TaxTMI 
TaxTMI 
2022 (9) TMI 678
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....rinting'. It has no role in conceptualization or in making or creation of design for advertisement to be printed for customers. The customers provide the 'ready to print' advertisement content and the respondent undertakes the printing of such content on PVC material procured by the respondent from the open market. The respondent has no authority from the customers for making any changes since the scope of the activity is limited to printing. Thus, according to the respondent, it has no role in the 'making of the advertisement'. 4. However, a show cause notice dated 22.10.2012 was issued to the respondent for recovery of service tax for the period April 2007 to March 2012. The show cause notice was issued to show cause as to why- a. An amount of Rs. 21,66,58,906/- (including cesses) should not be demanded from them towards service tax payable on account of 'Advertisement Services' provided by them under section 73(1) of the Finance Act, 1994 read with the proviso thereto: b. Interest at the applicable rates should not be paid by them under the provisions of section 75 of the Finance Act, 1994 on the amount demanded at (i) supra. c. Penalty should not be imposed on them unde....
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....bmitted that the noticee is also not authorized by the customers for making any changes in the designs supplied neither having any specialization in creation or conceptualization of such design so as to get covered under the term 'making of advertisement. The Purchase orders received from the customers clearly evidenced that the activity carried out by the noticee is mere printing of the materials based on the design and specification provided by the customers and by no stretch of imagination be treated as 'making of advertisement'. xxxxxxxxxxxx. xxxxxxxxxxxx" 8. A similar reply was filed by the respondent to the second show cause notice dated 12.05.2014. 9. The Commissioner, by order dated 18.07.2014, dropped the proceedings initiated by the two show cause notices. 10. Shri V.R. Pavan Kumar, the learned authorised representative appearing for the department, made the following submissions: (i) In respect to the bills raised by the respondent, the consumers are deducting TDS which clearly indicates that the activity undertaken by the appellant is a service; (ii) This apart, the respondent have not discharged VAT on merits, but only under a composition scheme....
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....e leviable to service tax under 'advertising agency' services. In order to levy tax on any activity under 'advertising agency' services, the activity should be related to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc. which is absent in the present case; (iv) An 'advertisement agency' basically prepares the contents of the advertisement material and is strategically involved in the manner in which the content of such advertisement is displayed or exhibited to the targeted public. The legislative intent is not to tax every activity connected with advertisement; (v) The CBEC, by letter dated 23.08.2007, had clarified that persons/agencies who canvas advertisement for publishing on commission basis and do not undertake any activity involving making, preparation, display or exhibition of advertisement do not come under the ambit of 'advertising agency' services; Printing activity amounts to 'manufacture' and so no service tax is payable (vi) The activity of printing of advertisement content on PVC material resulting into printed PVC flex or PVC board are considered as products of printing industry. Such printing activity results ....
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....er section 65 (105)(e) of the Finance Act. 14. To appreciate the contentions, it would be appropriate to reproduce the definition of 'advertising agency'. It is defined under section 65(3) of the Finance Act as follows:- "Section 65(3): 'advertising agency' means any person engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant." 15. It is made taxable under section 65 (105)(e) of the Finance Act and it is reproduced below: "Section 65 (105)(e): 'taxable service' means any service provided or to be provided to any person, by an advertising agency in relation to advertisement in any manner." 16. The Commissioner, after examining the nature of the work undertaken by the respondent, noted that what was required to be decided was whether mere printing activity can be considered as 'advertising agency' services only because the printed matter is advertisement material. After referring to various decisions of the Tribunal and the Circulars issued by the Board, the Commissioner held that the activity of printing of flex banners by the respondent as per the requirement of the cust....
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....n of advertisement'. The assessees strongly contested their liability for the service tax stating that they are involved in printing as per the requirements of their customers and are no way connected with the creation of contents or subsequent display of the advertisement materials. They have expertise in printing and they are not involved in any conceptualization, designing or consultation in advertising of any product or service of the customers in any manner. In simple terms, the point for decision is whether a mere printing activity can be considered as a work of advertising agency, only because the printed matter is advertisement material. The thrust given in the show notice that any person engaged in making advertisement material should be considered as advertising agency is misleading. xxxxxxxxx 24. Board vide letter F.No. 345/4/97-TRU dated 16.08.1999 while examining the service tax liability of printing and publishing telephone directories, yellow pages or business directories, clarified that their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carr....
