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    AUTHORITY FOR ADVANCE RULINGS

              (CENTRAL EXCISE, CUSTOMS & SERVICE TAX)

NEW DELHI

Hon'ble Mr.Justice Syed Shah Mohammed Quadri (Chairman)

      Mr.Somnath Pal (Member)

     Dr.B.A.Agrawal (Member)
 

            Tuesday, the Twenty-Ninth August Two Thousand Six
 

Order No. AAR/ 1/2006
in

Application No.AAR/01/R.O.M.(ST)/2006

 

 

Applicant                                                           M/s. Google Online India Private

Ltd. (GIPL)

                                                                                                1st Floor, No.3 Vittal Mallya Road,

                                                                                               Bangalore -560001 (India)

                                   

Commissioner designated                                   Commissioner of Service Tax, Delhi, 
                                                                                    C.R. Building,

IP Estate, New Delhi

                                                                                                           

Present :  for the applicant                                  Mr. Atul Gupta, Consultant,

                                                                        Ms. Chun Chun Goel

 

               

                                    for the Commissioner                             Shri A.K. Roy, Joint CDR

                                    designated                                            CESTAT, New Delhi

Shri  Bipin Sapra,

Jt. Commissioner,

Commissionerate of Service Tax,

Delhi

 

O  R D  E  R

(Hon'ble Mr. Justice Syed Shah Mohammed Quadri)

 

 

This is an application under Rule 18 of the Authority for Advance Rulings (Customs, Central Excise & Service Tax) Procedure Regulations, 2005 (for short "the Regulations").  The applicant prays the Authority to consider modification of ruling of the Authority bearing No. AAR/30/2005 dated the 13th December, 2005 in application No.  AAR/44/58/ST/2005 filed on 28th July, 2005. 

 

It is stated in the application that there is prime facie factual error that has been considered for pronouncing of advance ruling  inasmuch the Authority relied on the contention of the Commissioner that the applicant is providing various value added services, which tantamount to taxable services under the advertisement service category.  This plea of the Commissioner was vehemently opposed by the applicant.  The submission of the applicant was that it did not intend to provide the service of jumpstart etc. which are mentioned on the website of Google Inc. USA and which are not intended to be provided by the applicant.  It is further stated that CBEC has taken an entirely different viewpoint regarding the element of advertising services liable to service tax and the change in the approach of the department has taken place between the date of the application and the pronouncement of the ruling.   It goes to the root of the matter and vitally affects the rights of the parties and needs to be taken into account by way of review of the ruling pronounced by the Hon'ble Authority (emphasis added).  As the Ministry of Finance till date does not consider display or exhibition of advertisement as service liable to service tax under the category of advertisement services, there is apparent scope for mis-interpretation of the ruling pronounced by the Authority.  It is admitted that in the event of applicant providing any value added service relating to or connected with the preparation and making, display or exhibition of an advertisement other than that of service of display or exhibition of advertisement simpliciter,  the applicant would most certainly be liable to pay service tax on the value charged from the customer for rendering such value added services.   According to the applicant the value of sale of space should be excluded if that is separately identified and only tax the "value added" services like "jumpstart" or any other such value added service if the same is provided by the applicant in which case the applicant would abide by the conditions laid down in notification no. 12/2003- S.T. dated 20th June, 2003.  It is on this basis that the applicant seeks modification of our ruling clarifying as to whether in the light of the circulars and the subsequent developments, the applicant is liable to pay service tax on the charges providing/selling space to a customer for mere exhibiting/displaying an advertisement in a case where no other value added services are provided to such a customer.

 

2.         In his comments the Commissioner has submitted that as per regulation 18 of the Regulations there should be a mistake of law or facts on which the ruling is based and that in the present case there has been no mistake of law or facts in giving the ruling, therefore, the application is not admissible. 

 

            Adverting to para 11 of the ruling, the Commissioner states that the Authority considered the requirements of the terms of the advertisement agency and noted the applicant's submission that it would not be providing any service connected with the display or exhibition or advertisement.  All the facts were available with the Authority at the time of passing the ruling and there has been no mistake of law or facts.  In regard to the material change in the approach of CBEC, it is submitted that plea is taken for the first time in the application for rectification and that the grounds taken in the application do not fall under the mistake of law or facts.  It is pointed out that while pronouncing the ruling the Authority noted that the applicant even by merely providing/selling space for display or exhibition of an advertisement would be providing the service to the advertisers and, therefore, would be covered by the definition of the expression "advertisement agency" and, therefore, the service would fall within clause (e) of sub-section 105 of section 65 of Finance Act 1994 which is very wide.  Any extra service provided by Google is not the basis of classifying the present service of selling of space for displaying the advertisement on website as the advertisement agency service; therefore, the facts mentioned by the applicant have no bearing.  The draft circular does not relate to any classification issue and the question before the Authority was classification of services rendered by the applicant.  In any event in the draft circular the views and comments were invited; therefore, the contention based on this circular is of no consequence.

