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BRIEF FACTS OF THE CASE
1.
Briefly stated the facts of the case are that M/s. Mudra
Communications Pvt. Ltd., having registered business premises located at
“Mudra House”, Shantisadan Society, Near Parimal Garden, Ellisbridge,
Ahmedabad-380 006, (hereinafter referred to as “M/s Mudra”) are functioning
as an Advertising Agency as defined under Section 65(3) of the Finance Act
1994, providing taxable service under the category of “Advertising Services”
and holding Service Tax Registration No. “AAACM5763HST012”. M/s. Mudra offer
their clients entire range of advertising and communications services, which inter
alia include getting space booked in the print media or time slot in the
electronic media and later selling the same to their various clients for which
they receive payments from the clients.
2.1.
Vide letters dated 19.10.2010 and 27.04.2012, jurisdictional officers
called for certain information relating to their books of account including value
and service tax collected by M/s. Mudra from their clients on Broadcasting
Service during the period April-2011 to March-2012, which was supplied by them
vide letter dated 11.05.2012. Scrutiny of these records revealed that M/s. Mudra
purchased time slots from the electronic media for which they got agency
commission and sold such time slots to their clients who, in turn, used the slot for
screening the advertisements; that the electronic media raised bills to M/s
Mudra on the time slots sold by them and charged them service tax under the
category of “Broadcasting services”; that M/s Mudra further issued bills to their
clients for rendering advertising services; and that the bills raised by M/s. Mudra
included the gross value of broadcasting services and the service tax charged
by the electronic media. Thus, it appeared that M/s. Mudra collected full
transaction value of advertising service fees including broadcasting agency
charges as well as service tax on the said charges from their clients.
2.2.
For example, M/s. UTV Entertainment Television Ltd., Mumbai issued
invoice no. UTM/0910/0885 dated 3.10.2009 to M/s. Mudra, which reads as
under:
Gross Total
(-) Agency Commission 15%
Net Amount
(+) Service Tax 10%
(+) Education Cess 2%
(+) Secondary Higher Education Cess 1%
Total Amount
2,70,000
40,500
2,29,500
22,950
459
230
2,53,139
2.3.
It appears from the above table that M/s. UTV Entertainment
Television Ltd., Mumbai is the Broadcaster who issued invoice no. UTM/0910/0885
dated 31.10.2009 to M/s. Mudra for amount of Rs. 2,70,000/-. They gave agency
Commission to M/s Mudra @ 15% for Rs. 40,500/-, and charged service tax @
10.30% on the balance amount of Rs. 2,29,500/- which works out to Rs. 23,639/-.
Thereafter, M/s. Mudra issued a corresponding invoice No. 20090011030155
dated 30.11.2009 to their clients, M/s Nilons Enterprises Private Limited, Jalgaon
details of which are tabulated as follows:-
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Bill Amount
(-) Commission
Net Amount
(+) Agency Commission
(+)Service Tax 10% on Taxable Service Rs.33750
(+) Education Cess
(+) Secondary and Higher Education Cess
(+) Broadcaster Service Tax on Rs. 229500
Total Amount
2,70,000
40,500
2,29,500
33,750
3375
67.50
33.75
23,639
2,90,365
2.4.
It appeared from the above table that the bill raised by M/s. Mudra
to their clients included service tax amount of Rs. 23639/- which was charged to
them by the broadcaster, M/s. UTV Entertainment Television Ltd, inspite of the
fact that M/s. Mudra is neither a broadcasting agency nor has provided
broadcasting services to their clients. Thus, they had collected service tax on the
broadcasting charges from their clients under the category of Broadcasting
Services as is evident from the invoices raised by them.
2.5.
For another example, M/s. TV9 Associated Broadcasting Company
Private Limited, Ahmedabad issued invoice no. TV9G/1112/00764 dated
31.10.2011 to M/s Mudra as under:
Gross Amount
(-) Discount
Net Amount
(+) Service Tax 10%
(+) Education Cess 2%
(+) Secondary Higher Education Cess 1%
Total Amount
24000
3600
20400
2040
40.80
20.40
22501.20
2.6.
