2017 (12) TMI 167 - AT - Service Tax

Levy of service tax - Advertising Service - whether services taxable under the category of sale of space or time for advertisement service or not? - Held that - In the present case there are two categories of activities; one-PCMC is providing their own property such as land, building to the advertising agency for advertisement purpose, in this case activity clearly covered under the aforesaid provisions, therefore whatever space of land, building was provided by PCMC to the advertising agency it is liable for service tax - However in a case where PCMC is charging fees/taxes by giving permission for providing space by private parties to advertising agency is a statutory levy for which PCMC has got power from the provisions under the constitution. Therefore such levies will not amount to provision of any service. There is no bifurcation of both types of receipts, therefore matter needs to be remanded back to the Adjudicating authority for correct quantification of demand - Appeal allowed by way of remand.

Summary

Issues:
1. Taxability of activities conducted by the appellant under the category of 'Advertising Service'.
2. Applicability of service tax liability on fees/charges collected by the appellant for granting permission to use space for advertisements.
3. Time bar defense raised by the appellant.
4. Imposition of penalty under Sections 76 and 78.

Issue 1: Taxability of Activities:
The case involved the appellant, a municipal corporation, collecting fees for granting permission to use space for advertisements. The service tax department contended that these activities fell under the category of sale of space or time for advertisement service, leading to a demand of service tax amounting to a significant sum. The adjudicating authority upheld the tax liability and imposed penalties and interest. The appellant argued that as a government corporation, the activities were part of its sovereign functions and used for societal welfare, thus not constituting provision of service. The appellant relied on a Board Circular and a Gujarat High Court decision to support their position. The Tribunal analyzed the provisions of Section 65(105)(zzzm) of the Finance Act, 1994, and differentiated between activities where the appellant provided its property for advertisements and where it charged fees for private parties' spaces. The Tribunal remanded the case for correct quantification of demand, emphasizing the need for a clear distinction between the two types of activities.

Issue 2: Applicability of Service Tax on Fees/Charges:
The Tribunal observed that activities where the appellant provided its own property for advertisements fell within the taxable service definition under Section 65(105)(zzzm). However, when the appellant charged fees or taxes for granting permission to private parties to provide space for advertisements, it constituted a statutory levy authorized under the constitution, not a provision of service. The Tribunal referred to a Gujarat High Court decision to support this interpretation, stating that such fees and taxes were not subject to service tax. The lack of bifurcation in the impugned order led the Tribunal to remand the case for proper quantification of the demand.

Issue 3: Time Bar Defense:
The appellant raised a defense of the demand being time-barred due to a genuine belief, based on legal precedents, that the services in question were not taxable. They argued that there was no suppression of facts, justifying the non-invocation of the longer demand period. The Tribunal did not provide a specific ruling on this defense in the summary provided.

Issue 4: Imposition of Penalty:
The appellant contested the imposition of penalties under Sections 76 and 78, arguing that they were unwarranted. However, the Tribunal did not provide a detailed analysis of the penalty imposition in the summary provided, leaving the final decision on this issue unclear.

In conclusion, the Tribunal remanded the case back to the adjudicating authority for re-quantification of the demand, emphasizing the need for a clear differentiation between activities subject to service tax and those constituting statutory levies. The judgment highlighted the importance of correctly applying the provisions of the Finance Act, 1994, in determining the taxability of services provided by government entities like municipal corporations.