2012 (4) TMI 133 - AT - Service Tax

Appellants entered into a contract for investing into the construction of BOOT Projects - permission to put up specified number of sky-signs, unipoles, kiosks, lollipops etc. at different parts of Jalandhar-Kaparthala railway over bridge and also rent certain shops under the said railway over bridge - Such places given to the parties under the contract were being used by them for putting advertisements or further allotting the same to the advertisers - service tax demand was confirmed under the category of Sale of Space and Time for advertisement services assessee contented that there exists an agreement with the agency to spend a sum on the Jalandhar-Kapurthala railway line and in lieu of that obtained sole rights to display unipoles and sky signs with add-space - further submits that the applicants granted spaces to the agencies to put up structures and not space to advertise any products or services - he submits that the amount collected by the Municipal Corporation is on account of advertisement tax - the said parties are registered with the service tax department - Held that - there is difference of opinion between Member (Tech) and Member (Judicial), the registry of the Tribunal is directed to place the case papers before Hon ble President for nominating a third Member for decision

Summary

Issues Involved:
1. Applicability of service tax under Section 65(105)(zzzm) of the Finance Act, 1994.
2. Nature of advertisement tax collected by the appellant.
3. Requirement of pre-deposit under Section 35F of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Applicability of Service Tax under Section 65(105)(zzzm) of the Finance Act, 1994:

The Commissioner confirmed a service tax demand against the appellants based on two Show Cause Notices (SCNs), asserting that the activities of the appellant fell under the category of "Sale of Space and Time for Advertisement Services" as per Section 65(105)(zzzm) of the Finance Act, 1994. The appellants had entered into contracts with various parties, including M/s Shri Durga Publicity Service, for the construction of Built, Operate, Own, and Transfer (BOOT) projects. In return, these parties were permitted to put up advertising structures and rent shops under the constructed railway over bridge. The lower authority held that these activities amounted to providing taxable advertisement services.

The appellant argued that the collected amount was advertisement tax under the Punjab Municipal Corporation Act, 1976, and not for advertising services. They contended that the space was granted for erecting structures, not directly for advertising. The revenue, however, maintained that the space granted for advertisements fell within the definition of taxable services.

The Tribunal noted that the appellants had financed the project and obtained rights to place advertisements for 11 years. The Commissioner's view was that the amount charged was not advertisement tax but rent for land or poles for advertisements. The Tribunal, at a prima-facie stage, agreed with the adjudicating authority that the appellant's activity involved renting space for advertisements, thus attracting service tax.

2. Nature of Advertisement Tax Collected by the Appellant:

The appellants contended that the amount collected was advertisement tax, a statutory tax under the Punjab Municipal Corporation Act, 1976. They argued that the agreements were licensing agreements, not sales of advertising space. The revenue countered that the amount was consideration for the service of providing advertising space.

The Tribunal examined the agreements and noted that the appellants had granted permission to erect advertising structures and collected amounts labeled as advertisement tax. The Commissioner held that the amounts were not advertisement tax but rent for advertising space. The Tribunal found that the agreements and the conduct of the parties indicated that the amounts collected were indeed for renting advertising space, not merely a statutory tax.

3. Requirement of Pre-deposit under Section 35F of the Central Excise Act, 1944:

The Tribunal considered whether the appellants should be required to make a pre-deposit for the appeal to be heard. The Commissioner had imposed penalties and confirmed the service tax demand, asserting suppression of facts by the Municipal Corporation.

The Tribunal, while examining the prima-facie case, found that the appellants had a reasonable argument regarding the nature of the collected amounts. Given the overall circumstances and the partial bar by limitation on subsequent SCNs, the Tribunal directed the appellants to deposit Rs. 50 lakhs out of the total confirmed demand of Rs. 1,25,23,555/-. The balance amount of duty and penalties was waived, and recovery was stayed during the appeal's pendency.

Separate Judgment by Member (Technical):

The Technical Member disagreed with the Judicial Member, recording a separate order. He emphasized that the agreements were for licensing, not selling advertising space. He noted that the unipoles, kiosks, skysigns, lollipops, etc., were owned by M/s Shri Durga Publicity and not the appellant. The Technical Member held that the appellant was not providing a taxable service under Section 65(105)(zzzm) and that the advertisement tax collected was not consideration for any service. He concluded that the department had no prima-facie case and waived the requirement of pre-deposit.

Decision by Third Member:

The Third Member addressed the points of difference between the Judicial and Technical Members. He concluded that the activity of the appellant was not prima-facie covered by Section 65(105)(zzzm) for service tax. The advertisement tax collected could not be considered as consideration for a service. He waived the requirement of pre-deposit for hearing the appeal and granted a stay on the collection of dues during the appeal's pendency.

Conclusion:

The Tribunal directed the case to be placed before a regular Division Bench for appropriate orders, with the requirement of pre-deposit waived and a stay on the collection of dues granted during the appeal's pendency.