AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 748
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....Virender Sehwag, Shri Yuvraj Singh, Shri Harbhajan Singh and Shri Zaheer Khan as per agreements, but had not paid service tax on the taxable value received for advertising services. A show cause notice bearing F. No. V/STS/GR. IX/DN-II/1479/2004, dated 26-10-2004 was issued to the appellant on the ground that they had failed to pay service tax of Rs. 27,46,030/- on the taxable value of Rs. 5,26,70,587/- received by them during 1-4-2000 to 30-6-2003 for advertising services. The said show cause notice had been adjudicated vide Order-in-Original dated 30-12-2008 wherein it was held that the tripartite agreements between the appellant, M/s. Hero Honda Motors Ltd. and the cricket players was for endorsing the products and brand of M/s. Hero Honda Motors Ltd. by the cricket players as models and advertised by the appellant through various mediums e.g. television, radio, displaying the product on the cricket bats etc. throughout the contract territory during the contract period only. It was also held that the appellant even if they claim they are not known as an Advertising Agency, had provided services connected with display of advertisements during 1-4-2000 to 30-6-2003 as per definiti....
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....lar No. 64/13/2003-S.T., dated 28-10-2003. (d) Diebold Systems Pvt. Ltd. v. Commissioner of Service Tax [2008 (9) S.T.R. 546 (Tri.-Chennai)]. (e) Glaxo Smithkline Pharmaceutical Ltd. v. Commissioner [2006 (3) S.T.R. 711 (Tri.) = 2005 (188) E.L.T. 171 (Tribunal)]. With regard to limitation he submits that show cause notice for the period 1-4-2000 to 30-6-2003 has been issued on 26-10-2004 i.e. after more than one year, therefore show cause notice is time bar. He submits that appellant was already registered under the head of "Event Management Service" way back in 2002 and the BAS was included in the registration and they started paying service tax from 1-7-2003 therefore appellant was very much registered and the activity was known to the department. Therefore there is no suppression of facts on the part of the appellant; hence extended period could not have been invoked. In his support he placed reliance on following judgments : (a) Essel Packaging Ltd. v. CCE [2000 (117) E.L.T. 466 (Tri.)]. (b) Polymers & Transmission Products v. CCE [2000 (117) E.L.T. 1....
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....r Khan is advertising services or otherwise. The definition of advertising services is as under : "Advertising Agency" means a commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising concern. "Taxable Service" means any service provided, - (a) --- (b) --- (ba) --- (c) --- (d) to a client, by an advertising agency in relation to advertisement in any manner. In the instant case to conclude whether the service of advertising services or otherwise, it is necessary to go through the relevant clauses of the tripartite agreements between appellant, M/s. Hero Honda Motors Ltd. and Cricket players. Relevant paras of said agreements are extracted below : Agreement of Shri Sourav Ganguly This agreement made this day of 21st June, 2002 at New Delhi between M/s. Hero Honda Motors Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasan....
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....Honda will not be liable to pay any amount in eventually of termination of agreement between SOURAV and Percept/authority given by SOURAV to Percept. 5. TAXES : All payments to be made under the provisions of the Agreement shall be made in Indian Rupees and shall be subject to service tax and all other taxes applicable and also the deduction of Income Tax under the Indian Income Tax Act, 1961. Each payment shall be made in favour of "Percept D'Mark (India) Pvt. Ltd.". Agreement of Shri Virender Sehwag This agreement is made on March 5th, 2002 by and between M/s. PERCEPT D'MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as "Percept D'Mark", which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the First Part. Mr. Virender Sehwag, residing at RZ-145, Laxmi Garden, Nazafgarh, New Delhi-43 (hereinafter referred to as the "Model") of the Second Part. M/s. Hero Honda Motors Ltd., a company....
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....r the grant of the rights by the Model, the Client/Percept D'Mark shall pay to the Model, retainer fees as set out hereunder : - (b) All payments under this Agreement will be made in Indian Rupees and subject to the deduction of taxes as required under law, from time to time. Payments made under this Agreement or pursuant thereto shall be made by Percept D'Mark/the client to "Collage Sports Management" by Demand Draft drawn on such Indian bank account as may be designated by "Collage Sports Management"/"Model" in the manner and at the times set forth herein, and as stipulated in clause 3 & 4 of this Agreement. Time is of the essence in relation to all payments under this Agreement. 5. SERVICES OF THE MODEL The Model agrees to be available for Ten(10) days during the Contract Period for the purpose of conceptualizing, creating and producing advertising campaigns covering Television, Prizes, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products and to perform his obligations under this Agre....