Thereafter, M/s Mudra issued invoice No. 20110011030028 dated
01.11.2011 to their clients, M/s Ramdev Food Products Pvt. Ltd., Ahmedabad
the details of which are tabulated as follows:Bill Amount
(-) Commission
Net Amount
(+) Agency Commission
(+)Service Tax 10% on Taxable Service Rs.600
(+) Education Cess
(+) Secondary and Higher Education Cess
(+) Broadcaster Service Tax on Rs. 20400
Total Amount
24000
3600
20400
600
60
1.20
0.60
2101.20
23163
2.7.
It appeared from the above table that the bill raised by M/s. Mudra
to their clients included service tax amount of Rs. 2101.20/- which was charged
to them by the broadcaster, M/s. TV9 Associated Broadcasting Company
Private Limited, although M/s. Mudra is neither a broadcasting agency nor has
provided broadcasting services to their clients. Thus, they had collected service
tax on the broadcasting charges from their clients under the category of
Broadcasting Services as is evident from the invoices raised by them.
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3.1
As per Section 65 [15] of Finance Act 1994, ‘Broadcasting’ means:
“broadcasting” has the meaning assigned to it in clause (c) of section 2 of the
Prasar Bharti (Broadcasting Corporation of India) Act, 1990 (25 of 1990) –--+and
also includes programme selection, scheduling or presentation of sound or
visual matter on a radio or a television channel that is intended for public
listening or viewing, as the case may be; and in the case of a broadcasting
agency or organization, having its head office situated in any place outside
India, includes the activity of selling of time slots or obtaining sponsorships for
broadcasting of any programme or [collecting the broadcasting charges or
permitting the rights to receive any form of communication like sign, signal,
writing, picture, image and sounds of all kinds by transmission of electromagnetic waves through space or through cables, direct to home signals or by
any other means to cable operator including multisystem operator or any other
person on behalf of the said agency] or organization, by its branch office or
subsidiary or representative in India or any agent appointed in India or by any
person who acts on its behalf in any manner.”
3.2.
As per Section
Agency/Organization means:
65[16]
of
Finance
Act
1994,
Broadcasting
“any agency or organization engaged in providing service in relation to
broadcasting in any manner and, in the case of a broadcasting agency
or organization, having its head office situated in any place outside India,
includes its branch office or subsidiary or representative in India or any
agent appointed in India or any person who acts on its behalf in any
manner,
engaged
in the activity
of selling of
time slots
for
broadcasting of any programme or obtaining sponsorships for programme
or collecting the broadcasting charges or permitting the rights to receive any
form of communication like sign, signal, writing, picture, image and sounds of all
kinds by transmission of electromagnetic waves through space or through
cables, direct to home signals or by any other means to cable operator,
including multisystem operator or any other person on behalf of the said
agency or organization”.
3.3.
Section 65(105)(zk) defines the term ‘taxable service’ as:
“any service provided or to be provided to any person by a broadcasting
agency or organization in relation to broadcasting in any manner and, in the
case of a broadcasting agency or organization, having its head office,
situated in any place outside India, includes services provided by its
branch office or subsidiary or representative in India or any agent
appointed in India or any person who acts on its behalf in any
manner,
engaged
in the activity
of selling of
time slots
for
broadcasting of any programme or obtaining sponsorships for programme
or collecting the broadcasting charges or permitting the rights to receive any
form of communication like sign, signal, writing, picture, image and sounds of all
kinds by transmission of electromagnetic waves through space or through
cables, direct to home signals or by any other means to cable operator,
including multisystem operator or any other person on behalf of the said
agency or organization”.
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3.4
Section 67 provides that taxable value for the purpose of
Broadcasting Services as : “The Gross Amount received by broadcasting
agency or organization is liable to Service Tax at the rate specified in
section 66 of the Finance Act 1994”.
4.
In the light of the aforesaid legal provisions, it appeared that the
activities carried out by M/s. Mudra do not qualify as a broadcasting agency
nor the same could be classified under Broadcasting Services. Thus, M/s Mudra is
neither a broadcasting agency nor has provided broadcasting services, but
collected service tax on the broadcasting charges from their clients under the
category of “Broadcasting Service”. Therefore, it appeared that M/s Mudra
have contravened the provisions of Section 73A(2) of the Finance Act, 1994 in as
much as they have collected service tax, which is not required to be collected
by them from their clients, and have failed to pay the amount so collected to
the credit of the Central Government; and hence the amount of service tax so
recovered by M/s Mudra from their clients is required to be recovered from
them under Section 73 A(3) of the Finance Act, 1994.
