2011 (5) TMI 703 - AT - Service Tax

Demand of serviced tax under business auxiliary service - Promotion or marketing of service provided by the client versus broadcasting service - held that - once it is recognized that the Appellant is in his business, which is of delivery of signals, and is promoting his own business by his promotional activities these rulings become applicable - Appellant has made out a strong case in their favour to be treated on par with other players like theatre owners who deliver visual media to the consumers on the basis of a revenue share agreement - pre-deposit of the demands waived - stay collection of demands made by the impugned order-in-original during the pendency of the Appeal

Issues Involved:
1. Classification of service provided by the appellant.
2. Applicability of revenue sharing agreements.
3. Determination of whether the appellant's activities constitute "promotion or marketing of service."
4. Limitation period for issuing the demand.

Detailed Analysis:

1. Classification of Service Provided by the Appellant:
The appellant argued that their service should be classified under "Broadcasting Services" as defined in section 65(14) of the Finance Act, 1994, post-amendment in 2005. They contended that prior to 16-6-2005, their service was neither covered under "broadcasting service" nor "business auxiliary service." The Tribunal noted that the definition of "broadcasting services" was expanded in 2005 to include activities such as collecting broadcasting charges or permitting rights to receive communication. The appellant cited Circular No. B-1/6/2005-TRU and case laws (Zee Telefilms Ltd. v. CCE and Glaxo Smithkline Pharmaceuticals Ltd. v. CCE) to support their argument that services brought into the tax scope from a specific date imply no prior tax liability.

2. Applicability of Revenue Sharing Agreements:
The appellant asserted that their agreement with M/s. ESS was a revenue-sharing agreement, indicating a principal-to-principal relationship rather than a service provider-client relationship. They cited Circular No. 109/03/2009/STR, which clarified that revenue-sharing agreements do not constitute service provision under "Business Support Service." The Tribunal found that the appellant's situation was similar to that of a theatre owner and film distributor, where both parties operate independently for their own business purposes.

3. Determination of Whether the Appellant's Activities Constitute "Promotion or Marketing of Service":
The Revenue claimed that the appellant's activities fell under "business auxiliary service" as they involved the promotion or marketing of services provided by ESS. The appellant countered that their promotional activities were for their own business, not for ESS. They relied on case laws (Euro RSCG Advertising Ltd. v. CCE&ST, Precot Mills Ltd. v. CCE, Rolls Royce Industries Power (I) Ltd. v. CCE, Dalhousie Institute v. Asstt. Commissioner, Service Tax Cell, and Saturday Club Ltd. v. Asstt. Commissioner, Service Tax Cell) to argue that their activities did not constitute service to ESS. The Tribunal agreed, noting that the appellant's promotional activities were for their own business, similar to how theatre owners promote films for their own benefit.

4. Limitation Period for Issuing the Demand:
The appellant argued that the demand was issued following an audit objection, and extended limitation could not be invoked in such cases. They cited case laws (Aditya College Competitive Examination v. CCE, Vikram Ispat v. CCE, and Cambay Organics (P.) Ltd. v. CCE) to support their argument. The Tribunal did not delve deeply into this issue, as they found the appellant had a strong case on other grounds.

Conclusion:
The Tribunal concluded that the appellant's service was not covered under "business auxiliary service" prior to 16-6-2005. They found that the revenue-sharing agreement indicated a principal-to-principal relationship, and the appellant's promotional activities were for their own business, not for ESS. Consequently, the Tribunal waived the requirement of pre-deposit for the appeal and stayed the collection of demands during the appeal's pendency.

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