2017 (7) TMI 600 - AT - Service Tax

Appellant wins case on service tax liability for advertisement tax collection.

The Tribunal ruled in favor of the appellant, setting aside the demand for service tax liability on amounts collected as advertisement tax. The Tribunal ... Sale of space for advertisement service - Department is seeking to levy service tax on the amounts collected by appellant as advertisement tax - Held that: - It is a cardinal principle of taxation that there should not be any tax on tax - In respect of service tax liability demanded by the Department on alleged sale of space or time for advertisement service, we find that in the Gazette Notification published by the Municipal Corporation, Rajahmundry the rate of tax within the municipal limits has been indicated. We further find that the Section 197 (1f) of the Greater Hyderabad Municipal Corporation Act, 1955, authorising municipal taxation on advertisements has been adopted in respect of the municipal corporations in Andhra Pradesh. In respect of the municipalities, they are authorised to collect the said tax vide Section 114 of the Andhra Pradesh Municipalities Act, 1965 This activity of the appellant is certainly not selling of space or time for advertisement as alleged by the show-cause notice and confirmed / upheld by the lower authorities. Appellants then cannot be subjected to tax on this score. Appeal allowed - decided in favor of appellant. Issues involved:Demand of service tax liability on the appellant for the 'sale of space for advertisement service.'Analysis:Issue 1: Service Tax Liability on Sale of Space for Advertisement ServiceThe appeal revolved around the demand for service tax liability on the appellant for alleged services related to the sale of space for advertisement service. The original authority confirmed a tax liability of Rs. 3,01,575 along with interest and penalties under the Finance Act, 1994. The Commissioner(Appeals) set aside the penalties but upheld the tax liabilities. The appellant argued that they were only collecting advertisement tax as per statutory powers and should not be liable for service tax. The appellant relied on the judgment in Selvel Media Services Private Ltd. Vs. Municipal Corporation of City of Ahmedabad. On the contrary, the Department contended that the activity involved was renting space and time for advertising, justifying the tax liability.Issue 2: Tax on Tax PrincipleThe Tribunal examined the principle that there should not be any tax on tax. They considered the Gazette Notification by the Municipal Corporation of Rajahmundry, the Greater Hyderabad Municipal Corporation Act, and the Andhra Pradesh Municipalities Act. The Tribunal noted that the appellant's activity of collecting advertisement tax should not be subjected to service tax. They referred to a Board's circular and the judgment in Selvel Media Services Private Ltd. case, emphasizing that income derived from tax on advertising activity should not attract service tax. The Tribunal highlighted that the lower authorities erred in concluding that the appellant's activity fell under the category of sale of space or time for advertisement.Conclusion:The Tribunal found that the Department sought to levy service tax on amounts collected as advertisement tax by the appellant, which was not equivalent to selling space or time for advertisement. Consequently, the Tribunal ruled in favor of the appellant, setting aside the demand for tax liability. The appeal was allowed with any consequential benefits.