By TIOL News Service

NEW DELHI, MAR 04, 2017: REVENUE is in appeal against dropping of a Service Tax demand of Rs.3.06 crores by the CST, Delhi. The demand pertains to the period 24.11.2008 to 13.03.2009.

The facts are that the respondent executed an agreement dated 31.03.2008 with the Govt. of AP (Information and Public Relation Department) (IPRD) for providing Integrated Mobile Publicity in Assembly Constituencies ("IMPACT") through Mobile Publicity Vehicles.

The campaign was aimed at disseminating developmental information to the common people at grass root level and informing rural people to derive benefits from various welfare and developmental programmes started by Govt. The said activities were to be performed by the respondent through Publicity Mobile Vans, where popular commercial movies with advertisements on various welfare and development programmes, were to be screened through Projectors.

The department took a view that the service rendered falls under "Public Relation Service" falling under section 65(105)(zzzs) of FA, 1994.

As mentioned, the CST, Delhi dropped the demand by observing that the activity undertaken by the respondent was neither 'management' of any activity nor does the activity undertaken fall within the purview of 'Public Relations'.

The definitions in the FA, 1994 -

(86c) "public relations" includes strategic counselling based on industry, media and perception research, corporate image management, media relations, media training, press release, press conference, financial public relations, brand support, brand launch, retail support and promotions, events and communications and crisis communications;

(105) "taxable service" means any service provided or to be provided, -

(zzzs) to any person, by any other person, in relation to managing the public relations of such person, in any manner;

After considering the submissions made by both sides, the Bench observed -

+ The view taken by the adjudicating authority that such activities will need to be concerned with business, commerce or industry is without basis. The definition of the term 'public relation service' provides that the service could be provided "in any manner" and should be in relation to managing the public relation of a client. The definition makes it amply clear that the scope of tax is not limited to management of public relations . The use of the phrases "in relation to" and "in any manner" widens the scope of the taxability with reference to public relations.

+ The term 'management' can be thought of getting things done through others. The manager plans and guides the work of other people. The respondent's contention is that IPRD manages the impact programme and the respondent only provides infrastructure for the implementation of the same as per directions of IPRD. We are of the view that the term "management" is to be looked at with wider connotation. No doubt, IPRD has prepared the overall plan to be implemented. However, for carrying-out the plan, the respondent is required to plan and organize the logistic support required in terms of the hardware as well as the experienced persons to carry out the activities. When this is to be done on a state-wise basis, this will require considerable planning and management of the whole exercise. In our view this is to be considered as management of the public relations campaign.

+ Commissioner has erred in taking the view that no service tax would be leviable on the activities carried-out by the respondent. The activity would fall within the definition of public relation services in terms of the work carried-out by the respondent as seen from the terms and conditions of the contract entered into with IPRD. The services also do not fall under any category mentioned in general exemptions. Even though the respondent is registered under advertising agency service, they failed to include the amount received from IPRD and also did not pay service tax. The service tax liability would have completely escaped but for the detection of the same by the department. We are of the view that the liability for service tax needs to be confirmed to the respondent along with the liability for payment of interest under section 75 of the Act ibid. The respondent will also be liable for penalty as proposed in the demand/show cause notice dated 8.1.2010.

The Revenue appeal was allowed.

(See 2017-TIOL-685-CESTAT-DEL)