Judgment:
1. The captioned appeals have been filed by the Revenue against similar orders passed by the Commissioner (Appeals). The respondents, M/s Advantage Media Consultant & M/s Siddharth Advertising had rendered services as an advertising agency and collected commission from their clients. The respondents had collected service tax on the commission amount where the service was rendered to private parties. They did not collect the service tax separately from Government Agencies, like, Indian Railways. Before the lower authorities, the respondents had argued that they believed that the service tax was required to be paid only when the same was paid by the receiver of the service. Government Agencies did not pay service tax separately, they did not pay service tax on the gross amount received or any lower amount. Appeals were filed against the orders-in-original demanding service tax on the services rendered during the period 4/2000 to 3/2005, when the Commissioner (Appeals) allowed the appeals by way of remand. The Commissioner (Appeals) had directed the original authority to re-quantify the demand considering gross amount received, where the service tax was not paid, as inclusive of service tax payable. The Revenue is in appeal against this part of the impugned order. The Revenue has argued that the respondents have to pay service tax on the gross amount of commission received by them even in cases where the service tax was not collected. In respect of Government Agencies who did not pay service tax on gross amount collected, the Revenue argues that the service tax should be paid by the respondents at the applicable rate on the amount collected.
3. Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18.4.06 in Section 67(2) of the Finance Act, 1994 as amended: 67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.
4. This principle has all along been relevant and had to be applied. In the circumstances, we find no reason to interfere with the impugned order and we reject both the appeals filed by the Revenue. The Cross Objection in respect of S.T. Appeal No. 55/06 is also disposed.