2017 (8) TMI 1117 - AT - Service Tax

Advertisement Agency Service - the appellant rents the space for display of advertisement at various places of the theatre complex in the form of hoardings, neon signs, cinema tickets etc - department was of the view that the activities undertaken by the appellant would fall under the category of Advertisement Agency Service and that were liable to pay service tax - sale of space or advertisement - Held that - what is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and not simply providing of a place or space to the advertiser. The expression display or exhibit does not mean the physical act of display and exhibit, but relates to the services rendered, as an expert body, to the client, for the purposes of display or exhibit. The same may involve the expertise of the provider of the services to advise the client as to in which manner, the advertisement should be displayed i.e. whether in the newspaper or on TV channel or by way of hoardings or a audio/video advertisement in air or any other medium or at what point of time the same should be exhibited. No such expert services are being provided by the appellant in the present case. They are merely canvassing their clients to make utilize of the space available with them for the purposes of advertisement of their product during the course of matches, which are going to be telecasted and by which they can popularize their products. As such, the activities amount to sale of space and not as regards advertisement. The Board vide Circular No. 78/8/2004-ST dated 23.3.2004 has clarified that in case of free commercial time, selling the time allotted does not fall within the purview of Advertisement Service since the said activity is not connected to making, preparation, display or exhibition of advertisement. The Board clarified that such activity will be covered only under Space Selling and not under Advertising Agency - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activities undertaken by the appellant fall under the category of 'Advertisement Agency Service' and are liable for service tax.
- Whether the appellant's activities involve providing expert services in making, preparing, displaying, or exhibiting advertisements.

Analysis:

1. The appellants, engaged in screening movies at a cinema theatre complex, were alleged to be liable for service tax for the period from 2001-2007 for renting space for advertisement display. The department issued a show cause notice, confirmed the demand, and imposed penalties, leading to this appeal.

2. The appellant contended that they only provided time slots and space for displaying advertisements without involvement in developing advertisement content. The activities included screening advertisement clippings, slides, glow signs, branding menu boards, movie tickets, and permitting product displays.

3. The appellant argued that their activities were not taxable during the relevant period and that they started discharging service tax from 1.5.2006 when the activity of selling space or time for advertisement was brought under the tax net. They relied on a Tribunal decision for support.

4. The department argued that the appellant's activities fell within the definition of an advertising agency, emphasizing the definition of advertising agency and advertisement.

5. The Tribunal examined the nature of the activities undertaken by the appellant, highlighting that they did not engage in designing or developing advertisement content but only provided space and time for advertisement display.

6. The Tribunal referenced a High Court judgment and emphasized that what is taxed is the planning and expertise involved in making, preparing, displaying, or exhibiting advertisements, not merely providing space. The Tribunal clarified that the expertise of an advertising agency is crucial in determining how an advertisement should be displayed.

7. Referring to relevant circulars, the Tribunal concluded that selling time allotted for free commercial time does not fall under Advertisement Service but under Space Selling. The Tribunal found the demand for service tax unsustainable based on previous decisions and set aside the impugned order, allowing the appeal.

8. The Tribunal's decision was based on the distinction between providing space for advertisement and the expert services involved in the making and displaying of advertisements, ultimately ruling in favor of the appellant and providing consequential relief.