State transport corporation wins appeal against double service tax demand for advertising space rental

CESTAT Chandigarh allowed the appeal of a state road transport corporation against service tax demand for advertising space rental from May 2006. The tribunal held that since the corporation's agent had already deposited the demanded service tax amount of Rs. 16,19,883 in government treasury, the same could not be demanded again. The court found the extended limitation period invocation unsustainable as the state undertaking had no intention to evade tax. The demand for service tax, interest and penalty was set aside, with the tribunal ruling the impugned order legally unsustainable on both merit and limitation grounds.

---

---

Issues:
The issues involved in the present judgment are whether the appellant is liable to pay service tax on the sale and renting of space for advertising purposes from 01.05.2006 onwards and whether the demand of service tax from the appellant is barred by limitation.

Issue 1: Liability to Pay Service Tax:
The appellant, a state-owned road transport corporation, provided 'Advertisement Services through hoardings' and 'sale of space or time service for advertisement'. The Adjudicating Authority held that the activity of space selling does not fall within the definition of an advertising agency and was not liable for service tax prior to 01.05.2006. The appellant appointed M/s Pisces Communications Pvt. Ltd. to use space in buses starting from 01.09.2006, and the service tax amounting to Rs. 16,19,883/- was deposited by the agent. The Tribunal found that the demand of service tax, interest, and penalty is not sustainable in law and set it aside.

Issue 2: Limitation of Demand:
Considering the limitation aspect, the Tribunal noted that being a State Government Undertaking, it cannot be inferred that the appellant had an intention to evade tax. Referring to a previous case, it was established that the major portion of the demand raised beyond the limitation period cannot be upheld. The Tribunal further held that the substantial demand was barred by limitation as the show cause notice was issued after the relevant period. The Tribunal also cited a case to emphasize that intentional suppression of facts cannot be presumed merely because the appellant disagreed with the audit findings. The Tribunal found in favor of the appellant on the question of limitation, setting aside the impugned order.

Conclusion:
In conclusion, the Tribunal found that the impugned order was not sustainable in law on merit as well as on limitation. Therefore, the order was set aside, and the appeal of the appellant was allowed with consequential relief, if any, as per law.

---