2008 (2) TMI 171 - AT - Service Tax

Advertising agency - appellants contend that these advertisement matters were not conceptualized or designed by them held that there can be no demand of service tax on a person in the category of advertising agency unless it is established that such person conceptualized and de signed the advertisement matter displayed on hoardings etc. stay granted

Summary

Issues:
Demand of service tax on the appellant for the period October 1999 to September 2004, imposition of penalties, whether the appellant qualifies as an "advertising agency," and the applicability of case law in determining liability.

Analysis:
The Appellate Tribunal, after examining the records and hearing both sides, noted that the lower authorities demanded service tax exceeding Rs. 8.9 lakhs from the appellant, treating them as an "advertising agency" under Section 65(3) of the Finance Act, 1994 for the specified period. The appellant had displayed advertisement matters of certain companies on hoardings and sign boards during this time, with the contention that they did not conceptualize or design these advertisements themselves but were designed by their clients. The appellant argued that this fact should absolve them from the service tax liability. The Tribunal considered the submissions and case law cited by the appellant's counsel, including decisions such as Star Neon Sign v. CCE, Zodiac Advertisers v. CCE, and Ajanta Fabrication v. CCE, which emphasized that liability for service tax on an "advertising agency" requires proof of conceptualization and design of advertisement matter. As a result, the Tribunal found a prima facie case in favor of the appellant, leading to a waiver of pre-deposit and stay of recovery concerning the service tax and penalty amounts.

This judgment highlights the importance of establishing the role and responsibilities of an entity classified as an "advertising agency" under the relevant tax laws. It underscores the need for concrete evidence demonstrating the conceptualization and design of advertisement matter by the agency to impose service tax liability. The reliance on precedent cases by the Tribunal indicates a consistent interpretation of the law in similar contexts, providing clarity on the criteria for determining tax obligations in the advertising industry. The decision to grant waiver and stay of recovery signifies the Tribunal's recognition of the appellant's argument and the application of legal principles to protect their interests pending further proceedings.