2006 (8) TMI 29 - AT - Service Tax

Service Tax Advertising agency Services rendered by appellant do not part take of or include services (designing, conceptualizing, visualizing) normally rendered by an advertising agency Activity of selling of space or time could never be considered as service by an advertising agency, it is service rendered as a Broadcasting Service

Issues Involved:
1. Liability to Service Tax under "Advertising Service" for the period prior to 9-7-2001.
2. Applicability of penalties under Sections 76 and 78 of the Finance Act, 1994.
3. Jurisdiction of the impugned Show Cause Notice and Order-in-Original.
4. Application of extended period under Section 73 of the Finance Act, 1994.
5. Classification of services as "Advertising Service" vs. "Broadcasting Service".

Detailed Analysis:

1. Liability to Service Tax under "Advertising Service" for the period prior to 9-7-2001:
The appellants were held liable for Service Tax on advertising services for the period before 9-7-2001. The scrutiny of returns and balance sheets showed an income of Rs. 5,43,092,000 under "advertisement" from 1997-1998 to 1999-2000. A Show Cause Notice dated 25-7-03 demanded Service Tax of Rs. 2,71,54,600, asserting that this income related to services provided as an advertising agency. The Deputy Commissioner confirmed this demand and imposed penalties.

2. Applicability of penalties under Sections 76 and 78 of the Finance Act, 1994:
Penalties were imposed under Sections 76 and 78 for non-payment of Service Tax. The appellants contested this, arguing they did not render services connected with making, preparation, display, or exhibition of advertisements. However, the Commissioner (Appeals) found that the appellants were engaged in activities connected with the display or exhibition of advertisements, thus falling within the definition of an "Advertising Agency" under Section 65(2) of the Finance Act, 1994.

3. Jurisdiction of the impugned Show Cause Notice and Order-in-Original:
The appellants argued the Show Cause Notice and Order-in-Original were issued without jurisdiction as they had registered at various places and not opted for centralized registration. This plea was not raised during the initial proceedings, and the Commissioner (Appeals) did not consider it valid at this stage.

4. Application of extended period under Section 73 of the Finance Act, 1994:
The appellants contended that the balance sheet is a public document, and suppression of facts based on it is unsustainable. They relied on the Tribunal's decision in M/s. Hindalco Industries Ltd. v. CCE. However, the Commissioner (Appeals) noted that Section 73(a) does not include "suppression of facts" but relates to failure to disclose all material facts wholly or truly.

5. Classification of services as "Advertising Service" vs. "Broadcasting Service":
The appellants argued that their activities should be classified as "Broadcasting Service" and not "Advertising Service." They relied on various case laws and the Tribunal's decision in M/s. Zee Telefilms Ltd., which held that activities related to broadcasting do not fall under "Advertising Service." The Commissioner (Appeals) had found that the appellants advised clients on advertisement formats and timings, but no evidence supported this finding. The Tribunal concluded that the appellants' activities were limited to flashing or displaying advertisements, not making or preparing them, thus falling under "Broadcasting Service" and not "Advertising Service."

Conclusion:
The Tribunal allowed the appeal, setting aside the orders of the lower authorities. It was concluded that the appellants' activities were correctly classified as "Broadcasting Service" and not "Advertising Service." The penalties and demands for the period before 9-7-2001 were thus not sustainable. The decision was pronounced in court on 25-8-2006.

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