Advertising Agency Not Liable To Pay Service Tax On Amount Payable To Media Companies On Behalf Of Their Clients: CESTAT

The Bench of Dilip Gupta (President) and P. V. Subba Rao (Technical) has observed that, “The assessee has conceded about their liability to pay service tax on the amount of commission received by them while rendering the advertising agency service to the print media. However, still has contested the same on the ground of limitation.”

In this case, the assessee is engaged in providing services under the category of selling of space for advertisements in print media. At the time of inquiry followed by investigation, department observed that the services rendered by assessee are of the category other than those services which are specified in negative list under section 66D of the Finance Act.

A show cause notice was issued to the assessee. The original adjudicating authority confirmed the demand. Aggrieved by the decision of original adjudicating authority, the assessee filed an Appeal before Commissioner (Appeals), who rejected the appeal. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.

The assessee contended that no positive evidence has been adduced by the department to prove that the assessee has suppressed the facts with an intention to evade payment of service tax. Hence, the extended period of limitation is not invocable.

Whereas it was contended by the department that if the assessee fails to file returns as contemplated under Rule 7 of Service Tax Rules, 1994, Department gets entitled to invoke proviso to Section 73 of Finance Act, 1994.

The Tribunal observed that the assessee is admittedly providing advertisement services to print-media. Those services fall under negative list in sub-clause (g) of section 66 (b) of Finance Act. Hence, the show cause notice had wrongly proposed the demand on the amount received for rendering services to print media.

The Tribunal pointed out that there is no evidence on record produced by the Department to prove that the assessee had malafide intention to evade tax on the amount of commission. The entire burden of the department remains undischarged.

The Tribunal opined that “The invocation of extended period has been justified by the authorities below on the ground that the appellant has failed to take the service tax registration and to file their ST- 3 returns. Section 70 of the Finance Act has been invoked, however, the services rendered by the assessee are held to fall under the negative list. Thus, appellant had no liability to pay tax on the amount received for rendering advertisement agency service to the print media except on the amount of commission.”

In view of the above, the Tribunal allowed the appeal.

Counsel for Appellant/ Assessee: Jitin Singhal

Counsel for Respondent/ Department: Kuldeep Rawat

Case Title: M/s. Raj Kumar Jain v. Commissioner of CGST & Central Excise – Jodhpur

Case Number: Service Tax Appeal No. 54671 of 2023

Click Here To Read/Download The Order