5.
It appeared that the total amount of Service Tax on “Broadcasting
Charges” collected by M/s. Mudra in the aforesaid manner is as follows:
Year
Value
2009-10
5,59,49,211
Service Tax on Broadcasting charge
collected but not deposited to Govt.
57,62,769
2010-11
2011-12
Total
5,47,29,746
4,76,89,343
15,83,68,300
56,37,164
49,12,014
1,63,11,947
6.
Thus, it appeared that M/s Mudra had collected broadcasting
charges amounting to Rs. 15,83,68,300/- along with service tax amounting to Rs.
1,63,11,947/- leviable thereon, but have not credited the same to the central
government account as required under Section 73A. As per Section 68(1),
every person providing taxable service to any person shall pay service tax at the
rate specified in Section 66 in such manner and within such period as may be
prescribed. Since, M/s Mudra has contravened the provisions of Section 68 of
the finance Act, 1994 and rules made there under, they are liable to pay
penalty under Section 76. Further, as per Section 70 every person liable to pay
the service tax shall himself assess the tax due on the services provided by him
and shall furnish a return in such form and in such manner as may be prescribed.
However, M/s Mudra failed to include the taxable value in the relevant ST-3
returns with the department and thereby rendered themselves also liable for
penalty action under Section 77. It also appeared that M/s. Mudra willfully
suppressed the facts from the department by not declaring the material facts
and the correct value of taxable services, and thus found guilty of willful
suppression of actual liability of service tax with intent to evade payment of
service tax. They also have failed to deposit the service tax collected by them
from the clients to the credit of Central Government, and hence they are also
liable for penalty under Section 78.
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7.
Therefore, a show-cause-notice No.STC/4-95/O&A/11-12 dated
26.09.20145 was issued to M/s. Mudra calling upon to show cause to the
Commissioner of Service Tax, Ahmedabad as to why:
i.
Service tax on “Broadcasting charges” amounting to Rs. 1,63,11,947/as detailed above, collected by them from their clients but not
credited to the central government account as required under
Section 73A(2) of the Finance Act, 1994 should not be
demanded/recovered from them under Section 73A(3) read with
proviso to Section 73(1) of the Finance Act, 1994;
ii.
Interest as applicable on the above amount of Service tax of Rs.
1,63,11,947/- should not be recovered from them under Section 73B of
the Finance Act, 1994;
iii.
Penalty should not be imposed upon them under Section 76 of the
Finance Act, 1994 for failure to make the payment of service tax
payable by them, in stipulated time period;
iv.
Penalty should not be imposed upon them under Section 77 of the
Finance Act, 1994 for the failure to file correct prescribed ST-3 return
showing the correct value of taxable service; and
v.
Penalty should not be imposed upon them under Section 78 of the
Finance Act, 1994 for suppressing the value of taxable services
provided by them before the Department with intent to evade
payment of service tax.
DEFENCE REPLY
8.1.
M/s Mudra [name subsequently changed to M/s. DDB Mudra Pvt.
Ltd.] vide letter dated 25.11.2014 filed their reply to the subject SCN wherein
they, inter alia, stated that the services provided by them are classified as
advertising agency services; that they also facilitates publish, flashing and
display of such advertisements through print/electronic media for their clients,
however, they are not in the business of buying and selling of the space/time
slots in the print/electronic media; that they merely assist the client in preparing
the media plan, selection of the most effective media, time slot and space,
depending upon the target product offering, target customer and its availability
of the time/space; that there is absolutely no business relationship between the
broadcasting agencies and M/s. Mudra and they do not represent the
broadcasting agency nor does it approach clients on behalf of the
broadcasting agency so as to get the agency commission; that they do not
collect broadcasting charges from clients on behalf of the broadcasting
agency; that they work as a link, a facilitator or an expert to represent client in
dealing with broadcaster; that the broadcasting agency offers trade discount
on the gross value of the service charged; that they may use different
nomenclatures to describe the trade discount so offered, sometimes they use
the word discount while at times they use agency commission; that sheer using
different words and nomenclatures does not change the nature of the discount
offered and make it agency commission; and that the interpretation made in
the SCN to this regard is not correct.
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8.2.
