Appellant held liable for service tax on sale of advertisement space in telephone bills

The Tribunal upheld the lower appellate authority's decision that the appellant is liable to pay service tax on the sale of space in telephone bills due to commercial advertisements printed on them. The appellant's agreement to provide space for advertisements resulted in a reduction in printing cost, which was deemed a taxable service under the Finance Act. The Tribunal concluded that the appellant benefited from the differential amount saved, making them liable for service tax on the sale of space.

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Issues:
1. Whether the appellant is liable to pay service tax on the sale of space in telephone bills printed through a third partyRs.
2. Whether the reduction in printing cost by agreeing to provide space for commercial advertisement constitutes a taxable service under the Finance Act, 1994Rs.

Analysis:

Issue 1: Liability for Service Tax on Sale of Space
The appellant had finalized a tender with a printer for printing telephone bills at a reduced rate of &8377; 0.58 per A-4 image, with 1/5th of the backside portion containing commercial advertisements. The Department argued that by agreeing to provide space for advertisements, the appellant benefitted at &8377; 0.10 per bill, making it liable for service tax under the category of 'Selling of Space or Time for advertisement.' The original authority dropped the proceedings, but the lower appellate authority held the appellant liable. The Tribunal agreed that the differential amount saved by the appellant constituted a taxable service under section 65 (105) (zzzm) of the Act, leading to the conclusion that the appellant is indeed liable to pay service tax on the sale of space.

Issue 2: Reduction in Printing Cost and Taxable Service
The appellant contended that the reduction in printing cost due to the tender agreement was not a consideration for service tax liability under Section 65 (2) of the Finance Act. The appellant argued that the printer had already paid service tax on the advertisement space sold to customers. However, the Tribunal found that the saving in printing cost was a consideration for allowing the printer to put commercial advertisements on the telephone bills. As the advertisements were for commercial benefit and not related to BSNL or public interest, the Tribunal deemed the saved amount as the value of taxable service under the category of 'sale of space for advertisement service.' Therefore, the reduction in printing cost did constitute a taxable service, and the appellant's liability for service tax was upheld.

In conclusion, the Tribunal dismissed the appeal, affirming the lower appellate authority's decision that the appellant is liable to pay service tax on the sale of space in telephone bills due to the commercial advertisements printed on them.

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