ADWISE ADVERTISING PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this writ petition, the petitioner seeks the issuance of a writ of declaration by declaring the impugned letter M.F. (D.R.) Letter No. 341/43/96 -TRU, dated 31 -10 -1996 asultra viresthe provisions of Article 265 of the Constitution of India and Sections 67(d) and 95 of the Finance Act, 1994 (as amended) and pass such further or other orders in the interest of justice.

(2.) IN the affidavit filed in support of the writ petition, which is sworn to by the Managing Director of the petitioner Company it is stated that it is an advertising agency and provides services connected with the preparation, display and or exhibition or advertisements in newspapers, magazines, journals as well as on radio and television and the petitioner charges its clients for services in the preparation of advertisements.

(3.) IN the counter -affidavit filed on behalf of the respondents, which is sworn to by the Assistant Commissioner in the Office of the Commissioner of Central Excise, Coimbatore, he challenges even the maintainability of the writ petition. It is said that the writ petition was filed only on the basis of the mere apprehension and the petitioner has not so far been aggrieved by the mere issuance of a letter or instructions. The petitioner is not an aggrieved person according to the respondents, to be an aggrieved person, the order must be adverse or prejudicial to the petitioner, which alone can give cause of action for challenging the same in a Court of Law. It is said that prior to 1994, Customs and Excise duty means duty on goods either manufactured or imported. To widen the base of domestic indirect taxes, to tap the rich and growing source of revenue, the policy was adopted in the form of tax on services and the said tax was introduced as Chapter V in Finance Bill, 1994 which became Finance Act, 1994 and the same was made applicable from 1 -7 -1994. Sections 64 to 96 were introduced and made applicable for the new levy of service tax. By virtue of the amendment, which came into effect on 1 -11 -1996, certain other services viz. Advertisement, Advertising Agency, Courier Agency, Pager and Telegraph authority were also included and they were made liable to service tax. The charge of service tax was fixed at 5% on the value of taxable service rendered. 'Taxable service' is defined as any service provided to a client, by an advertising agency, in relation to advertisements in any manner. It is said that the petitioner has not challenged the validity of the amendment to the Service Tax. So long as the petitioner had not challenged the validity of the amendment, viz. theviresand applicability of the Service Tax, he cannot challenge the clarification alone. The clarification letter is initiated only to clarify the value to be adopted and the computation of taxable service. The method of arriving at the value of the taxable service being a factual position, the same has to be dealt with by the authorities, only and before any order is passed, the petitioner cannot question the valuation of taxable service. The writ petition is, therefore premature. In regard to Section 67(d) of Chapter V of the Licence Act, it is said that tax is levied on the Agency for the gross amount charged by such agency from the client for services in relation to advertisements. It is said that there is a subtle distinction between advertisement and services in relation to advertisements. Advertisement is the end product whereas service is the means provided for arranging to get the advertisement made, prepared, displayed or exhibited. As per the clarification, the gross amount charged for such service by the advertising agency from the client includes the commission received by the agency and not the cost of space or time charged by the print [or] electronic media for getting the advertisement published or broadcasted. The commission received by the advertising agency is on account of getting the advertisement displayed and levy in question is a service tax on service -charges relating to an advertisement and not on the cost of advertisement. There is no repugnancy between the clarification and the section imposing tax. The clarification issued by the respondents is with regard to the value of the taxable service, which is contemplated under Section 67(d), and the method to arrive at the value of the taxable service alone has to be clarified. It is not by clarification, the new tax is imposed, nor is it violative of Article 265 of the Constitution of India. Therefore, they prayed for the dismissal of the writ petition.