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TMI Blog2016 (5) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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, rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax on the taxable value received for advertising services. A show cause notice bearing F. No. V/STS/GR. IX/DN-II/1479/2004, dated 26-10-2004 was issued to the appellant on the ground that they had failed to pay service tax of ₹ 27,46,030/- on the taxable value of ₹ 5,26,70,587/- received by them during 1-4-2000 to 30-6-2003 for advertising services. The said show cause notice had been adjudicated vide Order-in-Original dated 30-12-2008 wherein it was held that the tripartite agreements between the appellant, M/s. Hero Honda Motors Ltd. and the cricket players was for endorsing the products and brand of M/s. Hero Honda Motors Ltd. by the cricket players as models and advertised by the appellant through various mediums e.g. television, radio, displaying the product on the cricket bats etc. throughout the contract territory during the contract period only. It was also held that the appellant even if they claim they are not known as an Advertising Agency, had provided services connected with display of advertisements during 1-4-2000 to 30-6-2003 as per definition under Section 65(3) of the Act, and not business auxiliary services which became taxable only w.e.f. 1-7-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Ltd. v. Commissioner [2006 (3) S.T.R. 711 (Tri.) = 2005 (188) E.L.T. 171 (Tribunal)]. With regard to limitation he submits that show cause notice for the period 1-4-2000 to 30-6-2003 has been issued on 26-10-2004 i.e. after more than one year, therefore show cause notice is time bar. He submits that appellant was already registered under the head of Event Management Service way back in 2002 and the BAS was included in the registration and they started paying service tax from 1-7-2003 therefore appellant was very much registered and the activity was known to the department. Therefore there is no suppression of facts on the part of the appellant; hence extended period could not have been invoked. In his support he placed reliance on following judgments : (a) Essel Packaging Ltd. v. CCE [2000 (117) E.L.T. 466 (Tri.)]. (b) Polymers Transmission Products v. CCE [2000 (117) E.L.T. 119 (Tri.)]. He further submits that the issue in the present case involves interpretation of law, therefore the penalties imposed under Sections 76 and 78 are not correct. In support of this submission he placed reliance on following judgments : (a) Century Cement v. CCE [2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --- (d) to a client, by an advertising agency in relation to advertisement in any manner. In the instant case to conclude whether the service of advertising services or otherwise, it is necessary to go through the relevant clauses of the tripartite agreements between appellant, M/s. Hero Honda Motors Ltd. and Cricket players. Relevant paras of said agreements are extracted below : Agreement of Shri Sourav Ganguly This agreement made this day of 21st June, 2002 at New Delhi between M/s. Hero Honda Motors Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi (hereinafter as Hero Honda , which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the first part. And M/s. PERCEPT D MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as Percept , which expression shall, unless repugnant to the context or meaning thereof, be deemed to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as Percept D Mark , which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the First Part. Mr. Virender Sehwag, residing at RZ-145, Laxmi Garden, Nazafgarh, New Delhi-43 (hereinafter referred to as the Model ) of the Second Part. M/s. Hero Honda Motors Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, 110057 (hereinafter as referred to as Client , which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the THIRD PART. And Collage Sports Management, partnership firm and having its office at 56, Community Centre, East of Kailash, New Delhi-1100065 (hereinafter referred as Collage Sports Management which expression shall include its successors and assigns) of the FOURTH PART. WHEREAS Percept D Mark has been appointed by the Client as the agency in connection with the promotion of the products which includes motorcycles, scooters and moped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising campaigns covering Television, Prizes, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products and to perform his obligations under this Agreement as set out in schedule hereto (the Services ). - Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Model s professional and other commitments, provided the Model shall co-operate with the Client to in the co-ordination of his schedule with the Client s need for his Services, and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for the Model. It is clarified for the avoidance of doubt, that days of availability of the Model shall be exclusive of travel time and one full shooting day shall mean a maximum ten (10) hours at the destination city where the shooting shall take place, i.e. from the time of arrival to the time of departur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal material provided by or on behalf of Percept D Mark/ The Client in relation to the advertisement or promotion of the Products. Agreement of Shri Yuvraj Singh This agreement made this day of 1st Sep., 2002 at New Delhi between M/s. Hero Honda