They further contended that the SCN admits that M/s. Mudra do not
qualify as a broadcasting agency nor can their activities could be considered
as broadcasting services and hence they are not required to collect service tax;
that they act only as a mediator or facilitator for the client and the client may
on its own choose to directly approach the broadcasters/publishers, however,
only at the cost of increased efforts and without having the required capabilities
of the same; that they therefore, execute plan for the client using their expertise
in the field, that the execution part is incidental and essential to the advisory
service, i.e. preparation of media plan; and that in this way, they become a
necessary link in this transaction and they are required to operate in this very
manner. They further stated that they execute the plan for the client by
coordinating with the broadcaster who raises the invoice on them to recover
the broadcasting charges along with the service tax thereon; that they make
payment to the broadcaster, and the broadcaster in turn, makes payment of
the service tax collected to the exchequer; that since they make payment to
broadcaster, the sound and prudent business sense and practice makes it
absolutely necessary for the company to recover the broadcasting charges
paid to the broadcaster, including service tax component thereon; and that in
other words, it is merely a recharge of the amount from the client towards the
expenses incurred for their cause.
8.3.
M/s. Mudra further submitted that they do not act as an agent of
the broadcaster to recover the broadcasting charges and service tax thereon;
that as they make the payment of the charges including service tax thereon to
the broadcaster which otherwise the client would have to pay directly to the
broadcaster, they simply recovers the monies from the client which they
rightfully and legally owe to them; that owing to the nature of transaction, the
monies so recovered do not represent collection of broadcasting charges and
service tax thereon; that the act of recovery does not amount to collection of
service tax which the company is not required to collect from the client; that
they are under bonafide belief that they are required to recover the monies due
from the client and the monies recovered as trade dues/receivable from the
clients in normal parlance and not to be viewed or construed as recovery of
collection of broadcasting charges and service tax thereon; and that they do
not collect the service tax from client, but recovers the dues arising in the normal
course of business, which it is required to recover in order to carry on the
business smoothly.
8.4.
They contended that since they have not collected any amount in
any manner as representing service tax and hence there is no liability on their
part to deposit the same with the exchequer in terms of section 73A(2); that they
are properly paying service tax on agency commission as required under
advertising agency services; that their method of payment of service tax on the
commission amount is in terms with CBEC instruction letter F.No. 341/43/96-TRU
dated 31.10.2016; that CBEC has clarified in the said letter that the charges paid
by the advertising agency to the print/electronic media as a cost of space or
time are not to be included in the taxable value, besides cited the case law in
re Moulis Advertising Service Pvt. Ltd. – 2008 (12) STR 225 (Tri.Chennai); and that
Boards circulars are binding on the department and cited CBEC circular No.
34/1/43/96-TRU dated 31.10.1996, case laws of IOC Ltd. – 2004 (165) ELT 257 (SC),
M/s. Mudra Communications Pvt Ltd., Ahmedabad : OIO NO. AHM-SVTAX-000-COM-015-15-16 DATED 22.01.2016
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Dhiren Chemical Industries – 2002 (143) ELT 19 (SC) and Usha Martin Ind – 1997
(94) ELT 60 (SC) in this regard.
8.5.
Without prejudice to their aforesaid submission, M/s. Mudra further
submitted that the whole situation is 'Revenue Neutral'; that the broadcaster
has collected the applicable service tax from the company which is
deposited with the Revenue; that they have not availed any CENVAT credit on
said service tax; that based on the said broadcaster invoice, company's client
is eligible for CEN VAT credit; and that if based on the said observation i n
the SCN, com pany need s to pay service tax on the amount received from
the client, the same amount of service tax paid to broadcaster would be
avail able as CENVAT credit to the company. They further stated that the
company receives the same amount from the client which is paid to the
broadcaster for broadcasting services arranged for client; that gross amount
received by the broadcaster has suffered the service tax and there is no loss
to the revenue; and that there are number of decisions of the Tribunal and
High Court in this regard, and relied on a judgment of Tribunal i n case of
Golkonda Engineering Enterprises Ltd .vs. The C.C.E., Hyderabad, held that
there is a clear evidence of revenue neutrality; that where there is revenue
neutrality, the charge of intention to evade payment of duty is not
sustainable, and hence, the invocation of section 11AC and other penalty
actions are not wanted. They further stated that while passing the said order,
Tribunal has relied upon the judgments, i.e. Kores (India) Ltd. vs. C.C.E.,
Hyderabad, [2004 ( 178) ELT 90 I (Tri - Bang.)], MRF Ltd. vs. C.C.E., Hyderabad,
(2004 ( 170) ELT 69 (Tri. - Bang.), and Hetro Drugs Ltd. vs. CCE, Hyderabad
[2004 ( 1 71) ELT 134 (Tri .-Bang.)]; and contended that based on the explanation
given above, it is justified that they are not liable to pay the amount of service
tax collected from the client on broadcasting charges, and submitted that the
service tax demanded is not payable by them.
