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TMI Blog2022 (9) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... A) P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI-IV [ 2019 (2) TMI 1310 - CESTAT CHENNAI] , a division bench of the Tribunal held that where the basic marketing or promotional material as per the approved design layout has been provided by the Reader s Digest to the appellant therein for getting them printed, and the appellant was only required to procure material on which it was to be printed, it would not mean that the service provided by the appellant would fall within the definition of advertisement agency . Levy of service tax on printing activity - HELD THAT:- The Commissioner was justified in holding that it would not be subjected to levy of service tax. In the first instance the activity of printing of advertisement content on PVC material which results into printed PVC flex or PVC board would amount to manufacture and, therefore, would not be leviable to service tax. Secondly, the appellant has not challenged the findings of the adjudicating authority on this aspect - or the post 01.07.2012 period, the Commissioner has held that the activity undertaken by the respondent being merely transfer of title on goods by sale and subjected to Sales Tax/VAT on the full valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to: b. Interest at the applicable rates should not be paid by them under the provisions of section 75 of the Finance Act, 1994 on the amount demanded at (i) supra. c. Penalty should not be imposed on them under section 76 of the Finance Act, 1994 for the contravention of statutory provisions, as detailed supra during the period prior to 10.05.2008. d. Penalty should not be imposed on them under section 77 of the Finance Act, 1994 for the contravention of statutory provisions, as detailed supra. e. Penalty should not be imposed on them under section 78 of the Finance Act, 1994 for mis-statement, suppression of facts and contravention of provisions of chapter V of the Finance Act or the rules made there under, with intent to evade payment of service tax as detained in the notice. 5. The relevant portion of the show cause notice is reproduced below: "5. The activity of Macromedia is to provide services related advertising/marketing campaigns of their customers though converting digital format communication media into quality wide format printing. Though Macromedia claims that they are mainly engaged in wide format printing on flex banners, they are not disputing the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducting TDS which clearly indicates that the activity undertaken by the appellant is a service; (ii) This apart, the respondent have not discharged VAT on merits, but only under a composition scheme which indicates that service is involved in the transfer of goods; (iii) From the definition of 'advertising agency' under section 65 (3) of the Finance Act, any person engaged in providing any service connected with the making, preparation or display of advertisement would be providing 'advertising agency' services; (iv) The Commissioner committed an error in placing reliance upon the letter of CBEC dated 16.08.1999 granting exemption to persons engaged in printing and publishing of telephone directories, yellow pages or business directories; (v) The Commissioner also committed an illegality in referring to the Circular dated 23.08.2007 which clarified that mere canvassing advertisements for publishing on commission basis is not classifiable under advertising service; and (vi) To support these contentions, the learned authorised representative placed reliance upon the decision of the Kerala High Court in Commissioner of Central Excise & Customs vs. Zodiac Advertisers [2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vi) The activity of printing of advertisement content on PVC material resulting into printed PVC flex or PVC board are considered as products of printing industry. Such printing activity results into 'manufacture' as defined under section 2(f) of the Central Excise Act, 1944. These products are classifiable under the Tariff 4911 10 10 of the Central Excise Tariff and are exempted from levy of central excise duty; No service tax payable from 01.07.2012 onwards as printing activity is not a 'service' (vii) The order passed by the adjudicating authority also sets aside the demand of service tax under the subsequent show cause notice for the period from 01.07.2012 to 31.03.2013. Though the appellant has preferred this appeal against the entire order, but no grounds have been stated in the appeal memo challenging the findings of the adjudicating authority that no service tax is payable for this period; and (viii) The show cause notice for the subsequent period April 2012 to March 2013 fails to specify under what charges the respondent was being subjected to service tax levy under the Negative list-based taxation effective from 01.07.2012. DISCUSSION 12. The submissions adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us decisions of the Tribunal and the Circulars issued by the Board, the Commissioner held that the activity of printing of flex banners by the respondent as per the requirement of the customers and selling the same to the customers would not be covered under the scope of the 'advertising agency' services for the period prior to 01.07.2012 and even for the period post 01.07.2012, the activity undertaken by the respondent, being merely transfer of goods by sale which is subject to Sales Tax/VAT on the full value, is excluded from the scope of the service tax under section 65B (44)(a)(i) of the Finance Act. The relevant portions of the order passed by the Commissioner are reproduced below: 20. I have examined the records of the case and the submissions made by the assessee carefully. The point for decision is whether or not the assessee is liable for service tax as advertising agency in respect of activities undertaken by them. The admitted facts of the case are that the assessee are undertaking printing work of flex banners, bill boards etc., as per the design and content provided by the customers. They have printing machines for wide/large format printing. It is also an admitted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, clarified that their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc., they will be liable to pay service tax on the charges made thereon". 