s. Surya Publicity to the appellant for purchase of time M/s.

Surya Publicity to the appellant for purchase of time and space was sought to

be tax by revenue under the category of Advertising Service. It is seen that

no evidence has been placed from record to establish that the appellant were

providing “Advertising Agency Services.” The role of appellant was limited to

being an intermediary in the sale of space/ time for media agency on

commission basis. In this regard the decision of Tribunal in case of H.K

Associates is relevant. In the said decision following has been held.

“7.1 The issue to be decided is whether M/s. H.K. Associates

have rendered the services of advertising agency to KBPL. It is not

disputed that actual work of painting on the walls/advertisements

were undertaken by various parties to whom M/s. H.K. Associates

have paid the amount as mentioned earlier. No evidence have

been relied upon to hold that M/s. H.K. Associates have conceived,

designed, prepared the advertisements in question.

7.2 The amounts paid to M/s. H.K. Associates have been

accounted under the category of advertisement and sales

promotion expenses by KBPL. A portion of the sum so received

was spent on advertisement by H.K. Associates. These facts alone

cannot lead to an inference that M/s. H.K. Associates have

rendered the services as advertising agency and the entire amount

of about Rs. 9 crores received from KBPL has to be treated as

representing payment for rendering advertising services.

7.3 We have also perused the notes given in the balance sheets

of KBPL. For example, in the balance sheet for the year 1999-

2000, a sum of Rs. 4,88,23,638/- is accounted as advertisement

and sales promotion expenses. In the schedule Q to the balance

sheet relating to the head “other expenses”, there is a ‘note’ which

clarifies as under :-

“Commission on sales amounting to Rs. 1,19,77,790.27 paid to

M/s. Harmeet Kandhari & Associates, belonging to a relative of the

directors of the company, has been clubbed with the

Advertisement & Sales Promotion expenses.”

Similar clarifications appear in the balance sheets for the other

years as well. Whether commission of sales could be treated as

advertisement and sales promotion expenses is a debatable point.

However, this is not an issue to be decided by us. It suffices to say

that the terms of the agreement produced and the entries in the

balance sheets of manufacturing company and those of M/s. H.K.

Associates support the claim by the learned advocate for the

parties. The balance sheet of M/s. H.K. Associates also mentions

these amounts only as commission on sales.

8. In view of the above, we find merit in the appeal of M/s. H.K.

Associates and accordingly, allow the same. Inasmuch as the

appeal of main party M/s. H.K. Associates is allowed on merit, the

question of enhancement of penalty on M/s. H.K. Associates and

imposition of penalties on other three parties as prayed for in the

other appeals by the department does not arise.”

The aforesaid decision of Tribunal has been upheld by Hon’ble Apex Court as

reported in 2010 (19) STR J111 (S.C).

In view of aforementioned CBEC clarification and the decision of tribunal in

similar circumstances the demand cannot be upheld, and is therefore set

aside. The appeal is consequently allowed.

(Pronounced in the open Court on 05.01.2023)

RAMESH NAIR

MEMBER (JUDICIAL)

(RAJU)

MEMBER (TECHNICAL)