Municipal hoarding permission fees on private premises are regulatory charges, not taxable advertisement space services.

A municipal corporation's written permission for hoardings on private premises was treated as a regulatory function under municipal law, not a taxable service in relation to sale of space for advertisement, because the corporation did not itself provide display space. The fee charged for such permission could not be subjected to service tax in the absence of a charging provision covering that activity. The corporation also lacked statutory authority to recover service tax on the licence or permission fee as a collecting agent. The impugned service-tax demands were therefore unsustainable and the amounts collected were directed to be refunded.

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Issues: (i) Whether the municipal corporation's grant of written permission for hoardings on private premises amounted to a taxable service within section 65(105)(zzzm) of the Finance Act, 1994. (ii) Whether the municipal corporation could recover service tax from the petitioner on the licence fee or written-permission fee charged under the municipal law.

Issue (i): Whether the municipal corporation's grant of written permission for hoardings on private premises amounted to a taxable service within section 65(105)(zzzm) of the Finance Act, 1994.

Analysis: The relevant statutory scheme under sections 244, 245 and 386 of the Bombay Provincial Municipal Corporations Act, 1949 showed that the corporation was granting written permission for erection or retention of hoardings and collecting fee for that permission. This was a regulatory function aimed at controlling hoardings and ensuring public safety, not a service rendered to the advertiser in relation to sale of space for advertisement. The expression "taxable service" in section 65(105)(zzzm) required a service provided by one person to another in relation to sale of space for advertisement, which contemplated provision of space for display. Since the space on private property was not provided by the corporation, the activity did not fall within the charging provision.

Conclusion: The municipal corporation's act of granting written permission for hoardings on private premises was not a taxable service under section 65(105)(zzzm) of the Finance Act, 1994.

Issue (ii): Whether the municipal corporation could recover service tax from the petitioner on the licence fee or written-permission fee charged under the municipal law.

Analysis: The municipal law did not contain any provision authorising the corporation to collect service tax on the fee charged for written permission. The corporation could not act as a collecting agent for service tax in the absence of statutory authority. Once the underlying activity was found not to constitute a taxable service by the corporation, the demand and recovery made towards service tax lacked legal support.

Conclusion: The municipal corporation had no authority in law to demand or recover service tax from the petitioner on the fee collected for written permission.

Final Conclusion: The impugned service-tax demands and recoveries were unsustainable, the amounts collected were ordered to be refunded, and the petition succeeded to that extent.

Ratio Decidendi: A municipal regulatory permission fee for hoardings on private property is not service tax unless the municipality itself provides space for display or another taxable service within the charging provision, and recovery of service tax is impermissible without statutory authority.

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