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....oever in connection with the use name, likeness, design, logo, trademark or trade name of the Player Endorsement. Furthermore Percept D'Mark/"The Client" undertakes to ensure that all Point-of-Sale Material, billboards, hoardings, etc. shall be removed from their place of display upon termination or expiry of this Agreement. 13. IDEMNITY Percept D'Mark/"The Client" agrees to protect, indemnify and save harmless "The Model" from and against any and all damages, claims, suits, actions, judgments and costs and expenses whatsoever, (including reasonable legal fees) arising out of, or in any way connected with (i) acts or omissions of "the Client" in relation to the advertisement, promotion or sale of the Products (ii) loss of damage to property, personal injury or, death resulting from the use of the Products (including, but not limited to Percept D'Mark/"The Clients" breach of clause 3 above) or (iii) advertising or promotional material provided by or on behalf of Percept D'Mark/"The Client" in relation to the advertisement or promotion of the Products. Agreement of Shri Yuvraj Singh This agreement made this day of 1st Sep., 2002 at New Delhi between....
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.... 4. RETAINER FEES : In consideration of the services to be rendered by YUVRAJ through Percept and the obligations undertaken by YUVRAJ as set out hereunder. However, Hero Honda will not be liable to pay any amount in eventually of termination of agreement between YUVRAJ and Percept/authority given by YUVRAJ to Percept. Subject to other terms & conditions in this agreement, the above fee is payable to PERCEPT on behalf of YUVRAJ from the date of this contract irrespective of Hero Honda getting the ICC permission. 5. TAXES : All payments to be made under the provisions of the Agreement shall be made in Indian Rupees and shall be subject to service tax and all other taxes applicable and also the deduction of Income Tax under the Indian Income Tax Act, 1961. Each payment shall be made in favour of "Percept D'Mark (India) Pvt. Ltd.". Agreement of Shri Yuvraj Singh This agreement is made on 1st September, 2002 by and between M/s. PERCEPT D'MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai ....
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....n with the advertisement and promotion of the product, including but not limited to, by way of television, radio, posters, hoarding, newspapers, magazines and other form of printed or visual material, including Player Identification in connection with advertisement on the internet. 3. RETAINER FEES In consideration for the grant of the rights by "the Model", "the Client" shall pay to "the Model", a total retainer fees to the tune of Rs. 15.00 lacs as set out hereunder : 5. TAXES All payments to be made under the provisions of this Agreement shall be subject to deduction of Income Tax under the Indian Income Tax Act, 1961 and all other applicable laws. 6. PAYMENT Payments to be made under the provisions of this agreement will be made in Indian Rupees, and will be paid to PDM on behalf of "The Model" by Demand Draft favouring Percept D'Mark (India) Pvt. Ltd. or any other name as may be advised by "The Model" from time to time, and drawn on such Indian Bank account as may be designated by PDM or any other party in whose favour the DD will be made, as the case may be, in the manner and at the times set forth herein, a....
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....t is made on October 28, 2002 by and between M/s. Hero Honda Motors Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi - 110057 (hereinafter as referred to as "Client") of the FIRST PART. And Mr. Harbhajan Singh, Son of Shri Sardev Singh Plaha residing at Plot No. 22, Daulatpuri behind Railway Goodshed, Jhalander City, Punjab (hereinafter referred to as "the Model") of SECOND PART. And Sporting Frontier Pvt. Limited, a company incorporated under the Companies Act, 1956 and having its Registered Office New Bridge Business Centre, No. 40 Ulsoor Road, Bangalore-40 (hereinafter referred to as "the Agent" which expression shall unless repugnant to the context or meaning thereof, be deemed to include its successors) of the THIRD PART. And M/s. PERCEPT D'MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as "PDM", which expression include its successors and assigns) of the F....
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....he Client", subject to and on the terms of this Agreement, the right and licence to use and exploit the Player Identification throughout the Contract Territory during the Contract Period in connection with the advertisement and promotion of the Endorsed product, including but not limited to, by way of Promotional Material television, radio, internet, posters and other forms of printed material. 3. PAYMENT In consideration for the grant of the rights by the Model and in consideration of the services to be rendered by the model under this agreement, the client shall pay to PDM a total sum of Rs. 12,50,000/- (Rupees twelve lacs fifty thousand only) subject to the diction of taxes as required under law, who in turn shall pay such amount, to the Agent for and on behalf of "the Model" as retainer fees at the times set out hereinbelow and in the manner set out in the Clause 5 herein below. The service tax as applicable shall be paid by "The Client". 5. MODE OF PAYMENT Payment of the amounts payable by the Client under Clauses 3 and 4 of this Agreement shall be made in Indian Rupees in the manner provided hereunder. Payments under this Agreemen....
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....nt will be informed to "the Client"/PDM for fresh/replenishment of stickers well in advance. 8. LABELS/SIGNATURE LINE It is agreed that "The client" has the right to create a signature line or to affix or attach the Model Identification in any manner or to endorse products themselves or to the associated packaging. As a part of the goods and services of "The Client", "Model" shall engrave his signature/initials, it being understood that the signature line shall be engraved on the actual goods and services to be promoted and marketed. The "Model" shall have the right of approval of the use of his signature and depiction on the signature line of goods or services, such approval not to be unreasonably withheld. Agreement of Shri Zaheer Khan This agreement is made on September 23rd, 2002 by and between M/s. PERCEPT D'MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai - 400013 (hereinafter referred as "PDM", which expression include its successors and assigns) of the First Part. And Mr....