8.6.
As regards contravention of section 68 and penalty under section
76, they stated that the above explanations make it clear that they are not
liable to pay the service tax component collected by them which forms the part
of the dues the client owes to them; that they are an advertising agency and
not a broadcasting agency nor does not provide the broadcasting services,
and hence it is not required to pay service tax under the said category; that as
an advertising agency it is not required to include the broadcasting charges
recovered from client in computing the taxable value of advertising services
provided and hence there is no contravention of the provisions contained in
section 68(1); that section 76 prescribes penalty if the person fails to pay tax as
per the provisions of section 68; and that there is no contravention of provisions
contained in section 68(1) hence penalty under section 76 is not attracted.
8.7.
On the proposal to impose penalty under section 77, M/s. Mudra
stated that section 70 stipulates that every person liable to pay service tax shall
himself asses the tax due on the services provided by him and shall furnish the
return in such form and in such manner and at such frequency as may be
prescribed with late fees not exceeding twenty thousand to the superintendent
of the Central Excise; that they have complied in all respects with the provisions
of section 70 and has been furnishing the return in form ST-3 with the department
at regular intervals; that they have prepared the returns ensuring completeness
and accuracy and rightfully declared the value of advertising agency services
following the provisions of section 66B and section 68 and hence there is no non
M/s. Mudra Communications Pvt Ltd., Ahmedabad : OIO NO. AHM-SVTAX-000-COM-015-15-16 DATED 22.01.2016
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compliance on the part of the company under section 70.; and that since there
is no contravention of any of the provisions of the Act, penal action under
section 77 is not attracted.
8.8.
As regards proposal for penalty under section 78, they stated that
penalty under the said section is attracted where any service tax has not been
levied or paid or has been short levied or short paid or erroneously refunded by
reason of fraud, collusion, willful mis-statement or suppression of facts or
contravention of the provisions of this chapter or the rules made thereunder with
the intent to evade payment of service tax; that they have levied service tax at
rates and in the manner prescribed under section 66 B and there was absolutely
no short levy or short payment or an erroneous refund claimed by them; that
they have demonstrated that they are not liable to pay the service tax
recovered from client forming part of the dues recoverable from them towards
the expenses incurred for their cause, and as a result they have not included the
charges recovered from the client in the taxable value of advertising services
provided by it; that they have consistently following this stand and there has
been absolutely no suppression of any of the facts or liability either willful or
erroneously, and hence the claim made by department that there has been
willful suppression of material facts is not sustainable.
8.9.
M/s. Mudra further contended that there was no intention to evade
service tax and hence extended period under section 73(1) can not be
invoked; that interest under section 73B is attracted only where there is a nonpayment of service tax.
PERSONAL HEARING
9.1.
Shri Amish Kamdar, CA appeared for a personal hearing on behalf
of M/s. Mudra on 27.11.2015 and besides reiterating the submissions made in the
defence reply, he undertook to produce evidence for payment of service tax
by the broadcasting agency within fifteen days. He further stated that this is a
case of double payment of service tax by the advertising agency and
broadcasting company. He also furnished copies of Supreme Court’s judgment
in re Prithvi Associates – 2015 (4) STR 625 (SC).
9.2.
Subsequently, M/s. Mudra vide letter dated 17.12.2015 submitted
certificates from six different broadcasting companies, i.e. India TV, ABP News
Network, Sony TV, Aaj Tak, Zee TV and Zee News, which contained figures of
service tax paid by them during the last three years.
DISCUSSION AND FINDINGS
10.
I have carefully gone through the case records, contents of show
cause notice, written submission of M/s. Mudra and the record of personal
hearing.
11.
I find that the limited issue which requires determination in the case
is whether M/s. Mudra had collected any service tax from their clients which
they were otherwise not required to collect, yet not deposited to the credit of
Central Government as specified under Section 73A(2), or otherwise?
