Prasar Bharati (Broadcasting Corporation of India) Vs Commissioner of Service Tax Delhi (CESTAT Delhi)
In the present case, it is true that no service tax was chargeable on the activity of the appellant, viz., carrying the advertisements in its broadcast and telecast. Therefore, the Government cannot collect service tax. It is also true that Section 73A(2) which mandated that any person who collects any amount as representing service tax to deposit it with the Government also did not exist at the relevant time. Thus, the Government had no authority to demand the amount.
However, it is equally true that the appellant had no authority under the Service tax law or any law for that matter, or on the principles of equity, to collect from its customers an amount representing it as service tax and retain it when no tax was payable. It is possible that the amount was collected under the mistaken belief that tax was payable. If so, the appellant should have deposited ‘the tax’ so collected with the Government as tax (pending the final outcome of the decision in the SCNs issued). Another possibility is that the appellant had not believed that tax is payable but had collected it from its customers by mistake. If so, it should have returned the amount to its customers. A third possibility is that the appellant knew that no tax was payable but since the SCNs were pending, as a matter of abundant precaution to save itself from a tax liability at a later stage, collected the amounts as Service tax from its customers. If so, once the decision is made that no service tax is payable, the appellant should have returned the amounts so collected as tax to its customers. It is clear that appellant has done none of the these but has retained the amounts collected from its customers as service tax. Now learned counsel for the appellant argues that in the absence of any provision, the Government cannot demand the amount collected either as tax or under section 73A(2) and the appellant has a right to keep the amount at the expense of the customers. Such retention thereof with the appellant is definitely an act against equity making the appellant unjustifiably enriched. The statutory provisions cannot be read as to imply that the appellant has a right to such unjust enrichment. Neither has the Government any right to recover tax (section 73) or any amount collected as representing tax (section 73A) in the absence of any legal provision nor has the appellant any right to collect from the customers any amount as representing tax and retain it. The amounts collected as tax must be returned to the persons from whom they were collected.
Had the appellant collected the amounts from its customers as representing tax as a matter of precaution, it could have paid it as tax under protest. Once, it is decided that no tax is payable, the appellant could have repaid the customers and claimed a refund. If the appellant had claimed refund without returning the amounts in part or whole to its customers, such refund would have been sanctioned under section 11B and the amounts would have been credited to the Consumer Welfare Fund under Section 11B of the Central Excise Act as applicable to the provisions of Service tax by Finance Act, 1994. Section 11B, including the provision of refunds being credited to the Consumer Welfare Fund were applicable during the period of dispute. Simply because the appellant retained the amounts with itself and has not deposited them with the Government should make no difference. Neither the Government nor the appellant has any right over the amounts collected from the customers as representing service tax in the absence of any legal provisions.
In view of the entire above discussion, the order under challenge confirming the demand with interest and imposing penalty upon appellant is hereby set aside. However, the appellant is directed to return the amount collected by it, under the garb of its liability to pay service tax when actually it was not liable, to all those customers from whom it was collected that too within a period of two months.
FULL TEXT OF THE CESTAT DELHI ORDER
The appellants herein are engaged in the broadcasting service through Doordarshan Kendra, Trivandrum. While Broadcasting they also carry advertisements. Advertising agency service was brought under the Service Tax net by Government of India by Finance Act, 1996 vide Notification No. 06/1996 dated 01.11.1996 and the following were inserted in the service tax provisions (Chapter V of the Finance Act, 1994):
Section 65 (3) Advertising agency” means any person engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant.
Section 65(105) (e) Taxable Service” means any service provided or to be provided to any person by an advertising agency in relation to advertisement, in any manner;
2. The appellant herein was only carrying the advertisements of the advertisers and broadcasting or telecasting them and not actually making the advertisements. While the service provided by an advertising agency was a taxable service, a question arises whether an amount paid by the advertiser only for the space in the print media or in electronic media would also be taxable. The Central Board of Excise and Customs issued a circular No. 341/43/96-TRU dated 31.10.1996 clarifying that ‘the amount paid excluding the commission by the advertising agency for space and time in getting the advertisement published in the printing media or the electronic media would not be includable’ in the value of taxable service for the purpose of levy of service tax.
3. Officers of the Department felt that the service rendered by Doordarshan Kendra, Trivandrum were taxable but neither has a registration certificate been obtained nor has any tax been paid nor any return filed by Doordarshan Kendra. It was felt that this amounted to contravention of the provisions of section 68 of Finance Act, 1994 and three following show cause notices were served upon the appellant.
