ST - Advertisement performed by celebrities - consideration received - appellant is liable for payment of service tax under 'advertising services' - services of celebrities have nothing to do with promotion of sale under BAS: CESTAT
By TIOL News Service
MUMBAI, DEC 07, 2015: THE appellants provided advertisement services to M/s. Hero Honda Motors Ltd. during 1/4/2000 to 30/6/2003. They had received Rs.5,26,70,587/- from M/s. Hero Honda Motors Ltd. on account of cricketers namely Shri Sourav Ganguly, Shri 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 SCN 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 so provided of advertising services.
The lower authorities upheld the charges leveled and confirmed the demand with penalty and interest.
Before the CESTAT, the appellant inter alia submitted that they are not advertising agency, their role is confined to introduce cricket players to the company, M/s. Hero Honda Motors Ltd. , and, therefore, they are not carrying out any services of advertising; that main object of the contract is to grant endorsement right to use and exploit the players identification, therefore, as far as services of the appellant is concerned, they themselves are not providing any advertising services; that their services were rightly classifiable under Business Auxiliary Services (BAS) which became taxable only w.e.f. 1/7/2003 and not before; that they have been paying service tax w.e.f. 1/7/2003 and, therefore, it cannot be said that prior to 1/7/2003 the services were covered under advertising services.
It is further submitted that an advertising agency basically prepares content of the advertising material for publicity as per the requirements of the client, however, the appellant is not engaged in preparation of any content of advertisement material for publicity but only introduce or make available the celebrities to the client. Reliance is placed on the decisions in Zee Telefilms Ltd. - 2006-TIOL-945-CESTAT-MUM & Diebold Systems Pvt. Ltd. - 2008-TIOL-489-CESTAT-MAD. The plea of time bar was also taken.
The AR justified the demand by reiterating the findings of the lower authority.
The Bench extracted the tripartite agreements entered into by the appellant with M/s. Hero Honda Motors Ltd. through the cricket celebrities and observed -
"…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 Honda Motors Ltd. and therefore the same is classified as Business Auxiliary Service which became taxable only from 1/7/2003, we do not agree with this contention for the reason that services of celebrities are nothing to do with the promotion of the sale whether sale is promoted or not, the service of celebrities is confined to display of brand and advertise the product of M/s. Hero Honda Motors Ltd. therefore services are clearly of ‘advertising services' and not of BAS."
The Bench also liberally extracted the findings of the Commissioner (A) and observed that there was no infirmity in the same.
On the question of limitation, the CESTAT held -
"…, we find that appellant has not disclosed the advertising services to the department and despite possessing the registration they have not disclosed to the department, the provisions of services and collection of amount there against. In such a situation it is clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was legally liable for penalties under Section 76 and 78…."
In fine, the order was upheld and the appeal was dismissed.
Change of fortune - Incidentally, the Tribunal had granted a Stay - 2012-TIOL-195-CESTAT-MUM in the matter by observing thus -
| 4. We find that prima facie the activity undertaken by the appellant does not cover under the category of advertisement. The applicant has made out a strong case for waiver of pre-deposit and we grant waiver of pre-deposit of the entire amount of service tax along with interest and various penalties and stay demands thereof during the pendency of the appeal. |
(See 2015-TIOL-2600-CESTAT-MUM)
