Rajasthan State Road Transport Corp Not Liable for Service Tax on Display of Govt Advertisements on Buses : CESTAT [Read Order]

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) observed that the appellant, being a government-owned transport undertaking, was not liable to pay service tax on the amount received from the State Government for displaying official advertisements on its buses.

The appellant, Rajasthan State Road Transport Corporation (RSRTC), is a state-owned passenger transport organization registered for various taxable services, including tour operator service, renting of immovable property, and sale of space or time for advertisement.

During an audit covering the period from April 2010 to March 2013, it was found that RSRTC had received Rs. 10.48 crore from the Government of Rajasthan for displaying advertisements about government achievements on its fleet of buses.

The department alleged that service tax was not paid on this amount and on an additional Rs. 10.94 crore received for similar activity, and it issued a show cause notice demanding Rs. 1.74 crore as service tax along with interest and penalty.

The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld the order. Aggrieved by this, the appellant approached the Tribunal.

The appellant’s counsel argued that RSRTC was not an advertising agency and that the payments were reimbursements, not consideration for advertisement services. The counsel submitted that CentralSales Tax at 5% had already been paid on the transactions and that there was no intent to evade tax.

The department’s counsel argued that the activity was taxable under “sale of space or time for advertisement service” as defined in the Finance Act, 1994.

The two-member bench comprising Dr. Rachna Gupta (Judicial Member) and A.K. Jyotishi (Technical Member) observed that RSRTC’s role was limited to displaying government messages on its buses and did not amount to providing advertisement services. The bench pointed out that similar issues had already been decided in RSRTC’s favour in earlier cases and that the department’s invocation of the extended limitation period was unjustified.

The tribunal set aside the impugned order, holding that RSRTC was not liable to pay service tax on the amounts received for displaying government advertisements. The appeal was allowed, and the demand, interest, and penalties were quashed.

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