CESTAT, bench of Delhi, while finding that Prasar Bharati was not subject to service charge on advertising services, ordered the company to make the refund to the customers as the former collected the same during pending proceedings under the apprehension that the tax claim may be confirmed. The Company is also required to provide a compliance report to the Registry of this Court within 15 days.
The appellant was only running advertisers’ advertisements and airing or telecasting them, without actually making the advertisements. In accordance with the circular of 31.10.1996, the Central Excise and Customs Office “the amount paid, excluding commission, by the advertising agency for the space and the time devoted to the publication of the advertisement in the printed media or services would not be included” in the value of the taxable service for the purpose of levying service tax. However, the department was of the opinion that the services rendered by Doordarshan Kendra, Trivandrum were taxable.
After receiving SCN, the appellant obtained service tax registration and collected the tax from advertisers from September 2002 to March 2003. The department determined that the appellant is liable to pay the amount so collected to as a tax to the central government under Section 76A. (2) the finance law.
While finding that no service charge is due to the appellant for the relevant period, the CESTAT panel composed of Mr. PV Subba Rao, member (technical) and Mrs. Rachna Gupta, member (judicial) considered that “in the present case, it is true that no service tax was payable on the appellant’s activity, namely the broadcasting of advertisements in its programs and television broadcasts. Consequently, the government cannot collect service tax. It is also true that Section 73A(2) which required any person who collects an amount as representing service tax to file it with the government also did not exist in the relevant time, so the government had no power to enforce the amount.
The Tribunal further added that “it is clear that the appellant did none of this, but that it withheld 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 enforce the amount collected either as tax or under section 73A(2) and that the appellant has the right to retain the amount at the customers expense. Such retention of it with the appellant is certainly an act against equity making the appellant unjustly enriched. The statutory provisions cannot be interpreted as implying that the appellant is entitled to such unjust enrichment. The government also has no right to recover the tax (Section 73) or any amount collected as representing the tax (Section 73A) in the absence of any statutory provision, nor does the appellant have the right to collect from customers an amount representing the tax and to retain it. Sums collected as tax must be returned to the persons from whom they were collected.
Ordering the appellant to refund the amount to customers within two months, the Tribunal further added that “once it is determined that no tax is due, the appellant could have refunded the customers and request a refund. Had the appellant requested a refund without returning the amounts in whole or in part 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 applicable to the services tax provisions by the Finance Act 1994.”
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