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12.
The undisputed facts of the case are that M/s. Mudra was holding a
valid Service Tax registration and has provided taxable services (Advertising
Services) in their capacity as an Advertisement Agency to their clients; that they
have provided advertising consultancy services to their clients for which they
were receiving commission fees from such clients, whereupon they were paying
service tax; and that after finalization of the advertisement schedule and slots,
etc. with their clients, M/s. Mudra was placing orders with the concerned
Broadcasting Agency to book time slots on various channels/electronic media
as required. Thus, in the whole transaction as illustrated by them in their defence
reply and during the personal hearing, M/s. Mudra acted as a conduit between
their clients and the broadcasting agency. I find that the entire defence was
built up by M/s. Mudra on a singular point that they are not providing any
broadcasting services either to the broadcasting agency who transmit the
advertisement matters or to their clients whose products are advertised, and
hence they are not liable to pay any service tax on broadcasting services. In
fact, this point has never been disputed by the department. On the contrary,
the SCN specifically mentions that M/s. Mudra was not providing taxable
services of the nature as specified under Section 65(105)(zk) i.e. broadcasting
services, nor they are qualified as a broadcasting agency as provided under
Section 65(15) and Section 65(16) of the Finance Act, 1994. The only allegation
contained in the present case is that M/s. Mudra have collected broadcasting
charges along with its service tax component from their clients even when they
are not qualified/required to do so, yet not deposited the same to the credit of
the Central Government as required under Section 73A(2). To this aspect, I find
no dispute from M/s. Mudra.
13.
M/s. Mudra has, in fact, admitted that they have
charged/collected the broadcasting charges from their clients, though in a
mediatory capacity on behalf of the broadcasting agency. They claim to have
done no wrong as the amount so collected was passed on to the broadcasting
agency, whereupon the broadcasting agency has paid service tax. I find no
substance in the arguments put forth by M/s. Mudra in this regard, as the issue of
taxability of the services; or their eligibility of being a broadcaster; or payment of
service tax by the broadcasting agency, etc. are all independent of the
provisions of Section 73A. The provisions of section 73A of the Finance Act are
enumerated below:“Section 73A: Service tax collected from any person to be deposited with
Central Government.
(1) Any person who is liable to pay service tax under the provisions of this
Chapter or the rules made thereunder, and has collected any amount in excess
of the service tax assessed or determined and paid on any taxable service under
the provisions of this Chapter or the rules made thereunder from the recipient of
taxable service in any manner as representing service tax, shall forthwith pay the
amount so collected to the credit of the Central Government.
(2) Where any person who has collected any amount, which is not required to
be collected, from any other person, in any manner as representing service tax,
such person shall forthwith pay the amount so collected to the credit of the
Central Government.
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(3) Where any amount is required to be paid to the credit of the Central
Government under sub-section (1) or sub-section (2) and the same has not been
so paid, the Central Excise Officer shall serve, on the person liable to pay such
amount, a notice requiring him to show cause why the said amount, as specified
in the notice, should not be paid by him to the credit of the Central
Government.” [emphasis provided]
14.
I find that the aforesaid provisions of Section 73A(2) and the
allegations made in the show cause notice are in conformity with each other.
Here, M/s. Mudra was not a broadcasting agency/organization and they have
not provided any broadcasting services to their clients, and hence they are not
required to charge/collect service tax from their customers. However, they have
charged and collected the service tax on the broadcasting charges from their
clients. Therefore, in the light of the provisions of section 73A(2), service tax so
collected has to be deposited by M/s. Mudra to the credit of Central
Government which they have admittedly not done. Therefore, I find that the
demand has been correctly made under Section 73A(3) of the Act ibid.
15.1.
under:-
Further, the provisions of section 73B of the Finance Act, 1994 is as
“Section 73B. Interest on amount collected in excess. — Where an amount has
been collected in excess of the tax assessed or determined and paid for any
taxable service under this Chapter or the rules made thereunder from the
recipient of such service, the person who is liable to pay such amount as
determined under sub-section (4) of section 73A, shall, in addition to the amount,
be liable to pay interest at such rate not below ten per cent and not exceeding
twenty-four per cent. per annum, as is for the time being fixed by the Central
Government, by notification in the Official Gazette, from the first day of the
month succeeding the month in which the amount ought to have been paid
under this Chapter, but for the provisions contained in sub-section (4) of section
73A, till the date of payment of such amount.”