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....nt content on the PVC material procured by the respondent from the open market. The respondent has no role at all in the conceptualization or in the making or creation of design. In fact, the respondent has no authority at all to even make any changes in the advertisement content provided by the customers and the respondent merely prints that on the PVC material procured from the market. This activity would not fall within the scope of the activity contemplated under section 65(3) of the Finance Act. 18. This issue was also considered in the Trade Notice dated 16.08.1999 issued by the Calcutta Commissionerate. After examination of the matter, it was decided that where ready made advertisement provided by the customers is printed and published in the telephone directory, the activity will not attract service tax and it is only when persons also undertake any activity relating to making or preparation of an advertisement that service tax would be levied. The said Trade noticed dated 16.08.1999 is reproduced below: "Trade Notice - Service Tax Trade Notice No. 99/GL-90/C.E./PRO/CAL-II/99 Calcutta Commissionerate Dated 16-08-1999 Communicated by CBEC through 345/4/97-TRU dat....
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....ent forms part of the service in relation to the advertisement. Exclusion: * Mere publishing of prepared advertisement in a paper or magazine or broadcast of prepared advertisement on electronic media by TV or Radio channel are not the functions of an advertisement agency. Hence such activities do not fall within the scope of the Advertisement agency service." 20. It would also be useful to refer to the Master Circular dated 23.08.2007 clarifying technical issues relating to taxation of services. In respect of the issue as to whether merely canvassing advertisement for publishing on a commission basis would attract levy of service tax, the said Circular mentions that it would not be taxable under section 65(105) (e) of the Finance Act. The relevant portion of the Circular is reproduced below: "Circular 96/7/2007-ST dated 23.08.2007 Master Circular clarifying technical issues relating to taxation of services Circular No. 96/7/2007-S.T., dated 23.08.2007 F.No. 354/28/2007-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi xxxxxxxxxx Reference Code Issue Clarification (1) (2) (3) 004.01/ 23.08.07 ....
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....Digest. We find that the findings of the adjudicating authority in this regard are seen in paragraph 11(iii) as under: (iii) As per the agreements and periodical work orders, the assessee has undertaken to print in paper the subject matter of Reader's Digest's marketing or promotional material as per the approved design layout and mail the material to customers as per the mailing schedule given by 'Reader's Digest'. The assessee had provided services of procurement of material including paper, personalizing the papers, get printed the subject matter, quality control of the final product and posting/dispatching the material as per the mailing schedule. For providing the above services, the assesssee has outsourced activities such as printing, scoring, inserting in covers, etc. Further they have deputed a person for co-ordinating the entire operations with the vendors and Reader's Digest. Having made these observations and analyzed the definitions of "advertising agency service", "business auxiliary service" and mailing list compilation and mailing service", the adjudicating authority concludes, in the same paragraph, that service provided by appellants to Reader's Digest merits ....
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....an advertising agency, or a cinema hall flashing an advertisement or newspaper/magazine publishing an advertisement will become an advertising agency. Such absurdities, from an interpretation have to be avoided, the term 'service connected with' used in the definition of "Advertising Agency" is to be understood in context of and in a restrictive manner." 24. Learned authorised representative appearing for the appellant, however, placed reliance upon the judgment of the Kerala High Court in Zodiac Advertisers. The High Court held that all commercial concerns engaged in any of the activities connected with advertisement, which includes making, preparation displaying or exhibition of advertisement, answer the description of advertising agency. The High Court also distinguished the Circular dated 16.08.1999 by observing that in the present case the respondent was not engaged in printing work only. 25. It further needs to be noticed that against the decision of the High Court in Zodiac Advertisers, the department filed an appeal before the Supreme Court and the Supreme Court set aside the order passed by the Tribunal as well as the High Court. The Supreme Court remitted the mat....