Club Providing Ad Display Space Doesn’t Qualify as Advertising Agency, May Attract BAS: CESTAT [Read Order]

Calcutta Club Ltd., the appellant, is a members-only club incorporated as a public limited company. During the financial years 2008-09 to 2012-13, the club earned advertisement income from businesses that displayed banners during events or in club publications. A show cause notice was issued, and the adjudicating authority confirmed a demand of Rs. 2,49,342 under the category of “Advertising Agency Service,” holding that the club was liable to pay service tax on this income.

The appellant’s counsel argued that it was not engaged in making, preparing, or displaying advertisements and did not act as an advertising agency. The club simply permitted businesses to display pre-prepared ads during internal member events and collected a fee or commission in return. They argued that its role was limited to providing space, not handling advertisement content or logistics.

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The appellant’s counsel referred to CBIC Circular No. 96/7/2007-ST dated 23rd August 2007, which clarified that merely canvassing advertisements for publication does not qualify as advertising agency service and instead falls under Business Auxiliary Services, if taxable. They also argued that their primary function was to serve club members, and the ad income was incidental.

The revenue countered that the club collected fees for displaying advertisements and, therefore, should be treated as providing advertisement services under Section 65(105)(e). They further argued that the club failed to register or pay service tax, and the liability came to light only after departmental verification.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that to be classified as an advertising agency, a person must be involved in the making, preparation, display, or exhibition of advertisements. Since the club did not perform these functions and only allowed advertisers to place ads during member events, it did not fall under the definition of an advertising agency.

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The tribunal also referred to the CBIC circular, which supported the appellant’s position. The tribunal explained that such activities do not attract tax under “Advertising Agency Services” and any potential liability would arise, if at all, under Business Auxiliary Services, a category not invoked in the show cause notice. The tribunal set aside the demand of Rs. 2,49,342 under advertising agency service.

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