2008 (1) TMI 329 - AT - Service Tax

In addition to displaying advertisements, appellants also leased out hoardings to its associates (advertising agencies) held that 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 agencies like the appellants to pay the tax on the leased amounts collected since it is not established that advertising agents had paid the tax, matter is remanded to original authority

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery of service tax and penalties.
2. Applicability of service tax on charges for leasing out hoardings to advertising agencies.
3. Interpretation of the clarification issued by the Commissioner of Service Tax.
4. Requirement for the appellant to establish that advertising agencies paid service tax on the gross value, including the cost towards hoarding.

Issue 1: Waiver of pre-deposit and stay of recovery of service tax and penalties:
The appellant, engaged in rendering advertisement services and leasing out hoardings, filed an application for waiver of pre-deposit and stay of recovery of service tax and penalties imposed under the Finance Act, 1994. The delay in filing the appeal was explained due to a bereavement. After hearing both sides, the requirement of pre-deposit was waived, and the delay in filing the appeal was condoned. The appeal was taken up for disposal.

Issue 2: Applicability of service tax on charges for leasing out hoardings to advertising agencies:
The appellant failed to pay service tax for activities conducted during 2002-2005, specifically for charges collected for hoardings leased out to advertising agencies. The dispute arose regarding whether the appellant was liable to pay service tax on charges collected from advertising agencies for leasing out hoardings to them. The appellant argued that the taxable value for service tax paid by advertisers included charges for preparing and maintaining hoardings or hiring them, based on a clarification by the Commissioner of Service Tax. However, the original authority and Commissioner (Appeals) held that the clarification did not apply to the appellant.

Issue 3: Interpretation of the clarification issued by the Commissioner of Service Tax:
The clarification issued by the Commissioner stated that hoarding companies billing advertising agencies, who then billed clients, did not need to pay service tax. The responsibility to pay tax was on the advertising agency intermediary. The appellant, being an advertising agency, was liable to pay service tax on charges for leasing out hoardings to advertising agencies. The letter also mentioned that the advertising agency intermediary could avail credit of service tax paid towards hiring hoardings.

Issue 4: Requirement for the appellant to establish that advertising agencies paid service tax on the gross value, including the cost towards hoarding:
The department argued that the appellant had not proven that the advertising agencies, who leased hoardings, paid service tax on the taxable value related to hoarding costs. The appellant contended that most associates were registered with the department, and the department should have verified whether the tax was paid by the advertising agencies. The matter was remanded to allow the appellant to provide evidence that the tax due had been received by the department.

In conclusion, the appellate tribunal remanded the case to the original authority for a fresh decision. The appellant was granted an opportunity to present their case, and the appeal was allowed by way of remand to establish whether the advertising agencies had paid service tax on the gross value, including the cost towards hoarding.