25. Further, vide circular No.6/7/2007-ST dated 23.08.2007, the Board clarified that merely canvassing advertisements for publishing on commission basis is not classifiable under advertising services. 26. It is also noticed that the printed material is sold by the assessee to their customers and VAT is being discharged on the value. The transaction between the assessee and the customer is essentially on sale of goods. The processes involved in preparation of the flex boards and banners resulting in printed material containing components of advertisement, can more appropriately be considered as production and processing of goods for the customers. 27. Considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 is reproduced below: "Trade Notice - Service Tax Trade Notice No. 99/GL-90/C.E./PRO/CAL-II/99 Calcutta Commissionerate Dated 16-08-1999 Communicated by CBEC through 345/4/97-TRU dated 16.08.1999 Attention of the Trade and Field Formations are invited to the fact that doubts have been raised as to whether persons engaged in the activity of compilation, printing and publishing of telephone directories, Yellow pages and business directories are covered under the definition of 'advertising agency' and accordingly liable to pay service tax. 2. The matter has been examined by the Ministry of Finance, Department of Revenue (Tax Research Unit). It has been decided that in the case of persons, who are printing and publishing telephone directories, Yellow pages or business directories, their activity is essentially of printing a readymade advertisement from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi xxxxxxxxxx Reference Code Issue Clarification (1) (2) (3) 004.01/ 23.08.07 Persons/agencies canvass advertisements for publishing, on commission basis. Such persons/agencies do not provide any other services like making, preparation, display or exhibition of advertisement. Whether merely canvassing advertisement for publishing on a commission basis by persons/agencies is classifiable as Advertising Agency service [section 64(105)(e)] or not? Merely canvassing advertisement for publishing, on commission basis, is not classifiable under the taxable service falling under section 65(105)(e). Such services are liable to service tax under business auxiliary service [section 65(105)(zzb)]. 21. It also needs to be noted that the Commissioner has also, after noticing that the respondent is not involved any designing, conceptualization of the advertising content and that the activity is limited to printing as per the contents supplied by the customers and after placing reliance upon the Trade Notice dated 16.08.1999 and the Circular dated 23.08.2007, held that the activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng list compilation and mailing service", the adjudicating authority concludes, in the same paragraph, that service provided by appellants to Reader's Digest merits classification as taxable services provided by an advertising agency in relation to the advertisement under Section 65(105)(e) of the Act. 5.4. We are unable to fathom these conclusions of the lower appellate authority. Surely it cannot be said of the appellants that they had prepared advertising material on their own. On the other hand, the facts clearly indicate that the basic market promotional material as per the approved design lay out by Reader's Digest had been given to the appellants for getting them printed in approved material. Appellants were only required to procure the material including paper, get the subject matter printed on to such paper with personalization for individual clients and post/despatch the material as per the mailing schedule. It cannot also be said of the appellants that they were engaged in display or exhibition or for that matter that they were 'Advertising Consultant' for Reader's Digest." 23. In Zee Telefilms Ltd. versus Commissioner of C. Ex. (Appeals), Mumbai-IV [2006 (4) S.T.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Supreme Court and the Supreme Court set aside the order passed by the Tribunal as well as the High Court. The Supreme Court remitted the matter to the Tribunal to examine whether the appellant undertook the work of conceptualising, visualising and creating the advertisement or whether it was only complying with the instructions of the clients. The relevant portion of the judgment of the Supreme Court is reproduced below: "2. Having heard learned counsel on both sides, we are of the view that an important question of law does arise in this case, namely, whether an assessee comes within the definition of the word 'advertising agency' as defined in Section 65(3) of the Finance Act, 1994 as amended. 3. However, on perusing the record, we find that material documents, particularly, orders and purchase materials, books of accounts etc., were not placed before the Tribunal/Adjudicating Authority despite being called upon to do so. There is a specific finding to that effect in the High Court's Order impugned herein. 4. In the circumstances, we set aside the order of the High Court as well as that of the Tribunal, giving final opportunity to the appellant herein to produce a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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