Advertisement space providers exempt from service tax under Section 66D(g) negative list

CESTAT Allahabad held that appellant's service of providing space for displaying advertisements through hoardings and kiosks falls under the negative list under Section 66D(g) and is not taxable. The tribunal distinguished this from advertising agency services, noting appellant only provided display space without designing or conceptualizing advertisements. Following precedent from Zodiac Advertisers case, the demand for service tax was set aside as unsustainable. Consequently, penalties under Section 78 on the firm and Section 78A on the partner were also set aside, with late fee restricted to Rs.1,00,000. Appeal allowed in part.

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Issues Involved:
1. Classification of Services Rendered by the Appellant.
2. Applicability of Service Tax on the Services Rendered.
3. Invocation of Extended Period for Demand.
4. Imposition of Penalties and Late Fees.

Summary:

1. Classification of Services Rendered by the Appellant:
The Appellant, a partnership firm, contended that their services were restricted to 'Selling of Space for Advertisements' and did not include making or preparing advertisement material, which is essential for classifying a service under 'Advertisement Agency'. The Adjudicating Authority, however, classified the services under 'Advertisement Agency Service' based on the registration certificate in ST-2 format, ST-3 returns, and statements of Shri Sanjay Adhlakha. The Tribunal found that the description of services in ST-2 and ST-3 returns did not conclusively prove that the Appellant provided 'Advertisement Agency Service'. The Tribunal held that the services rendered by the Appellant were indeed 'Selling of Space for Advertisements' and not 'Advertisement Agency Service'.

2. Applicability of Service Tax on the Services Rendered:
The Tribunal observed that the service of 'Selling of Space for Advertisements' was covered under the Negative List as per Section 66D(g) of the Finance Act, 1994, from 01.07.2012 to 30.09.2014. The Appellant was not liable to pay service tax on these services during this period. The Tribunal relied on the definition of 'Advertising Agency' and previous case laws to conclude that the Appellant's services did not fall under 'Advertisement Agency Service'. Consequently, the demand for service tax for the period 01.10.2012 to 30.09.2014 was set aside.

3. Invocation of Extended Period for Demand:
The Appellant argued that the demand was barred by limitation as there was no suppression of facts. The Tribunal agreed, noting that the value of services was declared in the ST-3 returns, and the Department had the opportunity to initiate action within the standard period. The invocation of the extended period under Section 73(1) of the Finance Act, 1994, was deemed unsustainable.

4. Imposition of Penalties and Late Fees:
The Tribunal found that since the demand for service tax was not sustainable, the penalties imposed under Section 78 on the Appellant and under Section 78A on the partner Shri Sanjay Adhlakha were also not maintainable. The Late Fee was restricted to Rs.1,00,000/- as the Appellant had already deposited Rs.80,000/-. The Tribunal set aside the penalties and the excess late fee.

Conclusion:
The Tribunal set aside the demand for service tax along with applicable interest and penalties. The appeal filed by the Appellant was partly allowed, providing consequential relief.

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