 

3.         Mr. Atul Gupta, learned counsel appearing for the applicant, fairly submits that the applicant has no grievances with regard to the ruling pronounced by the Authority; what he prays is clarification of the ruling as it is liable to be misinterpreted by the authorities.  Mr. Roy appearing for the Commissioner has argued that to invoke the jurisdiction of the Authority under regulation 18, the ruling must have been passed on a mistake of law or facts.  Indeed, ruling is not based on any mistake of law or facts.  The applicant in effect is seeking review of the ruling by  praying the Authority to interpret the ruling in a given situation and that is not within the scope of the said regulation.

 

4.         On the above contentions, the short question that arises for consideration is whether the applicant has made out a case to invoke regulation 18. 

The said regulation is in the following terms:

"18.     Modification of the order/advance ruling - The Authority may suo motu or on a petition by the applicant or the Commissioner, but before pronouncement of an advance ruling or before an advance ruling pronounced has been given effect to, on being satisfied that an order/advance ruling was pronounced under mistake of law or fact, modify such order/advance ruling in such respects as it considers appropriate, after allowing the applicant and the Commissioner a reasonable opportunity of being heard."

 

            A  plain reading of the regulation, quoted above, shows that the power of modification of order/advance ruling can be exercised by the Authority either suo motu or on the petition of the applicant or the Commissioner.  The limitation contained therein is that the power may be exercised either before pronouncement of an advance ruling or before an advance ruling pronounced has been given effect to.  The pre-requisite for exercising the power is the satisfaction of the Authority that an order/advance ruling has been pronounced under mistake of law or fact .    On these requirements being satisfied the Authority may modify such order/advance ruling in such respects as it may consider appropriate but after allowing the applicant and the Commissioner a reasonable opportunity of being heard.  It is thus apparent that the sine qua non  for exercising the power is satisfaction of the Authority that an order/advance ruling has been pronounced under mistake of law or fact.  It may not be out of place to mention here that the Central Excise Officer who passed the order has an analogous power under section 74 of the Finance Act, 1994 (Service Tax Law) though the pre-requisite of that power is a little different, namely, mistake apparent from the record.   Another analogous provision is Section 154 of the Income-tax Act, 1961 whereunder the pre-requisite for rectification of mistake is "a mistake apparent from the record".  

 

            It may be useful to bear in mind the distinction between the appellate power and the revisionary power on the one hand and the power of review and the power of rectification of mistakes on the other hand.             It is needless to point out that in an appeal the appellate authority has the widest power to consider the case afresh both on facts and law to interfere in the order under challenge.  In case of revision against the impugned order, the scope of the power is limited by the provision conferring such power so also the power of rectification of mistake.  The appellate and the revisionary powers are always exercised by the authority higher than the authority which passed the order under challenge.   The power of review and the power of rectification of mistakes are often conferred on the authority which passes the order, which is very limited.   It must be remembered that the power of review though wider than the power to rectify mistakes is nonetheless limited and can be exercised only when the requisite conditions are satisfied.

 

 

5.         With the above position of law in mind, let us turn to the facts of this case.  The applicant sought advance ruling of the Authority on the following question:

 

"Whether the activity of providing/selling space for advertisement on 'Google Website' as proposed to be carried out by the applicant and as detailed in Annexure 1 of this application, is classifiable under any of the below mentioned heads of taxable services or as any other taxable service enumerated in Chapter V of the Finance Act, 1994:

              

1.      Advertisement Services (as defined under section 65(105)(zh)[sic] of Chapter V of Finance Act, 1994).

2.      Computer Network Service (as defined under section 65(105)(zh) of Chapter V of Finance Act, 1994).

3.      Business Auxiliary Service (as defined under section 65(105)(zzb) of Chapter V of Finance Act, 1994).

4.      Any other taxable service (as enumerated in section 65(105) of Chapter V of Finance Act, 1994)" 

 

It is thus obvious that the question set forth for ruling from the Authority relates to classification of services provided by the applicant.  The relief sought in this application relates to quantum of amount chargeable to Service Tax.  The petitioner's submission in the application is:

 

"the correct approach according to us in the case of advertising services in the instant case is to exclude the value of the sale of space if that is separately identified and only tax the "value added" services like "jump start" or any other such value added service (if the same is provided by the applicant) to the extent of the consideration separately identified in respect of the same".

