2004 (10) TMI 9 - AT - Service Tax

Service Tax Advertising Agency Conceptualization and visualization and designing of advertisement not covered under the definition of advertising agency

Summary

Issues:
Service tax liability on rental income from advertisements displayed on leased site.

Analysis:
The judgment revolves around the service tax liability on the rental income received by the respondents from displaying advertisements on their leased site. The department had demanded service tax on the amounts collected from two parties, PEPSICO and LAQSHYA, treating the respondents as an Advertising Agency. The original authority confirmed the demands, but an appeal to the Commissioner (Appeals) resulted in a favorable decision for the respondents, leading to the Revenue's present appeal.

The Revenue's appeal challenged the service tax specifically on the rent received from PEPSICO, not LAQSHYA. The lease agreement with PEPSICO revealed that the advertisements displayed on the billboard were designed by PEPSICO, indicating that the respondents were not involved in the conceptualization or designing process. This fact aligned with a Trade Notice exempting printers and publishers of directories from service tax unless they engaged in designing activities. The Tribunal's decision in Contact Advertising Agency case emphasized that service tax applied only to agencies involved in conceptualizing, designing, or preparing advertisements for advertisers. Similar decisions in other cases supported the notion that merely displaying advertisements for rental charges did not attract service tax.

Ultimately, the Tribunal affirmed the impugned order in favor of the respondents, rejecting the Revenue's appeal based on the lack of involvement by the respondents in designing the advertisements displayed on their site.