Composite Advertising Contracts: Service Tax Demand Set Aside as Proper Separation of Goods and Services Established

CESTAT ruled in favor of the appellant, setting aside the service tax demand of Rs 5,94,38,654/- after finding no discrepancy between Balance Sheet and ST-3 returns once adjustments for sale of goods (Rs 13,35,68,175/-) and services under negative list (Rs 30,42,96,081/-) were made. The Tribunal also overturned the denial of CENVAT credit of Rs 97,36,884/-, recognizing that leasing space for billboards constituted legitimate input services for providing advertisement services. The court determined the composite contract properly separated advertisement services from goods sold, with appropriate service tax and VAT applied to respective components, consistent with Imagic Creative precedent. Late fees were invalidated due to reasonable delay caused by delayed collection of dues. The appeal was allowed with consequential reliefs. .....

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