2008 (1) TMI 270 - AT - Service Tax

Advertisement service leasing out hoardings to advertising agents - appellants are liable to pay ST on the charges collected for leasing out however, if service tax is paid by such advertising agencies on the gross value including cost towards hoarding for exhibiting advertisements from their clients, there was no need for appellants also to pay tax for leasing out the hoardings - matter is remanded to verify whether these agencies have paid tax or not appeal allowed by way of remand

Summary

Issues:
1. Waiver of predeposit and stay of recovery of service tax and penalties imposed under Sections 76 and 77 of the Finance Act.
2. Liability of the appellant for service tax on charges collected for leasing out hoardings to advertising agencies.
3. Interpretation of the clarification issued by the Commissioner of Service Tax regarding the liability to pay service tax in the case of hoarding companies billing advertising agencies.

Issue 1:
The application filed by M/s. SHRIJI ADS, Chennai sought waiver of predeposit and stay of recovery of service tax amounting to Rs.2,02,080/-, a penalty of Rs.1,94,000/- under Section 76 of the Finance Act, and another penalty of Rs.1,000/- under Section 77 of the Act. The delay in filing the appeal was explained due to the demise of the accountant's mother who handled excise matters for the appellant. The Tribunal waived the requirement of predeposit and condoned the delay in filing the appeal, allowing it to proceed for disposal.

Issue 2:
The appellant, engaged in displaying advertisements and leasing hoardings to advertising associates, failed to pay service tax for activities conducted between 2002-2005. The dispute arose regarding the demand for service tax on amounts collected for leasing hoardings to various advertising agencies. The department contended that the activity fell under the definition of taxable service provided by an "advertisement agency." The appellant argued that service tax was not required on charges collected for leasing hoardings to advertising agencies if the agencies had already paid service tax on the gross value, including hoarding costs, to exhibit advertisements.

Issue 3:
The appellant relied on a clarification from the Commissioner of Service Tax, stating that when a hoarding company billed an advertising agency, which further billed clients, the advertising agency was liable to pay service tax. The clarification emphasized that the hoarding company should ensure the advertising agency was registered with Service Tax. The Tribunal noted that the appellant, as an advertising agency, was liable to pay service tax on charges for leasing hoardings to advertising agencies unless the agencies had already paid service tax on the gross value, including hoarding costs. However, the appellant failed to prove that the advertising agencies, who were their clients, had paid the due service tax. The matter was remanded to the original authority for further consideration, allowing the appellant to present evidence supporting their case before a final decision.