2005 (7) TMI 6 - AT - Service Tax

Advertisement (i) Display/Exhibition is covered (ii) applicable even if provided to state /central govt. (iii) Hiring and displaying ads is taxable but hiring and sub-hiring the same is not taxable

Summary

Issues:
1. Liability to pay service tax on advertising services provided to State/Central Government departments.
2. Demand of service tax, interest, and penalties raised against the appellant.
3. Interpretation of the definition of "advertisement" and "advertising agency" under the Finance Act, 1994.
4. Applicability of service tax on services provided to Government departments for general awareness programs.
5. Bar of limitation for demanding service tax.
6. Calculation of service tax based on the gross amount charged by the advertising agency.

Analysis:

1. The appellant, registered as an advertising agent, provided advertising services to Government departments for general awareness programs. The dispute arose regarding the liability to pay service tax on these services, which the appellant failed to discharge during the period in question.

2. A show cause notice was issued to the appellant, demanding service tax under Section 73(a) of the Finance Act, 1994, along with interest and penalties for non-payment and failure to file correct returns. The Assistant Commissioner upheld the demand and imposed penalties, which were also confirmed by the Commissioner (Appeals), leading to the present appeal.

3. The Tribunal analyzed the definition of "advertisement" and "advertising agency" as per Sections 65(2) and 65(3) of the Finance Act, 1994. It concluded that the appellant's activities fell within the scope of advertisement services, as clarified by relevant Service Tax Circulars, despite the nature of the advertisements being for public awareness.

4. The Tribunal distinguished previous cases cited by the appellant, emphasizing that the services provided to Government departments constituted advertisements, thereby attracting service tax liability. The argument that the activity did not meet the definition of advertisement was dismissed.

5. The issue of limitation for demanding service tax was raised by the appellant, but the Tribunal held that the appellant's failure to disclose the services provided to Government departments and the abrupt cessation of tax payment justified invoking the longer period of limitation.

6. Regarding the calculation of service tax, the Tribunal noted that certain expenses incurred by the appellant were not includible in the taxable service value as per relevant clarifications. The matter was remanded for re-quantification of tax, leaving the decision on personal penalty imposition to the adjudicating authority.

Therefore, the appeal was disposed of with directions for re-calculation of service tax and further proceedings on penalty imposition based on the correct taxable service value.