The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that non-payment of excise duty as per machinery provision including designated point of time of taxation invites penalty proceedings.
M/s. Mudro Communications Pvt. Ltd., has registered business premises located at “Mudra House”. Shanti Sadan Society, Near Parimal Gardensbridge. Ahmedabad-380 006, ( hereinafter referred to as “M/s Mudra” ) was 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. “AACM5763HST012”.
M/s. Mudra offered their clients the entire range of advertising and communications services, which, inter alia, included getting space booked in the print media or time slots in the electronic media and later selling the same to their various clients for which they received payments from the clients.
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 commissions and sold such time slots to their clients who, in turn, used the slot for screening the advertisements.
M/s Mudra further issued bills to their clients for rendering advertising services, and 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.
It appeared to the department that the bill raised by M / s Mudra to their clients Included a service tax amount of Rs. 23639/- which was charged to them by the broadcaster, M / s UTV Entertainment Television Ltd, even though 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.
It appeared to the department that the activities carried out by M/s. Mudra does 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.
It was found that the duty has been collected by the appellants and has been finally paid to the department either by the appellants or by the broadcasters, therefore, the department having already collected its same could not have called upon the appellant to make double payment and thereby to enrich the exchequer.
It was evident that the determination of revenue neutrality is a question of fact and if machinery provisions by way of scheme adopted by the assessee are found to have been misused or compromised by allowing improper gain by way of saving of interest over normal machinery provisions relating to point of taxation and payment of duty, same can still result in demand of interest as well as penalties.
A two-member bench comprising Mr Somesh Arora, Member ( Judicial ) and Mr C L Mahar, Member ( Technical ) remanded the matter for a relook as far as the interest and penalties are concerned by the provision of Finance Act, 1994 vis-à-vis, the scheme adopted by the appellant, by the contract/arrangement entered by them and broadcasters. Penalties likewise are to be confined to breach of machinery provisions only, if so found and not for intent to evade considering the legalities of the issue involved.
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