Advertisement space receipts may attract service tax; municipal tax collection claim does not create prima facie constitutional immunity.

Consideration received for permitting advertisement on municipal property was treated as falling within the taxable service of sale of space or time for advertisement under the Finance Act, 1994. The plea that the receipts were collected as advertisement tax under the Punjab Municipal Act, 1976 did not, on a prima facie basis, create immunity from service tax. Section 76 indicated that such collections formed part of the Corporation Fund and were not State revenue for Article 289 of the Constitution. On that view, pre-deposit was waived and further proceedings stayed subject to deposit of the service tax demand and corresponding interest within time, excluding penalties.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of further proceedings in an appeal against service tax demand raised on receipts from advertisement space, and whether such receipts were prima facie immune from service tax by reason of the Punjab Municipal Act, 1976 and Article 289 of the Constitution of India.

Analysis: The appellant had received consideration for permitting advertisement on municipal property, which was treated as falling within the taxable service of sale of space or time for advertisement under Section 65(105)(zzzm) of the Finance Act, 1994. The plea that the amounts were collected as advertisement tax under the Punjab Municipal Act, 1976 did not create a prima facie immunity from service tax. Section 76 of the Punjab Municipal Act, 1976 showed that such collections formed part of the Corporation Fund and were not revenue of the State so as to attract Article 289 of the Constitution of India. On that prima facie view, the adjudication order was not shown to suffer from infirmity, though the question of penalty was treated separately.

Conclusion: The appellant was granted waiver of pre-deposit and stay of further proceedings, subject to deposit of the service tax demand and corresponding interest within the stipulated time, excluding penalties.

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