 

The relief now sought is not the subject matter of the question much less can it form the subject matter of rectification of petition.

 

Though the applicant alleges that there is existence of prima facie factual error, a perusal of para 11 of the advance ruling on which reliance is placed, unmistakably points out that the plea of the applicant that it will not be providing any service connected with the display or exhibition was adverted to and after considering the material before it, the Authority recorded the finding that the applicant would not merely be selling the slot on website but would also be assisting in preparation of advertisement and its displaying/exhibiting; thus it squarely falls within meaning of advertising agency.  It was, further, concluded " In fact, without prejudice to the factual position stated above, any service to a client connected with even any one or more of the four activities mentioned above, would be sufficient to bring the commercial concern providing such service within the ambit of the definition of advertising agency". 

 

6.         In view of these findings it would be difficult to accept the contention of the learned counsel of the applicant that the conclusion recorded by the Authority on the point as to whether applicant falls within the definition of "Advertising Agency"  suffers from any mistake of fact or law, which is the sine qua non  for exercising the power under regulation 18 of the Regulations.

 

The other ground on which the application is based is material change in the approach of the Central Board of Excise and Customs regarding what element of advertising services is liable to taxation under Service tax; it is noted above that this is beyond the scope of the application and, therefore, it is not relevant for the purpose of this application.

 

We have indicated above the submission of Mr. Atul Gupta that the applicant has no grievance with the ruling pronounced by the Authority; however, what the applicant seeks in this application is the clarification of some positions of the ruling which according to it are liable to be misinterpreted in regard to valuation of services.  To say the least this can hardly be a ground under regulation 18 of the Regulations.

 

For the above reasons, the application is without any merit and accordingly it is rejected.

 

 

 

Sd/- Sd/-   Sd/-
(Somnath Pal) (Justice S.S.M. Quadri) (B.A. Agrawal)
Member Chairman Member

                                                                           

 

 

Registered /A D

 

F. No. AAR/01/R.O.M.(ST)/2006

Dated 29th August,  2006

 

 

(A) This copy is certified to be a true copy of the Order and is sent to :-

                                               

1.                  M/s Google Online India Private Limited (GIPL), 1st Floor, No. 3 Vittal Mallya Road, Bangalore-560001.

2.                  Commissioner of Service Tax,Delhi, C.R. Building I.P. Estate, New Delhi-110002.

3.                  Mr.A.K.Roy, Joint Chief Departmental Representative, Customs, Excise & Service Tax Appellate Tribunal, West Block-2, R.K.Puram, New Delhi-66.

4.                  Guard File

 

 

(J.P. Mamgain)

Additional  Commissioner

 

 

Registered /A D

 

F. No. AAR/01/R.O.M.(ST)/2006

Dated 5th September, 2006

 

 

(A) This copy is certified to be a true copy of the Order and is sent to :-

                                               

1.                  M/s Google Online India Private Limited (GIPL), 1st Floor, No. 3 Vittal Mallya Road, Bangalore-560001.

2.                  Commissioner of Service Tax,Delhi, C.R. Building I.P. Estate, New Delhi-110002.

3.                  Mr.A.K.Roy, Joint Chief Departmental Representative, Customs, Excise & Service Tax Appellate Tribunal, West Block-2, R.K.Puram, New Delhi-66.

4.                  Guard File

 

 

(J.P. Mamgain)

Additional  Commissioner

 

 

 

(B)                           In view of the provisions contained in Rule 25 of the Authority for Advance Rulings (Procedure) Regulations, 2005, permission of the Authority is accorded for publication of the Advance Ruling. Copy of the Advance Ruling is forwarded to:

 

1.                              Centex Publications Pvt. Ltd., 1512-B, Bhishma Pitamah Marg,

Opp. ICICI Bank of Defence colony, New Delhi-110 003

2.                              Deeparchie Publications, M-93, Marg-46, Saket, New Delhi-110 017

3.                              Excise & Customs Cases, B-37, Sector-1, Noida-201301 (U.P.)

4.                              Cen-Cus Publications, A-252, Shivalik, New Delhi-110 017

5.                              Taxindiaonline.com Private Limited., B-XI/8183, Vasant Kunj, New Delhi-110 070

6.                              Taxmann Allied Service Pvt. Ltd, 59/32, New Rohtak Road,  New Delhi-110005.

7.                              www.allindiantaxes.com, 803, Kirti Shikhar, District Centre, Janakpuri, New Delhi-110058

8.                              Company Law Institute of India Private Limited, 2, Vaithyaram Street, T. Nagar, Chennai-600017

 

 (J.P.Mamgain)

Additional  Commissioner