15.2.
Therefore, I hold that M/s. Mudra is also liable to pay interest at the
appropriate rates on the amount of service tax so collected from their clients
but not deposited to the credit of Central Government under the provisions of
section 73B of the Finance Act, 1994.
16.
I have gone through the case laws cited by M/s. Mudra in support
of their defence. In fact, all these decisions are related to non-payment of
service tax on broadcasting charges collected by the concerned assessee.
Since the present case involves Section 73A which is totally independent of any
other provisions of the statute, including taxability or short-payment/nonpayment of Service Tax, these case laws have no relevance in the present case.
I find that the ratio of cited case laws is not applicable in the instant case.
Accordingly, I hold that M/s. Mudra have collected an amount representing
service tax and they have failed to deposit such amount to the credit of Central
Government as required under Section 73A(2), hence the same is liable to be
recovered from them under Section 73A(3) along with interest at the
appropriate rates under Section 73B.
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17.
Notwithstanding the above provisions of Section 73A, I have gone
through the arguments made by M/s. Mudra that they have collected
broadcasting charges and service tax leviable thereon on behalf of the
broadcasting agencies and paid the said amount to the respective
broadcasters who had displayed/ broadcasted the advertisement procured by
them on behalf of their customer. In other words, payment has been only routed
through them wherein no service portion is involved and hence the same is not
liable to service tax. In this regard, I find that when the payment is routed
through the assessee the same is forming cost of displaying advertisement on
behalf of the client. Therefore, in view of Rule 5 of Service Tax (Determination of
Value) Rules, 2006 the said cost should have been included in the taxable value
of service. Thus, I observe that M/s. Mudra should have paid service tax on the
total taxable value they have charged/collected from their clients, which they
have failed to do. I also observe that M/s. Mudra being an agent on behalf of
their clients, had to ensure that whatever advertisements given by their
customers has to be displayed by broadcaster with whom they have booked
time slots. Therefore, I find that the activities of M/s. Mudra to receive
advertisements from the customers, book the time slot with the broadcaster and
ensure that the said advertisement had displayed by the broadcaster, he
become mediator to arrange payment from customer to broadcaster through
his books of accounts. The payment to the broadcaster from the customer of
the assessee has not directly gone to the broadcaster. All these facts clearly
suggest that the broadcasting of the advertisement through the broadcaster is
a part of their activities. Therefore, I find that the assessee have hired the service
of broadcaster for broadcasting the advertisements supplied by their customer.
Therefore, if entire transaction is looked from receiving advertisement from
customers till the broadcasting of the same at specific time slot of the
broadcaster, I find that broadcasting service hired by the assessee is definitely
their input service. Meaning thereby the cost of input service hired is incurred by
the assessee and its cost has to be included in the taxable value of the service
rendered by the assessee which has not been done.
18.
It is the claim of the assessee that they have received invoices from
the broadcaster in their name on behalf of their clients whose behalf the
advertisement were displayed. In the said invoice broadcaster has charged
service tax on the broadcasting charges. They were entitled to have availed
Cenvat credit of the same and as they had raised invoice of the same amount
along with same service tax to their customer, the issue is revenue neutral. In this
regard, I find that their claim cannot be accepted. There is mechanism in the
Cenvat credit Rules, 2004 to avail credit of service tax suffered in the input
service, but the assessee have not complied with the same. Therefore, I find that
there is substantial lapse on the part of assessee. All the procedures prescribed
under the Cenvat Credit Rules, 2004 need to be complied if anybody intend to
avail Cenvat credit of service tax suffered in their input service otherwise the
mechanism devised by the Government to avoid double taxation will collapse.
Therefore I do not accept their claim for revenue neutrality.
19.
