The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)held that hiring of space for advertisement on the buses by Tamil Nadu State Transport Corporation does not fall under definition of advertising agency and set aside the demand of Service tax.
M/s. Tamil Nadu State Transport Corporation, the appellant challenged the Order in Appeal (impugned order) passed by the Commissioner of Central Excise (Appeals), Salem. On investigation by the officers of Central Excise, it appeared that the appellant was rendering advertisement agency services by placing advertisement boards on the buses of leading consumer brands.
Advertisement charges were collected by the appellant from the clients as evident from their balance sheets wherein the receipts were accounted as ‘Non-Operational Revenue’. Scrutiny of the documents revealed that during the period from January 2002 to June 2006, the appellant had collected Rs.1,28,64,245/- as advertisement income from various parties. Hence a Show Cause Notice dated 22.9.2006 was issued to the appellant demanding service tax of Rs.11,81,098/- for the period from January 2002 to June 2006 with interest and penalties.
After due process of law, the adjudicating authority confirmed the demand of service tax amounting to Rs.7,93,321/- along with interest and imposed penalties under various sections of the Finance Act, 1994, vide OIO No. 28/2007 Dated 31.12.2007. In appeal, the Commissioner (Appeals) upheld the impugned order.
Ms Manne Veera Niveditha, counsel appeared for the appellant and Shri Harendra Singh Pal appeared for the Revenue.
The appellant submitted that they are a Government of Tamil Nadu Undertaking providing transportation facilities to the public. The terminology “Advertisement Charges” used by the appellant in their accounts is only for the sake of easy identification and convenience and it is not the deciding factor to determine that the appellant was covered under the service tax category “Advertising agency”. The charges collected from their clients were for using the space provided in the buses for fixing advertisement boards.
that the appellant has stated that they were offering space on the rear side of the bus and the rear side of the driver’s seat to advertisers to display an advertisement of their choice. Their clients make the best use of the space by displaying advertisement boards made according to their convenience, taste, choice, design etc. within the space allotted to them.
The Board vide Ministry of Finance F. No. 345/4/97-TRU, dated 16-8-1999 had clarified that no service tax is chargeable on the advertisement booked for yellow pages. The reasoning given therein is also applicable to this case. It was clarified that if persons undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc., only then will they be liable to pay service tax on the charges made thereon under the “advertisement agency” service.
A two-member bench comprising Shri P. Dinesha, Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) held that hiring of space will not bring the appellant under the definition of ‘advertising agency’. “Since the issue has been decided on merits in favour of the appellant the question of interest, penalties or invoking the extended period does not arise. “, the bench held while allowing the appeal.
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