By TIOL News Service

MUMBAI, MAY 17, 2013: THE appellant manufactures machinery for use in fertilizer industry. They placed an advertisement for their machinery in a magazine, called “Fertilizer Focus” which is published in UK.

The department was of the view that for the consideration paid by the appellant for putting out the advertisement in the foreign magazine, they are liable to discharge Service Tax under the category of “Sale of space or time for advertisement” services.

It is not the case that some official from the department happened to read this magazine published in the UK but that this expense was reflected in the books of accounts of the appellant and thus the whole issue germinated without a fertilizer.

Be that as it may, a demand of Service Tax amounting to Rs.32,642/- was issued and the same was confirmed along with interest and penalties.

The lower appellate authority too was of the view that there was nothing wrong in the demand and so the appellant is before the CESTAT.

It is inter alia submitted that -

+ the definition of “Sale of space or time for advertisement” under section 65(105)(zzzm), specifically excludes sale of space for advertisement in Print Media and since the magazine is a print media, they are not liable to pay any Service Tax.

+ The term 'Print Media' has been defined under Section 65(105)(zzzm), as a 'Newspaper' defined under section 1(1) of the Press and Registration of Books Act, 1867 and as per the said Act “newspaper” means any printed periodical work containing public news or comments on public news and, therefore, the said magazine comes under the category of 'Print Media';

+ if the Service Tax is levied, they would be eligible for availing credit thereon under the category of input services and, therefore, the entire transaction is revenue neutral.

The Revenue representative submitted that the magazine “Fertilizer Focus” is mainly circulated amongst the people engaged in fertilizer industry and does not have any news value for the general public and, therefore, it does not qualify as newspaper. Inasmuch as the appellant should be put to terms, the Revenue representative pleaded.

The Bench observed -

“5.1 The definition of 'newspaper' as defined under the Press and Registration of Books Act, 1867 is wide enough to cover any periodical work containing public news and comments on public news. In the instant case, the magazine is published once in two months and it is a printed periodical work. The magazine publishes news pertaining to fertilizer industry and advertisement of the said industry and contains articles on research work which is going on and the statutory provisions relating to the said industry. Since the scope of magazine is specific, it will be mainly of interest to public connected with that industry. Public connected with the industry would include a large number of the public such as fertilizer users, manufacture of fertilizers, farmers, scientists and all others whoever is interested in that field. They are as much part of the general public as anybody else and, therefore, we are prima facie of the view that the impugned magazine is a newspaper as defined in the law.

5.2 In any case, the transaction is revenue neutral, inasmuch as the appellant could have taken credit of the Service Tax paid on the transaction as promotion or marketing of the goods come within the purview of input services as defined in rule 2(l) of the CENVAT Credit Rules, 2004. Thus, the appellant has made out a strong prima facie case in their favour for grant of stay.”

In fine, the Bench granted unconditional waiver of pre-deposit of the adjudged dues and stayed recovery.

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(See 2013-TIOL-748-CESTAT-MUM)