State Undertaking Must Predeposit 10,00,000 for Service Tax on Advertisement Sales: CESTAT Ruling

The Appellate Tribunal CESTAT Chennai ruled that a State Government undertaking must predeposit &8377; 10,00,000 within eight weeks for service tax on 'Sale of Space or Time for Advertisement Service' from 1.4.2006 to 30.6.2011. The Tribunal found the applicant liable for the tax amount pre-April 2009, rejecting the claim of shifting liability to the advertisement agency. Despite financial hardship, the Tribunal did not grant a full waiver but stayed recovery for the balance dues during the appeal process.

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Issues:
Demand of service tax on 'Sale of Space or Time for Advertisement Service' for the period 1.4.2006 to 30.6.2011. Dispute over the liability for payment of service tax and the applicability of credit. Prima facie case for waiver of predeposit of the entire dues based on financial hardship.

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai dealt with a case involving a State Government undertaking engaged in the business of transport service facing a demand of service tax amounting to &8377; 42,14,016/- along with interest and penalty for the period from 1.4.2006 to 30.6.2011 under the category of 'Sale of Space or Time for Advertisement Service' effective from 1.5.2006. The applicant contended that they had entered into an agreement with an advertisement agency in April 2009, shifting the responsibility of paying service tax to the agency from that point onwards. However, prior to April 2009, the applicant had paid the tax, leading to a demand of &8377; 1,47,000/- for the period from April 2006 to March 2009 based on certain calculations. The applicant argued that regardless of who paid the tax, they should be eligible for credit as the advertisement agency had already paid tax on the gross value, making the demand unsustainable. The applicant also highlighted their significant financial loss amounting to &8377; 149 crores and cited a previous Tribunal decision in support.

The Revenue, on the other hand, contended that the applicant did not dispute the tax payment before April 2009 and should be liable for the entire tax amount post that period. Referring to a similar case involving the Tamil Nadu Cricket Association, where 50% predeposit was directed, the Revenue argued for payment of the full tax amount post April 2009. The Tribunal analyzed the submissions from both parties and noted that in the case of the Kerala State Road Transport Corporation, the matter was remanded as the service tax liability was not considered due to payment by the parties taking the space. In the current case, the Tribunal found that the applicant had indeed paid tax before April 2009, and there was no evidence to support the claim that the liability was shifted to the advertisement agency post that date. Consequently, the Tribunal ruled that the applicant failed to establish a prima facie case for waiver of predeposit of the entire dues.

Therefore, considering the overall facts, circumstances, and the financial hardship pleaded by the applicant, the Tribunal directed the applicant to predeposit &8377; 10,00,000/- within eight weeks, with the balance dues predeposit waived and recovery stayed during the appeal process. The judgment was dictated and pronounced in open court by the Tribunal.

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