2015 (11) TMI 55 - AT - Service Tax

Business Auxiliary service - Advertisment service - Whether services provided by the appellant to M/s. Hero Honda Motors Ltd. through Cricket Celebrities namely Shri. Saurav Ganguly, Shri. Virender Sehwag, Shri. Yuvraj Singh, Shri. Harbhajan Singh and Shri Zaheer Khan is advertising services or otherwise - Held that - All the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are paid the consideration towards advertisement performed by the celebrities. It is also undisputed that the payment consideration towards advertisement performed by the celebrities are received by the appellant, therefore appellant is legally liable for payment of service tax under the category of advertising services during the period involved in the present case. - Commissioner (Appeals) has rightly held that service of celebrities to M/s. Hero Honda Motors Ltd. through appellant is advertising services and accordingly rightly upheld the order-in original Extended period of limitation - Held that - Appellant has not disclosed the advertising services to the department and despite possessing the registration they have not disclosed to the department, the provisions of services and collection of amount there against. In such a situation it is clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was legally liable for penalties under Section 76 and 78. - Decided against assessee.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on the services provided.
3. Invocation of the extended period for demand.
4. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary issue was whether the services rendered by the appellant to M/s. Hero Honda Motors Ltd. through cricket celebrities constituted "advertising services" or "business auxiliary services" (BAS). The appellant argued that their role was limited to introducing cricket players to Hero Honda and that they did not engage in creating advertising content, thus their services should be classified under BAS, which became taxable only from 1/7/2003. However, the tribunal examined the tripartite agreements and concluded that the services provided were indeed advertising services. The agreements clearly indicated that the celebrities were engaged for promoting Hero Honda's products through various media, and the appellant was responsible for the advertising campaigns, making them liable for service tax under the category of advertising services.

2. Applicability of Service Tax on the Services Provided:
The tribunal upheld the findings of the Commissioner (Appeals) that the appellant was liable to pay service tax on the advertising services provided during the period from 1/4/2000 to 30/6/2003. The definition of "advertising agency" under Section 65(3) of the Act includes any service connected with the making, preparation, display, or exhibition of advertisements. The tribunal found that the appellant's activities fell squarely within this definition. The payments received by the appellant from Hero Honda for these services were subject to service tax, and the appellant was responsible for collecting and remitting this tax to the government.

3. Invocation of the Extended Period for Demand:
The tribunal addressed the issue of whether the extended period for demand was rightly invoked. The appellant contended that the show cause notice issued on 26/10/2004 for the period 1/4/2000 to 30/6/2003 was time-barred. However, the tribunal found that the appellant had not disclosed the provision of advertising services to the department despite being registered for service tax. This non-disclosure amounted to suppression of facts, justifying the invocation of the extended period for demand. The tribunal noted that some agreements explicitly mentioned the liability for service tax, further supporting the case for extended period invocation.

4. Imposition of Penalties under Sections 76 and 78 of the Finance Act, 1994:
The appellant argued against the imposition of penalties, citing that the issue involved interpretation of law and there was no suppression of facts. However, the tribunal upheld the penalties imposed under Sections 76 and 78. It was established that the appellant had suppressed the fact that the amounts received were for taxable advertising services. The tribunal referred to the Kerala High Court's decision in the case of M/s Krishna Poduval, which held that penalties under Sections 76 and 78 are distinct and can be imposed simultaneously for separate offenses. Given the suppression of facts and failure to pay service tax, the penalties were deemed justified.

Conclusion:
The tribunal concluded that the services provided by the appellant were indeed advertising services and not BAS. The appellant was liable for service tax on these services for the period from 1/4/2000 to 30/6/2003. The extended period for demand was rightly invoked due to suppression of facts. The penalties under Sections 76 and 78 were upheld. The appeal filed by the appellant was dismissed, and the order-in-original was maintained.

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