2015 (11) TMI 227 - AT - Service Tax

Advertising Agency service or sponsorship service - Import of service - agreements with various sports bodies located abroad and not having office in India - whether the service received by the appellant under various agreements fell under advertising agency service - Held that - A perusal of the rights granted to the appellant under the sponsorship agreements reveals that these are agreements for sponsorship of various sports events and not for receiving advertising agency service. - Merely because there is a mention of expression advertising material and the same is defined in the agreement, it cannot be said that GCC has provided advertising agency service to the appellant. The service rendered by sports bodies abroad could possibly be covered under the head of Sale of Space or Time for Advertisement and Sponsorship Services , which became taxable with effect from 01.07.2006. However, taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. As such, it is clear that what is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and not simply providing of a place or space to the advertiser. The expression display or exhibit does not mean the physical act of display and exhibit, but relates to the services rendered, as an expert body, to the client, for the purposes of display or exhibit. The same may involve the expertise of the provider of the services to advise the client as to in which manner, the advertisement should be displayed i.e. whether in the newspaper or on TV channel or by way of hoardings or a audio/video advertisement in air or any other medium or at what point of time the same should be exhibited. We find that no such expert services are being provided by the appellant in the present case. They are merely canvassing their clients to make utilize of the space available with them for the purposes of advertisement of their product during the course of matches, which are going to be telecasted and by which they can popularize their products. As such, the activities amount to sale of space and not as regards advertisement. - there was no Advertising Agency Service received by the appellant from abroad except in respect of dealer advertisements - Demand set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of services under "Advertising Agency Service."
2. Applicability of service tax on sponsorship agreements.
3. Taxability of dealer advertisements in Bangladesh and Sri Lanka.
4. Validity of disposing of appeals during stay application hearings.

Detailed Analysis:

1. Classification of Services under "Advertising Agency Service":

The core issue was whether the services received by the appellant under various agreements with sports bodies abroad fell under "Advertising Agency Service" as defined under Section 65(3) of the Finance Act, 1994. The appellant contended that the agreements were for sponsorship of sports events, not for receiving advertising agency services. The agreements granted global partnership rights, including naming rights, logo display, and promotional activities, which did not constitute advertising agency services. The Tribunal agreed, noting that the rights granted were for sponsorship, not for services connected with the making, preparation, display, or exhibition of advertisements.

2. Applicability of Service Tax on Sponsorship Agreements:

The Tribunal examined the definition of "Advertisement" and "Advertising Agency" under the Finance Act, 1994, and concluded that the sponsorship agreements did not fall under these definitions. The agreements were for granting rights related to sponsorship, not for providing advertising agency services. The Tribunal referenced the CESTAT judgment in the case of BCCI Vs. CST, Mumbai, which supported the view that selling television rights or providing space for advertisements did not constitute advertising agency services.

3. Taxability of Dealer Advertisements in Bangladesh and Sri Lanka:

The appellant acknowledged that the amounts pertaining to dealer advertisements in Bangladesh and Sri Lanka (Rs. 72,157/- and Rs. 98,171/-) were liable to tax under advertising agency services. Consequently, the Tribunal upheld the demand for these amounts along with interest and penalties.

4. Validity of Disposing of Appeals During Stay Application Hearings:

The Revenue contended that appeals should not be disposed of during stay application hearings. However, the Tribunal found no statutory provision or judicial precedent prohibiting the disposal of appeals if both parties consented. The Tribunal cited various judgments but noted that none established a principle against disposing of appeals during stay hearings. Therefore, the Tribunal proceeded with the final disposal of the appeals.

Conclusion:

The Tribunal concluded that the services received by the appellant from sports bodies abroad did not fall under "Advertising Agency Service" except for the dealer advertisements in Bangladesh and Sri Lanka. The impugned demand, except for Rs. 1,70,328/-, was set aside along with related interest and penalties. The appeals were allowed on these terms, affirming the appellant's contention that the sponsorship agreements were not taxable as advertising agency services.