Now, coming to their submission regarding non-existence of
suppression of facts etc., I observe that the assessee was found to be issuing
invoices charging broadcasting charges and service tax thereon, however the
same were never declared in their ST-3 returns filed from time to time. The
aforesaid facts came to notice only during the course of audit. Nor they had
approached the department in this regard. I find that the assessee was in
M/s. Mudra Communications Pvt Ltd., Ahmedabad : OIO NO. AHM-SVTAX-000-COM-015-15-16 DATED 22.01.2016
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knowledge that they were not rendering broadcasting service, however they
were raising Invoices to their client indicating therein broadcasting charges and
service tax thereon. Therefore, I find that there exists sufficient ground for
existence of suppression of material facts with intent to evade nonpayment of
amount collected by them as service tax. Accordingly I find that demand for
extended period is justified and I find that decision cited by the assessee in this
regard are of no relevance.
20.1.
The SCN also proposes to impose penalty under Section 76 and 77
of the Act. Though this is a case of demand under section 73(A) of the Finance
Act, 1944, penalties under section 76, 77 and 78 are liable to be imposed in view
of CESTAT, Mumbai’s decision in the case of Pandurang Travels vs Commissioner
of Central Excise, Pune, reported in 2009(15) STR 567(Trib.- Mumbai) holding that
charging service tax and not depositing is clear evasion of tax liability. I find that
the assessee failed to deposit an amount of Rs. 1,63,11,947/- collected as service
tax which they are otherwise not required to collect, but failed to deposit to the
credit of Central Government in contravention of Section 73A(2). For their acts
of omission and commission which amounted to suppression of material facts
from the department as stated in para supra, they have rendered themselves
liable for penalty under section 78. Although the SCN proposes to impose
penalty under both Sections 76 and 78, in the light of specific provisions given
under Section 78 which prohibits imposition of penalty under Section 76 when
penalty already payable under Section 78, I refrain from imposing separate
penalty under Section 76.
20.2.
As regards penalty proposed under Section 77 of the Act, I find that
M/s. Mudra has failed to declare collection of service tax amount of Rs.
1,63,11,947/- in the ST-3 returns filed by them from time to time, thereby violated
the provisions of section 70 of the Finance Act,1994 read with Rule 7 of Service
Tax Rules, 1994. Accordingly I hold them liable to penalty under section 77(2) of
the Finance Act, 1994.
21.
order.
In view of foregoing discussions and findings, I pass the following
ORDER
i.
I confirm demand of service tax amounting to Rs. 1,63,11,947/-, (Rupees
One Crore Sixty Three Lakhs Eleven Thousand Nine Hundred and Forty
Seven only] in terms of Section 73A(3) read with proviso to Section 73(1) of
the Finance Act, 1994, which was charged/collected by M/s. Mudra from
their clients but not deposited to the credit of Central Government as
required under Section 73A(2) of the said Act;
ii.
I order that M/s. Mudra should pay interest as applicable under Section
73B of the Finance Act, 1994 on the above amount of service tax of Rs.
1,63,11,947/- collected in excess of the tax assessed/determined;
iii.
I also impose a penalty of Rs. 1,63,11,947/-, (Rupees One Crore Sixty Three
Lakhs Eleven Thousand Nine Hundred and Forty Seven only] on M/s.
Mudra under Section 78 of the Finance Act, 1994;
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iv.
I impose a penalty of Rs. 10,000/- under Section 77(2) of the Finance Act,
1994 for their failure to file correct ST-3 return showing the correct value of
taxable service and the actual amount of service tax collected;
v.
The amount of penalty imposed under Section 78 as above shall be
reduced to twenty-five percent of the service tax determined as per Para
21(i) above, provided that such reduced penalty is also paid along with
the service tax and the interest as applicable, within a period of thirty
days of the date of receipt of this order
(G.R. MEENA)
Principal Commissioner of Service Tax
Ahmedabad.
F.No. STC/4-95/O&A/2011-12
Date: -22.01.2016
BY REGD POST AD.
To
M/s. Mudra Communications Pvt. Ltd.,
“Mudra House”, Shantisadan Society,
Near Parimal Garden,
Ellisbridge, Ahmedabad-380 006.
Copy forwarded to:1.
2.
3.
4.
5.
The Chief Commissioner, Central Excise Zone, Ahmedabad.
The Deputy/Assistant Commissioner of Service tax (Audit) Ahmedabad.
The Deputy Commissioner of Service Tax, Division-I, Ahmedabad.
The Superintendent of Service Tax, Range-II, Division-I, Ahmedabad.
Guard file.
M/s. Mudra Communications Pvt Ltd., Ahmedabad : OIO NO. AHM-SVTAX-000-COM-015-15-16 DATED 22.01.2016