Motors Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi-110057 (hereinafter as Hero Honda , which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the first part. And M/s. Percept D mark (India) Private Limited, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as Percept , which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the Second part. And Mr. Yuvraj Singh, an individual residing at 5904, Duplex Houses, Modern Housing Complex, Mani Majra, Chandigarh-160101 (Hereinafter referred as YUVRAJ ) of the Third Part. WHEREAS (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as PDM , which expression include its successors and assigns) of the First Part. And Mr. Yuvraj Singh, an individual residing at 5904, Duplex Houses, Modern Housing Complex, Mani Majra, Chandigarh-160101 (hereinafter referred to as The Model ) of the Second Part. And M/s. Hero Honda Motors Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi - 110057 (hereinafter as referred to as Client ) of the THIRD PART. WHEREAS PDM has been appointed by the Client as one of the agencies, the agency in connection with the promotion or sales and publicity of their products namely Hero Honda motorcycles. AND WHEREAS the model has agreed to act as a model in connection with the promotion of the Products of The Client as defined herein on terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows : In this Agreement, the following words shall have the following meanings : (a) The Model Identifications shall mean any words and/or symbols and/or photographic and/or graphic representations, which iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of conceptualizing, creating and producing advertising campaigns covering Television, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products. (b) These Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for The Model . 8. CREATIVE APPROVAL The Model has the right of reasonable approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of The Model and to words spoken by or attributes to him, and provided further that The Model shall not unreasonably withhold his approval. PDM shall send two (2) copies of the storyboard in print form for approval to T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w) on terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows : 1. DEFINITIONS : In this Agreement the following words shall have the following meanings : (a) The Model Identifications shall mean any words and/or symbols and/or photographic and/or graphic representations, which identify the the Model and/or his name and likeness, in connection with the Endorsed Product, and shall include, without limitation, audio recordings, visual recordings, image, caricature, sobriquet, autograph, lieness, portrait, voice, silhouette of the Model. (b) Product shall mean any model of two wheelers manufactured by the Client. (c) Endorsed Products shall mean the Product of The Client , which is advertised or promoted in connection with the Model Identification. (d) Contract Territory shall mean the Republic of India. (e) Contract Period shall mean a period of (12) months commencing from 28-10-2002 and concluding on 27-10-2003. (f) Promotional Period shall mean the material, based on the Model Identification Rights, created and/or coming into existence pursuant to the Model rendering Services as contemplated u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in any other name as may be advised by the Agent/Model from time to time, and drawn on such Indian bank account as may be designated by the Agent/Model or any other party in whose favour the DD will be made. Time is of the essence in relation to all payments under this Agreement. 6. SERVICES OF THE MODEL (a) The Model agrees to be available for eight (8) days during the Contract Period for the purpose of conceptualizing, creating and producing advertising campaigns covering Television, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products. (b) These Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for The Model and a PDM representative. One full day shall me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications shall mean any words and/or symbols and/or photographic and/or graphic representations, which identify the Model and/or his name and likeness, in connection with the Product. (b) Product shall mean any model of two wheelers manufactured by The Client . (c) Endorsed Products shall mean the Product of The Client , which is advertised or promoted in connection with the Model Identification. (d) Contract Territory shall mean India. (e) Contract Period shall mean a period of (12) months commencing from 23rd September, 2002 and concluding on 22nd September, 2003 or on such earlier date as this Agreement may be terminated in accordance with the terms hereof. (f) Contract Year shall mean the period of twelve successive months commencing on 23rd September, 2002 during the contract period. 2. GRANT OF ENDORSEMENT RIGHTS The Model grants to The Client , subject to and on the terms of this Agreement, the right and license to use and exploit the Player Identification throughout the Contract Territory during the Contract Period in connection with the advertisement and promotion of the product, including but not limited to, by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Client and in the public appearance use of his judgment in choice of language and demeanour to create an atmosphere, which would be condusive to appearance effort. (d) That The Model will make sure that the bat logo is neat and clean in appearance on the front and back of the bat and that the requirement will be informed to The Client/PDM for fresh/replenishment of the stickers well in advance. 