TaxTMI 
TaxTMI 
2006 (2) TMI 50
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..... 14,75,89,500/- Rs. 7,66,13,907/- Penalty Rs. 14, 75, 89,500 + Rs. 500 + Rs. 1,000 + (Rs. 200 for every day of delay till the date of payment of service tax) Rs. 7,66,13,907/- + 500+ Rs. 1,000+ (Rs. for every day of delay till the date of payment of service tax) Interest Under Section 75 - not quantified Under Section 75-not quantified. 2.1 Activities undertaken by M/s. Star India Pvt. Ltd. (hereinafter also referred to as the appellants) are recorded in Para 13 of the impugned order in appeal and the relevant portion is extracted below: (1) "By M/s Star India Pvt. Ltd. as per agreements entered into between M/s. Star Advertising Sales BV of Netherlands and M/s. Star India Pvt. Ltd. [the Appellant No. 2] and agreement between M/s. Satellite Television Asian Region Ltd., Hongkong and M Star India Pvt. Ltd., [the Appellant No. 2] (a) to solicit and book advertisements and forward by facsimile or telex each advertiser's requisition for telecast of its advertisements to STAR. (b) The representative shall provide STAR with ready to broadcast advertising materials to be....
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..... (g) ZTL shall maintain records relating to performance of the agreement which may be reviewed and audited by ATL or its professional accountants on reasonable notice and at all reasonable times. (h) ZTL shall obtain any required registration and approvals from Government of India's various departments and Associations for production, development and acquiring rights of programme software including feature films, serials, music and entertainment programmes and for export thereof. (i) ATL shall pay to ZTL all costs plus an amount equal to 10% of the total amount of the cost for the 1st five years of the agreement and thereafter 15% of the total amount of the costs. [Costs shall include all amounts expended by ZTL in producing and delivering programming and dubbed programming.] (j) ZTL shall collect information relating to the advertisers wanting to advertise their products and services on any of the channels and ZTL shall convey such details and information forthwith to ATL to enable them to sell advertisements and sponsorship on the channels and collect advertisements from advertisers in India and dispatch the same to ATL. (k) ZTL shall potential advertisers with in....
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....ovided, (e) to a client, by an advertising agency in relation to advertisements in any manner." (iii) Section 67 of the Act defines value of taxable services for charging service tax, as under:- "For the purpose of this Chapter, the value of taxable services, - (d) in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency from the client for services in relation to advertisements." 3.1 On considering the matter on record and the submissions, it is found:- (a) Once a phrase or expression is defined in a statute, that definition alone will entirely apply whenever that phrase or expression is employed in the body of the statute. Even the definition should be under stood in the context of phrase defined. Purpose of definition is not to contradict or supplant it altogether after considering these submissions in light of the following decisions:- (i) In Hotel and Catering Industry Training Board v. Automobile Proprietary Limited - (1968 (3) All. E.R. 399 (at page 402 (E), Lord Denning speaking for the Court of Appeal explained as under:- "It is true that "the industry" is defined; but a definition i....
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....n advertising agency as designing, visualizing, conceptualizing etc. "However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing, etc. then they will be liable to pay service tax on the charges made thereon". Therefore, the definition of 'advertising agency' cannot be read literally and out of context, if done so then every person some way connected with an advertisement will be advertising agency. That cannot be and is not the coverage of the Service Tax envisaged. In the present case, one cannot ignore term being defined i.e. 'advertising agency' a proceed to levy service tax on- (i) any commercial concern. (ii) providing service connected with making, preparation, display or exhibition of advertisements. If the definition is read in isolation and in an all encompassing manner out of context, then arty person/company employing cameraman connected with shooting of advertisement film will become an advertising agency. A caterer supplying tea and biscuits during the production of advertising film will also become a person connected with preparation of advertisement and be....
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.... Finance Act, 2002 carried out a retrospective amendment effective from 16-7-2001 by amending the definition of broadcasting agency or organisation as under:- "Section 65(15)…… in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner." When the legislative body by the scope of the term 'Broadcasting Agency' has itself described the activity of appellant's herein as selling of time slots of advertisement for the foreign broadcaster or obtaining sponsorships for programme of the foreign broadcaster & the appellants as a representative of foreign broadcaster, therefore, they cannot claim themselves or become liable to be an "Advertising Service Provider, to Service Tax since Advertising Service Providers definition has not been shown to have undergone a change after 16-7-2001. That ....
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....sp; (Emphasis Supplied) The activities carried on by the appellants were specifically covered by the definition of "broadcasting agency" with effect from 16-7-2001 while the definition of 'advertising agency' remains the same. Therefore, coverage under the new category is an area not covered by the....