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.... 3. RETAINER FEES In consideration for the grant of the rights by "the Model", "the Client" shall pay to "the Model", a total retainer fees to the tune of Rs. 12,50,000/-(Rs. Twelve Lakhs and Fifty Thousand Only) as set out hereunder : (a) Rs. 6,25,000 payable on the signing of this Agreement. (b) The balance sum of Rs. 6,25,000 payable after 6 months from signing of the agreement. 5. TAXES All payments to be made under the provisions of this Agreement shall be subject to deduction of Income Tax under the Indian Income Tax Act, 1961 and all other applicable laws. 6. PAYMENT Payments to be made under the provisions of this agreement will be made in Indian Rupees, and will be paid to PDM on behalf of "The Model" by Demand Draft favouring Percept D'Mark (India) Pvt. Ltd. or any other name as may be advised by "The Model" from time to time, and drawn on such Indian Bank account as may be designated by PDM or any other party in whose favour the DD will be made, as the case may be, in the manner and at the times set forth herein, and as stipulated in clauses 3 & 4....
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.... Identification in any manner or to endorse products themselves or to the associated packaging. As a part of the goods and services of "The Client", "The Model" shall engrave his signature/initials, it being understood that the signature line shall be engraved on the actual goods and services to be promoted and marketed. "The Model" shall have the right of approval of the use of his signature and depiction on the signature line of goods or services, such approval not to be unreasonably withheld. From the above tripartite agreements, it clearly shows that all the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are paid the consideration towards advertisement performed by the celebrities. It is also undisputed that the payment consideration towards advertisement performed by the celebrities are received by the appellant, therefore appellant is legally liable for payment of service tax under the category of advertising services during the period involved in the present case. As regard the contention of the appellant that the services are of promotion of sale of goods of M/s. Hero ....
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....ndorsed products (d) Hero Honda to provide for business class travel and five star accommodation for the Model and the Appellant (e) Appellant shall have the right/responsibility, as well as duty to get all approval of all materials provided, relating to depiction of Hero Honda and any product/models/programme under the Hero Honda umbrella (f) All payments under this agreement shall be made to the Appellant in Indian rupees and shall be subject to service tax (g) upon expiry of this agreement, Hero Honda shall cease to use the Model identification promotional material to advertise their endorsed products (h) The Appellant/Hero Honda shall indemnify the Model for any damages arising out of any act of the Appellant/Hero Honda in relation to advertisement, promotion or sale of the endorsed products. 11. As per Sec. 65(3) of the Act, "Advertising Agency" means any person engaged in for providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. And as per Sec. 65(105)(e) "taxable service" means any service provided, to any person, by an advertising agency in relation to advertisement, in any manner....
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....reparation, display or exhibition of advertisements and includes an advertising consultant. It would, thus, be noticed that the scope of the service which is included in the tax net extends not only to any service connected with making, preparation of advertisements but also includes any service connected with display or exhibition of advertisements. The Tribunal decision in the Zee Telefilms Ltd. [2006 (4) S.T.R. 349] relating to a caterer or lawyer or cinema hall who are merely associated with an advertisement film, cited by the Appellant, is not relevant to the facts of their case, since they were not merely associated but were, in fact, involved with conceptualizing, creating, and producing advertising campaigns, with the Models, in relation to the endorsed products, as per the said tripartite agreements. 14. The Appellant, in their submissions, have stated that their case was covered under the Board's clarification, vide circular No. 64/13/2003-S.T., dated 28-10-2003, that any person engaged in canvassing for advertising will not be covered by the expression 'advertisement', if he is not undertaking any activity of advertisement. However the said circular had also clar....
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....ertising agency fails to collect the service tax, the responsibility for payment of tax lies on the advertising agency. The advertising agency, therefore, cannot claim any exemption from payment of service tax on the ground that the same was not paid by the client. (iii) In having received payments from M/s. Hero Honda, for rendering advertising services, as per the tripartite agreements, it was the responsibility of the Appellant for paying the service tax, as per Sec. 67 of the Act, read with Rule 6(1) of the Service Tax Rules, 1994. M/s. Hero Honda, a manufacturer of two wheelers, was not liable to pay service tax on behalf of the service provider. Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibility for paying the service tax on the taxable advertising services, rendered by them during 1-4-2000 to 30-6-2003. 16. (i) The Appellant's submission that they are paying service tax w.e.f. 1-7-2003 under 'business auxiliary services', in relation to promotion or marketing of goods or services of clients, as per definition under Sec. 65(19) of the Act....