SHRIJI ADS Vs. COMMISSIONER OF CENTRAL SERVICE

JUDGEMENT

(1.) THIS application is filed by M/s. Skriji Ads, Chennai for waiver of predeposit and stay of recovery of service tax of an amount of Rs. 2,02,080/ -, a penalty of Rs. 1,94,000/ - imposed under Section 76 of the Finance Act '94 (the Act) and another penalty, of Rs. 1,000/ - imposed under Section 77 of the Act. The appellants are engaged in rendering advertisement service. In addition to displaying advertisements, the appellants also leased out hoardings to its associates who undertook the activity of displaying advertisements. The demand has been raised on the appellant for leasing out hoardings; for service tax on the leased amounts collected. The appeal has been filed with a delay of 9 days. The delay has been explained as caused by the demise of the mother of the accountant of the appellant in charge of excise matters. After hearing both sides, the requirement of predeposit is waived and the delay in filing the appeal is condoned. The appeal is taken up for disposal.

(2.) THE appellant is engaged in displaying advertisements. It also provides on lease hoardings to its associates who are engaged in advertising. The appellant had failed to pay service tax for the activities they are engaged in during the period 2002 -2005. When the investigation started, they paid the service tax of Rs. 2,89,686/ - along with interest for the amounts charged for displaying advertisement, as an advertisement agency. The impugned demand and penalties relate to charges collected for hoardings leased out to various other advertisement agencies, displaying advertisements.

(3.) THE learned Counsel for the appellants reiterates the grounds taken before the lower authorities. It is argued that when the advertiser pays service tax for exhibiting any advertisement material, the taxable value would include the charges for preparing and maintaining hoarding or for hiring the hoarding. Therefore, there was no need for the appellant to pay service tax on the charges collected from the advertising agencies for leasing out the hoardings to them. The appellant relies on a clarification dated 22.7.2003 issued by the Commissioner of Service Tax in support of their above plea. The said communication had clarified that when a hoarding company provided service of display of an advertisement to an advertiser, the hoarding company was the 'service provider' and the advertiser was the 'client'. The gross amount charged by the hoarding company to the client was liable to pay service tax. But when the hoarding company billed an intermediary i.e., an advertising agency, which in turn billed the clients, then the advertising agency/intermediary was the service provider who was liable to pay tax. It is argued that in view of the above clarification, the original authority could not have demanded the impugned tax on charges for leasing out hoardings to an advertisement agency. Moreover, the department was bound by its own clarification. The original authority had rejected their argument on the plea that 'a simple letter issued from the department cannot override the statutory provisions' and hence the assessee was liable to pay tax on the taxable value received from clients/advertising agency. In the impugned order, the Commissioner (Appeals) held that the clarification was not applicable to advertisement companies like the appellant. He affirmed the impugned order on the above basis.