TIOL-DDT 235 · the untouched capture
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<html> <head> <title>Untitled Document</title> </head> <body bgcolor="#FFFFFF"> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 235</font><br> 07 11 2005<br> Monday</b></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>What is the binding nature of public notices issued by Custom Houses</b></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Way back in 1996 in Ranadey Micronutrients followed by several decisions, the Supreme Court had held that the department cannot take a plea against its own circulars.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> In Steel Authority of India Vs. Commissioner of Customs, Bombay – <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2005/2002-TIOL-23-SC-CUS.htm">2002-TIOL-23-SC-CUS</a> - this very issue had been in agitation before the Supreme Court. The Apex Court then ruled that <b>It is hardly to be supposed that the Customs authorities can take one stand in one State and another stand in another State. The trade notice issued by one Customs House must bind all Customs authorities and, if it is erroneous, it should be withdrawn or amended</b>.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This decision of the Supreme Court was delivered on October 28, 1999. By a strange coincidence, exactly six years later to the date by a decision dated October 28, 2005, the Supreme Court has taken a different view. Please see our latest case <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2005/2005-TIOL-134-SC-CUS.htm"><b>2005-TIOL-134-SC-CUS</b></a> which we have carried today.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case the counsel for the importer relied on a public notice issued by the Madras Custom House with regard to interpretation of an exemption notification. But the counsel for revenue took a plea that the public notice issued by a particular Custom House cannot be equated with the circular issued by the Board in exercise of its statutory power under Section 151A of the Customs Act. The exemption notification being a statutory one cannot be clarified by one Custom House as the same must emanate from the same authority.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court did not agree with the assessee’s counsel and held that in terms of Section 151A it was only the Board which may issue instructions and even the Board had limited power as held in the Pahwa Chemicals Case.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Of course the SAIL case was apparently not brought to the notice of the Apex Court.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what happens to the trade notices and public notices issued by the Commissioners. They may not have relevance even within the same Commissionerate. The Supreme Court in this very case had observed that the legislature always intend to avoid hard ship. The same cannot be said off the executive. What is the purpose of issuing clarifications by trade notices and public notices if they are not binding on any one including the ones who issued them? It is high time they stopped issuing clarifications as they only result in more confusion and litigation. Yet another example of this kind of confusion is analysed in our Guest Column today. Finally is the present decision of the Apex Court per incuriam or does it over rule the SAIL decision?</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Draft circular on advertisement: Some unanswered questions</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While on Board clarifications, here is a write up sent in by a concerned netizen on the Board's recent draft circular.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>(1) Is the Govt. trying to bring the print media under Service Tax net?</b></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier, the Board vide its circular F.No. 345/4/97 dt.16.08.1999, while clarifying the matter whether printing of yellow pages would cover in the ambit of advertising services, has used the following wording with regard to print media:</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“However, the amount paid, excluding their own commission by the advertising agency for space and time in getting the advertisement published in print media or the electronic media will not be includible or the value of taxable service for the purpose of levy of service tax. The commission received by the advertising agency would, however, be includible in the value of taxable service. In other words, service tax is attracted on advertising agencies, which are providing service to advertisers by conceptualizing, designing, or preparing advertisement. Print or electronic media is excluded from the levy of service tax as they do not provide any service to the advertisers, but are merely selling space of time for the exhibition of advertisements.”</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whereas the present draft circular seeks to recognize the selling of space by print media as service, as per the following wordings used in the draft circular</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para (2) “ Advertising agency means any commercial concern providing any service connected with display or exhibition of advertisement”</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para (4) “ Advertising agency obtains space and time in getting advertisement published in print or electronic media. Such services are used by an advertising agency to provide advertising services to a client in respect of display, or exhibition of advertisement. Such services being an input service, form an integral part of the taxable service provided under Sec.65(105) (e)”</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para (7) “ The services provided by the media is actually received by the advertising agency and used as an input service for providing the taxable service to the client”</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Therefore, the amount paid by the advertising agency to the media for obtaining space for display or exhibition, being in the nature of input service used in providing the taxable service, is liable to be included in the value of the taxable service.”</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, the draft circular is a clear departure from the earlier clarification (vide cir . dt. 16/08/1999 ) in treating the selling of space by print media as a service and also viewing it as part of advertising agency service i.e. providing the service of display or exhibition of advertisements. The draft circular clearly seeks to interpret the services of print media as input service.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If that be so, there is a responsibility on the part of the Govt. to state it clearly in the circular, rather than leaving it to interpretation by the field formations.<br> Further, there is no justification in leaving the print media form the purview of service tax, considering the fact that electronic media are already under service tax net as Broadcasting service providers for selling time slots.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If print media is not brought under service tax net, it will break the Cenvat chain, and Ad. Agencies solely depending on print media will be at a disadvantage.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>(2) From which date the clarification through the (draft) circular will be effective?</b></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The draft circular is trying to interpret, the provisions contained in the statute with regards to valuation of advertising services. Considering the fact that there is no major changes in Sec.67 of Finance Act, 94 (with regards to advertising agency services) right from its inception, there is every possibility of interpreting earlier circulars issued in this context are not in line with the provisions of the Act, hence untenable. What if some audit raises this question, and seeks to include the amounts paid to print media for past assessments also</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hence, the Board should clearly state in the circular to the effect that the contents of the circular will be having prospective effect from the date of circular.</font></p> <p align="center"><font color="#000066" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Litigation - A machine which you go into as a pig and come out as a sausage - Ambrose Bierce - The Devils' Dictionary, 1911</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6666">Until Monday with more DDT</font></b></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Have a nice extended weekend.</b></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mail your comments to</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></b> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p> </body> </html>