CESTAT upholds Eligibility to Avail Credit of Service Tax paid by Advertising Agency as Input Services [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the eligibility to avail credit of Service tax paid by advertising agency as input services.

The Department was of the view that the appellant had taken CENVAT credit of Rs.2,34,067/- during the period 2006-07 and 2007-08 based on invoices raised by various broadcasters which were in relation to broadcasting of advertisement for their clients.

The department was also of the view that such services do not qualify as input services for the Appellant and therefore the CENVAT credit availed was inadmissible under the provisions of CENVAT Credit Rules, 2004( CCR ). Therefore, it appeared that the CENVAT credit availed erroneously was liable to be recovered under Rule 14 of CCR read with Section 73(1) of the Finance Act.

The demands in Show Cause Notices were fully confirmed by the lower authority as proposed in the said Notices and Penalty imposed Under Section 78 read with Rule 15 of CCR and besides imposing penalties under Section 77 and levying interest under Section 75 of the Finance Act, 1994.

The counsel for the appellants submitted that the appellants were advertising agencies and they avail the services of broadcasting agencies and hence the services of broadcasting were an input service. At no point of time, they acted as pure agent for clients as the prevailing relationship between them was service provider-client relationship. There was no restriction in the CENVAT Credit Rules that the input and output service could fall under one and the same category.

A Two-Member Bench comprising Vasa Sesha Giri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “Regarding dis-allowance of CENVAT credit we find that the Appellant, in the case of advertisement through FM/Visual media, at the behest of their clients were availing the services of FM and TV channels including satellite channels who charged service tax along with charges for broadcasting the advertisements. As it is a part of their advertisement work, it is an input service”.

The Bench further noted that the only condition for availing credit on inputs / input services is that the said services should be used directly or indirectly in providing the output service and in their case, the Appellant have directly utilised the services of broadcasting agencies and other advertising agencies to provide the output services and hence they are eligible to avail the service tax paid on the said service providers.

“We are not inclined to agree with the findings in the impugned order that the Appellants were acting as pure agents and hence not eligible to avail the credit of Service Tax paid to the channel operators and FM operators. The Appellant is an advertising agency and so they can avail the services of broadcasting agencies and hence the services of broadcasting are an input service. At no point of time, the appellant was acting as intermediaries and hence the Appellants are entitled to avail the credit of Service tax paid by them as input services” the Bench concluded.

To Read the full text of the Order CLICK HERE

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