Service Tax Demand on Ad Space Sales Pre-2014 Not Sustainable Under Section 66D(g): CESTAT [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax demand on advertisement space sales prior to 2014 is not sustainable under Section 66D(g) of the Finance Act, 1994.

The assessee M/s. Chhattisgarh Samvad had appealed against the order passed by the Principal Commissioner, in which he confirmed the demand of service tax of Rs. 11,93,60,235 on the appellant, along with interest under Section 75 of the Finance Act, 1994, and imposed an equal amount as penalty under Section 78 of the Act.

Upon examining the facts of the case, the appellant is an associate organization of the Chhattisgarh Government’s Public Relations Department, tasked with handling advertising for its various schemes. Government departments send requests, and the appellant’s in-house team creates content like posters, hoardings, and ad films. Once the designs are approved, they get published through selected partner agencies.

The appellant collects money from the client department for a consolidated sum towards the amounts charged by the empanelled agencies, service tax on their services, and 10% or 15% as its service charges and service tax on its service charges, and pays the empanelled agencies for their services.

When the appellant’s records for the period 1.4.2011 to 30.6.2015 were audited, it was observed that the appellant had not paid service tax on certain services which it had rendered and also that it had collected certain sums from the clients as representing service tax but did not deposit the amounts as service tax.

A show cause notice was issued, and later on, the impugned order was passed.

In this appeal, mainly 4 grounds were raised by the appellant, and one of the grounds was with respect to the demand of service tax on the sale of space for advertisements.

The assessee’s counsel submitted that the selling of space or time for advertisement as defined under section 65(105) (zzzm) of the Act was not taxable before 1.7.2012. After 1.7.2012, selling of space or time slots for advertisements other than advertisements broadcast by radio or television were exempted as per section 66D (g) of the Act until 1.10.2014. It was further submitted that after 1.10.2014, the appellant has been paying service tax.

The appellant’s counsel explained that under the negative list regime (Section 66D), service tax was not payable on listed services. S.No. (g) of this list reads as follows:

Before 2014

“(g) selling of space or time slots for advertisements other than advertisements broadcast by radio or television”.

After 2014

“(g) selling of space for advertisements in print media”

The tribunal noted the demand will not be sustained as the entire demand relates to ad space sales before 2014, which were exempt, and the appellant has been paying service tax since 2014. The bench set aside the demand and directed the Commissioner to verify.

Delhi CESTAT, comprising Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), partly allowed the assessee’s appeal.

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