No service tax is leviable on amount paid to print media for publishing advertisement.

PJ/CASE LAW/2015-16/2598

Case:-R.J. AGENCIES VERSUSCOMMISSIONER OF SERVICE TAX, CHENNAI

Citation:- 2014 (35) S.T.R. 794 (Tri.-Chennai)

Brief facts:–The applicant has also filed applications for waiver of pre-deposit of dues arising from Order-in-Appeal No. 80/2009 (MST), dated 21-12-2009. The applicant submits that they were engaged in the business of canvassing advertisement for newspapers orperiodicals and they were getting commission from such advertisement agencies and they have been paying service tax for such commission under the category of ‘Business Auxiliary Service’. During the period in question i.e. April, 05 to March, 07, they have paid Service Tax amount of Rs. 58,589/- and Educational Cess of Rs. 1172/- on such commission. However, they had not paid any Service Tax on the amount which they received from their clients and remitted by them to the concerned print media for publishing advertisement. Revenue was of the view that Service Tax should have been paid on such monies handled by the applicant under the category of “Advertising Agency Service” because they had taken service tax registration as “Advertising Agency”. Based on such argument, a show cause notice was issued and adjudicated confirming a demand of Rs. 3,38,634/- along with appropriate interest and penalty.

Appellants contention:-Ld. Advocate for the applicant submits that the applicant had no print media and they only canvassed business for print media and they have to necessarily pay to the print media for carrying advertisement and such amounts paid to the print media cannot be considered as consideration for services rendered by the applicant. Further, she relies on the clarification issued by C.B.E. & C. on 23-8-2007 with code No. 004.01 clarifying that persons/agencies canvassing advertisements on commission basis will not be considered as ‘advertisement agencies’ taxable under Section 65(105)(e) of Finance Act, 1994 but they are liable to pay service under the category of “Business of Auxiliary Service” under Section 65(105)(zzb). It is her contention that under “Business Auxiliary Service”,only commission can be taxed and not the amount paid to the print media. Therefore, she prays that her appeal may be admitted without any pre-deposit.

Respondents contention:-Opposing the prayer, ld. AR for Revenue submits that applicants are registered as “Advertising Agency”. Therefore, service tax should be paid under the category of “Advertising Agency Service”. He further submits that there was no evidence before the lower authority to show that they were only canvassing and not playing any role in making or publishing the advertisements. He further submits that original authority’s finding is that they took part in making and preparation of the advertisement by giving size (number of lines), position (classified or otherwise) and heading of the advertisement” and therefore they were acting as advertisement agency and therefore the cited Board’s circular will not come to their rescue. Hence demand of tax is legal and proper in this case.

Reasoning of judgment:-Considered submissions on both sides. Since 1996, when the entry for taxing services of Advertising Agencies was enacted, no service tax is levied on the charges levied by print media forpublishing advertisements as was clarified initially by CBEC videcircular F. No. 341/43/96-TRU, dated 31-10-1996 and continued in Circular dated 23-8-2007 pointed out by the counsel for applicant. Further the position got explicitly incorporated in entry 65(105)(zzzm) introduced, since 1-5-2006, in Finance Act, 1994. If such charges are not taxable in the hands of print media it cannot be taxable in the hands of agents who just collect and remit the money to the print media. There is no finding on the contention ofapplicant in reply to show cause notice that they had made payment to print media and such payment could not form consideration in their hands whatever be the type of activity (giving advice about number of lines and heading for advertisement, etc., or just canvassing clients for the print media) that they have done and whatever be the heading under which it is sought to be taxed (i.e. as business auxiliary service or advertising services).It is not clear as to from where the figures are taken for issuing the demand. If it is from financial statements of the applicant. revenue has an obligation to verify the same statement to give a finding on the contention of the applicant that the monies received from the clients were remitted to the print media is correct or not. In the absence of such clear finding, prima facie we are of the view that the applicant was canvassing advertisement and receiving commission and considering the fact that they have already paid tax on commission received, it is appropriate to grant waiver of pre-deposit of dues for admission of appeal. It is so ordered. Further there shall be stay on collection on such dues arising from the impugned order during pendency of appeal.

Decision:- Stay application allowed.

Comment:- The crux of the case is that the service provider engaged in the business of canvassing advertisement cannot be asked to pay service tax on the amount remitted to the print media for publishing advertisement because the same is exempt from the levy of service tax.
Prepared by:-Neelam Jain

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PJ/CASE LAW/2015-16/2598

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