2016 (5) TMI 748 - AT - Service Tax

Classification - Advertisement services or Business Auxiliary services - all the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are paid the consideration towards advertisement performed by the celebrities. - Period involved is 1-4-2000 to 30-6-2003 - Appellant submitted that they are not advertising agency and their services were rightly classifiable under Business Auxiliary Services which became taxable only w.e.f. 1-7-2003 therefore on the BAS, since there was no tax liability prior to 1-7-2003 no demand can be raised since the services admittedly covered under BAS and they have been paying service tax under such head w.e.f. 1-7-2003. Held that - from the tripartite agreement, it clearly shows that It is also undisputed that the payment consideration towards advertisement performed by the celebrities are received by the appellant, therefore appellant is legally liable for payment of service tax under the category of advertising services during the period involved in the present case. As regard the contention of the appellant that the services are of promotion of sale of goods of M/s. Hero Honda Motors Ltd. and therefore the same is classified as Business Auxiliary Service which became taxable only from 1-7-2003, we do not agree with this contention for the reason that services of celebrities are nothing to do with the promotion of the sale whether sale is promoted or not, the service of celebrities is confined to display of brand and advertise the product of M/s. Hero Honda Motors Ltd., therefore, services are clearly of advertising services and not of BAS. By applying the decision of Madras High Court in the case of of M/s. Adwise Advertising Pvt. Ltd. Vs. Union of India 2001 (3) TMI 1 - HIGH COURT (MADRAS) , locating or selecting a particular media would be a Service , by the advertising agency in relation to the advertisements . Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibility for paying the service tax on the taxable advertising services, rendered by them during 1-4-2000 to 30-6-2003. Imposition of penalty - Section 76 and 78 of that Act - Held that - by applying the decision of Hon ble Kerala High Court in the case of Asst. CCE & Ors. Vs. Krishna Poduval & Ors. 2005 (10) TMI 279 - Kerala High Court , despite providing taxable advertising services, during the period 1-4-2000 to 30-6-2003, they had suppressed the fact that the amount realized by them was for the said taxable services provided by them during the relevant period. Therefore, penalty is imposable as a person who is guilty of suppression deserve no sympathy. Invocation of extended period of demand - Non-disclosure of advertising services to the department and despite possessing the registration also not disclosed to the department, the provisions of services and collection of amount thereagainst - Held that - it is a clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was legally liable for penalties under Sections 76 and 78. The impugned order does not require any interference, hence the same is maintained. - Decided against the appellant

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on the services provided.
3. Invocation of the extended period for demand.
4. Imposition of penalties under Sections 76 and 78.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary issue was whether the services provided by the appellant to M/s. Hero Honda Motors Ltd. through cricket celebrities constituted "advertising services" or "business auxiliary services" (BAS). The appellant argued that their role was limited to introducing cricket players to Hero Honda and did not involve advertising services. They contended that their services should be classified under BAS, which became taxable only from 1-7-2003. However, the tribunal concluded that the services provided fell under the definition of "advertising services" as per Section 65(3) of the Act. The tripartite agreements clearly showed that the cricket players were engaged through the appellant for advertising and promoting Hero Honda's products. Therefore, the services were classified as advertising services and not BAS.

2. Applicability of Service Tax on the Services Provided:
The appellant received Rs. 5,26,70,587/- for advertising services but did not pay service tax on this amount. The tribunal upheld the demand for service tax amounting to Rs. 27,46,030/- along with interest and penalties. The appellant's argument that the services were not advertising services and hence not taxable before 1-7-2003 was rejected. The tribunal noted that the services involved the display and advertisement of Hero Honda's products by the cricket players, which clearly fell under the category of advertising services.

3. Invocation of the Extended Period for Demand:
The tribunal addressed the issue of the extended period for demand due to suppression of facts. The appellant argued that the show cause notice issued on 26-10-2004 for the period 1-4-2000 to 30-6-2003 was time-barred. However, the tribunal found that the appellant had not disclosed the provision of advertising services to the department despite being registered. This non-disclosure constituted suppression of facts, justifying the invocation of the extended period for demand.

4. Imposition of Penalties under Sections 76 and 78:
The appellant contended that the penalties under Sections 76 and 78 were not warranted as the issue involved interpretation of law. The tribunal disagreed, stating that the appellant had suppressed facts regarding the taxable advertising services provided. The tribunal cited the Kerala High Court's decision in the Krishna Poduval case, affirming that penalties under Sections 76 and 78 are distinct and can be imposed concurrently. The tribunal upheld the penalties, emphasizing that the appellant's actions warranted no leniency.

Conclusion:
The tribunal upheld the Order-in-Appeal and Order-in-Original, confirming the service tax demand along with interest and penalties. The appeal was dismissed, and the tribunal found no merit in the appellant's arguments regarding the classification of services, applicability of service tax, limitation period, and imposition of penalties. The tribunal's decision was based on a detailed examination of the tripartite agreements and the nature of the services provided, which clearly constituted advertising services.

← Previous Next →