Tribunal Upholds Exemption for Printing Services as 'Manufacture'

The Tribunal dismissed the Department's appeal, upholding the Commissioner's decision that the respondent's activities of wide format printing based on client-provided designs did not amount to 'advertising agency' services and were not subject to service tax. The Tribunal determined that the printing of advertisement content on PVC material constituted 'manufacture,' exempt from service tax. It further ruled that post-01.07.2012 activities involving the sale of printed material were excluded from service tax. The decision was issued on 14.09.2022.

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Issues Involved:
1. Whether the activity of "wide format printing" and supply of advertising material based on designs provided by clients amounts to rendering a service under the category of 'advertising agency' services.
2. Whether the activity of printing advertisement content on PVC material amounts to 'manufacture' and is thus not liable to service tax.
3. Whether the activity post-01.07.2012, which involves the transfer of title on goods by sale subjected to Sales Tax/VAT, is excluded from the scope of service tax.

Issue-Wise Detailed Analysis:

1. Wide Format Printing as 'Advertising Agency' Service:
The primary issue was whether the respondent's activity of wide format printing based on designs provided by clients constitutes 'advertising agency' services. The respondent argued that its role was limited to printing the provided advertisement content on PVC material without any involvement in conceptualization, design, or creation of the advertisement. The Department contended that the respondent's activities fell under the definition of 'advertising agency' as per section 65(3) of the Finance Act, which includes any service connected with the making, preparation, display, or exhibition of advertisements.

The Tribunal referred to the definition of 'advertising agency' under section 65(3) and the taxable service under section 65(105)(e). It concluded that since the respondent merely printed the provided content without any role in its creation or modification, the activity did not fall within the scope of 'advertising agency' services. The Tribunal supported its conclusion by citing various circulars and decisions, including the Trade Notice dated 16.08.1999 and the Master Circular dated 23.08.2007, which clarified that mere printing of ready-made advertisements does not attract service tax under 'advertising agency' services.

2. Printing Activity as 'Manufacture':
The Tribunal considered whether the printing of advertisement content on PVC material amounts to 'manufacture' under section 2(f) of the Central Excise Act, 1944. The Commissioner had held that such printing activity results in products classifiable under Tariff 4911 10 10 of the Central Excise Tariff, which are exempt from central excise duty. The Tribunal agreed with this finding, noting that the activity of printing flex banners and boards as per customer requirements and selling them to customers is essentially a manufacturing process and not a service. Therefore, it is not liable to service tax.

3. Post-01.07.2012 Activity and Service Tax:
For the period post-01.07.2012, the Tribunal examined whether the respondent's activity, which involved the sale of printed PVC material subjected to Sales Tax/VAT, was excluded from the scope of service tax under section 65B(44)(a)(i) of the Finance Act. The Commissioner had held that such activity, being a transfer of title on goods by sale, is excluded from service tax. The Tribunal found no grounds in the Department's appeal to challenge this finding and noted that the show cause notice did not specify why service tax would be applicable for this period. Consequently, the Tribunal upheld the Commissioner's order that no service tax was payable for the post-01.07.2012 period.

Conclusion:
The Tribunal dismissed the Department's appeal, affirming the Commissioner's order that the respondent's activities did not constitute 'advertising agency' services and were not liable to service tax. The Tribunal emphasized that mere printing of advertisement content provided by clients does not fall within the scope of 'advertising agency' services, and such activities amount to manufacture, exempt from service tax. Additionally, the post-01.07.2012 activities involving the sale of printed material were excluded from service tax under the relevant provisions. The order was pronounced on 14.09.2022.

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