2017 (8) TMI 548 - AT - Service Tax

Sale of space of time or advertisement service - advertisement on Bus Shelter - The appellants are collecting taxes and license fee in respect of permission granted for putting up advertisement boards on the private properties and not providing such properties for advertisement - Held that - The very fact that the amounts is collected by virtue of an agreement between the two parties shows that they are not in the nature of tax, but are for the nature of income other than tax. If the amount collected for the activities undertaken in this agreements were tax then no such agreement would have been needed. The Nagpur Municipal Corporation holds the right to advertise and M/s. Green Thumb Innovators Private Limited have bought the right to advertise on the bus stand for a specified period. In the above circumstances, it is apparent that the appellant are involved in sale of space for advertisement and are liable to tax in respect of the bus stand - the demand is sustained except for portion, which relates to the Revenue generated on the alleged sale of space from private properties not owned by the appellant. The demand is sustained except for portion, which relates to the Revenue generated on the alleged sale of space from private properties not owned by the appellant. Penalty - Held that - the penalty is set aside by invocation of section 80. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Confirmation of demand of service tax and imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994 by Nagpur Municipal Corporation.

Analysis:
The appeal filed by Nagpur Municipal Corporation contested the demand of service tax and penalties imposed. The appellant argued against the demand made on various income heads related to the sale of space for advertisement services. The first issue revolved around the income generated from granting rights for display advertisements, specifically on bus shelters. The appellant contended that such agreements did not amount to the sale of advertisement space but rather constituted royalty. They highlighted that the corporation's role was to maintain city infrastructure and amenities, not to provide space for advertisement. The appellant's position was supported by a tribunal decision in a similar case.

Regarding the imposition of penalties, the appellant argued that there was no intention to evade taxes, emphasizing their belief that no taxes applied to the collected amounts. They cited a tribunal decision to support their stance. On the other hand, the Assistant Commissioner relied on the impugned order and a High Court decision to assert that the amounts collected were charges for permitting advertisements, not taxes.

The tribunal examined the arguments presented. It found that agreements between the corporation and advertisers indicated a sale of space for advertisements, leading to tax liability. This applied not only to bus stand advertisements but also to street light and other properties. However, in cases where advertisements were permitted on private properties, the tribunal referenced a High Court decision to conclude that no service tax was applicable as the corporation was not providing a taxable service in relation to the sale of advertisement space on those properties. Therefore, the demand for service tax on revenue generated from private property license fees for advertisements was deemed unsustainable.

Ultimately, the tribunal sustained the demand except for revenue generated from alleged sales of space on private properties not owned by the corporation. The imposition of penalties under Sections 76, 77, and 78 was set aside based on a tribunal precedent, invoking Section 80 of the Finance Act. The appeal was partly allowed based on the above determinations.