CESTAT Quashes Service Tax Demand On Cost Towards Advertisements For Clients In Newspapers And Magazines

The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand on costs towards advertisements for clients in newspapers and magazines.The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that the service provider should be providing more than one service, and when one of the services provided is exempted, then alone the provisions of sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004 are invokable.The appellant/assessee is registered for service tax and has paid service tax since 1996. The appellant places advertisements for clients in various newspapers and magazines and receives the cost of such advertisements as a press space bill. The appellant retains 15% of the amount charged to the ultimate customer, and the remaining 85% of the amount collected from the ultimate customer is remitted to the newspapers or magazines that publish advertisements.The appellant pays service tax on 15% of the amount retained by it and does not pay any service tax on the balance of 85% of the amount, which he does not retain but collects from the ultimate customer and transfers the same to the newspapers or magazines that publish the advertisements.It appeared to the department that the appellant was required to pay a 6% amount on the 85% amount collected from the ultimate customer and remitted to the publisher of the advertisement, treating the same as exempted service by invoking the provisions of sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004.Therefore, initially, a show cause notice was issued to the appellant covering the period from 2008–09 to 2011–12, demanding a 6% amount on an 85% amount that did not suffer service tax at the hands of the appellant, and the amount demanded under said sub-rule (2) of Rule 6 was Rs. 4,90,25,118. The show cause notice was contested by the appellant. The appellant contended to the original authority that 85% of the amount is towards media costs, and the same is not retained by the appellant. The appellant has paid service tax on the 15% component retained by it, and, therefore, the said service cannot be considered an exempted service.The department invoked the provisions of sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004 for the demand of an amount in respect of the 85% component of the consideration received by the appellant, which was subsequently paid to the news media that published the advertisements collected by the appellant.The tribunal noted that there should be more than one service provided by a service provider for the invocation of said sub-rule (2), and one of the services provided should be an exempt service. This is pretty clear from the words “as well as” used in the said sub-rule (2). It further provides that Cenvat credit in respect of inputs or input services going into service on which service tax is not payable is not admissible for availment, and Cenvat credit in respect of inputs and input services that are utilized for providing service on which service tax is payable is admissible for availment.The tribunal held that the service provider should be providing more than one service, and when one of the services provided is exempted, then alone the provisions of sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004 are invokable. In the present case, Revenue has failed to establish that there is more than one service provided by the appellant. The appellant is providing only one service, whether it was earlier classified as an advertising agency service or subsequently classified as a business auxiliary service. The appellant is merely providing one service, and, therefore, the provisions of sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004 are not invokable.Counsel For Appellant: Vishal AgarwalCounsel For Respondent: Vinod KumarCase Title: M/s. Network Advertising Pvt. Ltd. Versus Commissioner of Service Tax-V, MumbaiCase No.: Service Tax Appeal No. 87732 of 2016Click Here To Read The Order

CESTAT Quashes Service Tax Demand On Cost Towards Advertisements For Clients In Newspapers And Magazines

Mariya Paliwala

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