Tribunal reinstates original demand against advertising agency for sub-letting space, overturning modified penalty.

The Tribunal accepted the Revenue's appeal, setting aside the modified demand and penalty imposed by the Commissioner (Appeals) and reinstating the original demand under Section 68 of the Service Tax Act against the respondents. The Tribunal held that the respondents, an advertising agency, were liable to pay service tax for sub-letting advertising space to other companies, as it fell within the definition of 'Advertising Agency' under Section 65(3) of the Finance Act.

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Issues:
- Appeal against modification of demand under Section 68 of Service Tax Act
- Interpretation of 'Advertising Agency' under Section 65(3) of the Finance Act

Analysis:
1. Appeal against Modification of Demand:
The appeal before the Appellate Tribunal CESTAT, New Delhi was directed by the Revenue against the order-in-appeal where the Commissioner (Appeals) modified the order-in-original of the adjudicating authority. The original order confirmed a demand of Rs. 78,285 under Section 68 of the Service Tax Act against the respondents, along with a penalty of Rs. 100 per day under Section 76. The Commissioner reduced the demand to Rs. 2,985 and set aside the penalty. The Tribunal noted that none appeared on behalf of the respondents during the hearing, and as no adjournment request was received, the appeal was decided on merits after hearing the learned JDR.

2. Interpretation of 'Advertising Agency' under Section 65(3) of the Finance Act:
The facts revealed that the respondents, an advertising agency, had let out a portion of a site obtained from the Municipal Corporation for advertising purposes to other companies. The adjudicating authority held the respondents liable to pay service tax under Section 68, considering the sub-letting as falling within the scope of the Act. However, the Commissioner (Appeals) reversed this decision, stating that sub-letting did not constitute a service under Section 68. The Tribunal disagreed, emphasizing that the definition of 'Advertising Agency' under Section 65(3) includes providing services related to advertisement. As the respondents provided space for advertisement to other companies and charged consideration, it was deemed a service under the Act. Despite raising bills against certain companies, the respondents failed to discharge the service tax liability. The Tribunal held that the Commissioner's order was contrary to the law and restored the original demand, stating that the respondents are liable to pay the service tax along with interest and penalty as per the order-in-original.

In conclusion, the appeal of the Revenue was accepted by the Tribunal, setting aside the modified demand and penalty imposed by the Commissioner (Appeals) and reinstating the original demand under Section 68 of the Service Tax Act against the respondents.

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