8. CREATIVE APPROVAL The Model has the right of reasonable approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of The Model and to words spoken by or attributes to him, and provided further that the Model shall not unreasonably withhold his approval. PDM shall send two (2) copies of the storyboard in print form for approval to The Model and if PDM does not receive any disapprovals in writing within seven (7) days after the receipt of these materials by The Model , they will deem to have been approved by the Model. 9. LABELS/SIGNATURE LINE It is agreed that The client has the right to create a signature line or to affix or attach the Model Ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors Ltd. and the cricket players for the endorsement of the products of M/s. Hero Honda Motors Ltd. by cricket players, as Models, in advertisements through various mediums e.g., television, radio etc. throughout the contract territory during the contract period only. The Appellant s contention is that the services rendered by them were only in the nature of liaison work and not advertising services since they are not involved in making, preparation, display or exhibition of advertisements, as defined under Sec. 65(3) of the Act. 10. From the copies of tripartite agreements signed with various cricketers, and submitted by the Appellant, it is seen that as per these agreements, (a) Appellant has been appointed by Hero Honda in connection with the promotion or sales and publicity of their products (b) The cricket player, through his agent, has agreed with the Appellant to act as Model in advertisements, for the promotion of the endorsed products of Hero Honda, through television, radio, internet and other printed material (c) The Model shall be available for the purpose of conceptualizing, creating, and producing advertising campaigns in relation to endorsed products (d) Hero Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use the Model identification promotional material to advertise their endorsed products. (ii) As per each of these tripartite agreements, all the individual cricket players had their own agents for approval of advertising materials and receiving payments. Only in the case of Sourav Ganguly, the Appellant were also his agents, the rest of the agreements being the same. 13. From these above referred details of the said tripartite agreements, the services rendered by them were in no way connected with any liaison work relating to the endorsement rights of the cricket players/Models, as claimed by the Appellant. Contrary to their submissions, the Appellant in having been appointed by M/s. Hero Honda in connection with the promotion or sales and publicity of their products they were in fact, involved in the making, preparation, display or exhibition of advertisements, as defined under Sec. 65(3) of the Act. The Board Circular No. 341/43/96-TRU, dated 31-10-1996, had clarified that, the expression advertising agency has been defined to mean any commercial concern engaged in providing any services connected with the making, preparation, display or exhibition of advertisements an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tite agreements, all the payments made under the agreement were to be made to the Appellant, by M/s. Hero Honda, in Indian rupees and were subject to service tax or subject to deduction of all taxes required under the law and that service tax shall be paid by Hero Honda. Therefore, the submissions of the Appellant that, in their case there was no consideration and the question of payment of service tax did not arise, is neither based on facts nor as per the requirements of service tax law. (ii) During the relevant period, as per Sec. 67 of the Act, read with Rule 6(1) of the Service Tax Rules, 1994, the value of any taxable service shall be the gross amount charged by the service provider of such service rendered by him and the service tax on the value of taxable services, received during any calendar month, shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month. The Board has also clarified, vide Circular No. 341/43/96-TRU, dated 31-10-1996, that the advertising agency is legally bound to collect and pay service tax. However, if the advertising agency fails to collect the service tax, the responsibility for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relating to the taxable advertising services rendered by them. 17. As regards penalty imposed on them under Sec. 76 and Sec. 78 of the Act, in the M/s. Krishna Poduval case, [(2006) 1 S.T.R. 185] the Hon ble Kerala High Court has held that under Sections 76 and 78 of Finance Act, 1994, incidents of imposition of penalty are distinct and separate under the two provisions and even if offences are committed in course of same transaction or arise out of same act, penalty imposable for ingredients of both offences and that person who is guilty of suppression deserve no sympathy. This decision of the Hon ble Kerala High Court squarely applies to the facts of the Appellant s case since, 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. ORDER 18. In view of the above findings, I uphold the impugned Order-in-Original No. 15/STC/AC/08-09, dated 30-12-2008, and accordingly reject the appeal filed by the Appellant. From the detailed above findings of the ld. Commissioner (Appeals) we do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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