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....(Tribunal) = 2004 (174) E.LT. 65 (iii) CCE v. Team UPD - 2006 (3) S.T.R. 427 (Tribunal) = 2005 (179) E.L.T. 469 (iv) CCE v. Team UPD - 2005 (184) E.L.T. 389 (v) The Madras High Court in Advertising Club v. CBEC reported at 2006 (2) S.T.R. 457 (Mad.) = 2001 (131) E.L.T. 35 (Mad.) in para 21, noted as under: "…….The decision as to how and in what format the advertisement should be, how it should be projected, at what point of time it should be flashed, in which areas it should be exhibited or the manner in which it should be drafted and exhibited has got nothing to do with the press media or electronic media. That would be the task of "advertising agency" alone. Therefore, when we consider the situation where a client goes to the press media and asks for flashing of the advertisement and such advertisement is flashed in the media this cannot be deemed to be a service provided by that media to such a client. Similarly, when a person approaches the electronic media and flashes an advertisement on the radio or television, as the case may be, the radio or television simply would flash the advertisement as per the instructions of the person concerned but such person will n....
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....Google case is extracted below:- "4….. In this additional comments, the Commissioner states that the applicant will not only be providing the value added service to its clients who advertise with it with respect to display or exhibition of an advertisement but will also be providing service with respect to preparation of an advertisement; its sales representatives personally help the clients design the advertisement in case the proposed expenditure is more than $ 4000 a month as could be seen on the website http://services.google.com/ads inquiry/en. When a client or an advertiser is spending more than $30 in a month, the applicant has "jumpstart" offer where the campaign is personalized and the applicant helps to create the campaign via e-mail (see http://adwords.gooele.com/select/jumpstart welcome?) Thus it is clear that through jumpstart offer and with the help of sales representative, the applicant would be trying to create a platform to provide service of an advertising agency to its advertiser. Whether the advertisers actually avail the facility or not is not an important factor, what is important is the fact that the applicant would be providing service of preparin....
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....Bench. In the above view, we are not able to follow the Google's decision arrived at by the Advance Ruling Authority. (i) (i) Circular dated 28-10-2003 issued by Central Board for Excise and Customs clarifies as under:- 2. The term canvassing may merely involve contacting potential advertisers and persuading them to give advertisement to a particular newspaper /periodical/magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper /periodical /magazine. Such a service is known as "space selling". In such cases, since the agency undertakes the job of merely bringing the order for an advertisement and does not undertake any further activity, it would not fall within the definition of Advertising Agency and will not be subjected to Service Tax. 3. On the other hand, canvassing' may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the news paper/periodical/magazine, negotiating the price, informing the general layout of the adver....
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.... by the department, to prove that the appellants carried on the activities over and above selling of time slots are considered. These clauses relate to the procurement/production of television programmes such as serials, daily, soaps, films etc. for broadcasting on television channels owned by the foreign broadcasting agencies Zee Teleflims also thus act as an agency/representative for procurement/production of television programme for foreign broadcasting agencies as procurer is another side of a canvasser. The activity referred to in clause (j) of the said agreement only talks about the activity of gathering the information of the potential advertisers so that the time slots can be sold to them. Such activities could be data/or Management Information Systems & could be business Auxiliary Service or Marketing Service or other relevant Commercial Services, it can not be an Advertising Agency Service which is the subject of levy herein. An information provided to principal broadcaster about its potential market has nothing to do with advertising. Activity referred to in clause (k) of the said agreement is making the sales pitch to the potential customer and providing the potential a....
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.... in connection with concerned flashing advertisement by broadcaster. Provisions of law that there can be a second levy or double levy for the same service again as an advertising agency has not been shown to us. (1) (i) The Commissioner (Appeals) upheld the order of the adjudicating authority demanding Service Tax for extended period of limitation on the ground that the appellants failed to take registration despite repeated reminders. In view of the circulars issued by Central Board for Excise and Customs from time to time, the appellants could entertain legitimately a bona fide belief that the activities of selling time slots, obtaining sponsorship etc. was & is not liable to Service Tax under the category of 'advertising agency' therefore, they were not required to take Service Tax registration and to pay service tax. Hence, the demand of Service Tax beyond the period of six months to be held to be barred by limitations. In particular, the very first circular dated 31-10-1996, issued along with the levy of service tax on advertising agency, in para 8, clarified that the client is the advertiser. The appellants could therefore never imagine that service to their principa....
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....ke out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal. Provisions of Section 11A of the Act....For the reasons indicated above, the tribunal was in error in applying the provisions of Section 11A or the Act. There were no materials from which it could be inferred or established that the duty of excise had not been levied or paid or short-levied or short- paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder". The Supreme Court's decision in the case of Padmini Products would squarely cover this case & the conclusion that the demands beyond the normal period of limitation are not sustainable. (ii) Supreme Court in Baidyanath Ayurved Bhavan Ltd. v. CCE reported at 2004 (165) E.L.T. 494 (S.C.), held as under:- "We find that there are four issues involved in these appeals but that three hinge on this one question: Was the show cause notice dated 27th August, 1987 beyond time?. The pe....