2023 (9) TMI 1417 - HC - Service Tax

Liability of service tax - advertising services - HELD THAT - It becomes pertinent to note that the engagement of the sub-contractors was solely for the purposes of discharge of its contractual obligations. The sub-contractors had not undertaken the work at the behest of the principal party which had awarded the contract to the petitioner. The appeal fails and shall stand dismissed.

Summary

Issues involved:
The appeal seeks to set aside the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dated 03 August 2018. The main issue revolves around the service tax liability concerning advertising services.

Service Tax Liability for Advertising Services:
The appellant engaged outsourced agencies for advertising services related to toilet blocks, bus queue shelters, and utility services. The appellant contested the levy of service tax, arguing that the outsourced agencies were not its clients and the advertisements were not for its benefit. However, CESTAT observed that the definition of advertising agency under Section 65(3) of the Act includes services related to the making, preparation, display, or exhibition of advertisements. The CESTAT concluded that the appellant, as the main service provider, was liable for service tax on payments received from the advertising agencies, even if the agencies had already paid service tax to their clients. The CESTAT upheld the demand for service tax, stating that the appellant was equally a service provider for displaying the advertisements.

Conclusion:
After considering the submissions and reasoning provided by CESTAT, the High Court found no merit in the challenge raised by the appellant. The engagement of sub-contractors was deemed to be solely for fulfilling contractual obligations, and not at the behest of the principal party. Consequently, the appeal was dismissed.