CENVAT - applicant engages ad agency who in turn engages services of Co for broadcasting advertisement - ST paid on broadcasting service availed as CENVAT - based on Circular, it appears applicant has prima facie case in favour - Stay granted: CESTAT
By TIOL News Service
MUMBAI, MAR 11, 2013: THE applicant is a PSU engaged in the manufacture of petroleum products. They engaged the services of four advertising agencies for preparing the advertisement for their products. These advertising agencies further engaged the services of Times Global Broadcasting Co. Ltd. for broadcasting the advertisement. The broadcasting company paid service tax in respect of taxable service provided by them and recovered the amounts from the advertising agencies. The advertising agencies also raised invoices in favour of the applicant.
But obviously, the invoices carried the component of Service Tax paid by the broadcasting company and seeing this, the applicant availed CENVAT credit thereof.
The CCE, Mumbai-II is of the view that the credit availed is incorrect. He denied the credit on the ground that the broadcasting company has not provided the service "DIRECTLY" to the applicant inasmuch as the broadcasting company had been engaged by the advertising agency and who had reimbursed the service tax. For the record, the CENVAT credit involved is Rs.3,62,24,989/- and is accompanied by an equivalent penalty and interest.
The PSU is before the CESTAT with a Stay application and makes the following submissions -
+ the product of the applicant is being advertised by the broadcasting company and the broadcasting company issued invoices specifically mentioning advertiser as the applicant.
+ the Board Circular dated 1.11.1996 clarifies that the advertising agency is liable to pay service tax in respect of the preparation of advertisement material and the amount paid in respect of advertisement in the newspapers or in the electronic media will not be includible in the value of taxable services for the purpose of levy of service tax.
+ As the invoices issued by the broadcasting company specifically mentioned that the advertiser is the applicant, therefore, the credit cannot be denied.
The Revenue representative submitted that the broadcasters are engaged by the advertising agency and paid service tax, therefore, it cannot be said that the appellant engaged the broadcasters for making advertisement in the electronic media; that the credit of service tax paid by the broadcasting agency is available to the advertiser engaged by the applicant and not to the applicant.
The Bench observed -
"6. We have gone through the copies of sample invoices produced by the applicant, issued by Times Global Broadcasting Co. Ltd. In the invoices it is specifically mentioned that the advertiser is Indian Oil Corporation Ltd. (applicant). Further, we find that the advertising agencies while discharging the service tax liability are not to take into consideration the expenses in respect of the advertisement in the electronic media. For ready reference, the relevant portion of the Board Circular is reproduced below:-
"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 serviced tax. The commission received by the advertising agency would, however, be includible in the value of taxable service."
7. In view of the above, as the invoices on the strength of which credit has been availed are in the name of the applicant, therefore, prima facie the applicant has made out a case for waiver of pre-deposit of the dues. The pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal…"
In fine, the stay petition was allowed.
In passing: It is Trade Notice No. 114/96, dated 1-11-1996 of the Mumbai-II Commissionerate based on letter F. No. 341/43/96-TRU, dated 31-10-1996.
(See 2013-TIOL-419-CESTAT-MUM)
