By TIOL News Service

MUMBAI, DEC 05, 2017: A  Service Tax demand of Rs.1,17,95,397/- was confirmed against  Pimpri Chinchwad Municipal Corporation (PCMC) by the  CCE, Pune-I  on the ground that the applicants were providing service under the category of Sale of advertising space or time service.

In the application for stay filed by PCMC, it was submitted -

++ That the applicant is a Municipal corporation and undertaking statutory obligations of collecting tax and fee and the Revenue wants to impose service tax even in respect of collection of statutory taxes, levies and charges.

++ Out of the total demand, approximately Rs. 78 lakhs is in respect of collection of statutory taxes, levies and charges by the Municipal Corporation on advertisement, licensing fees and other charges such as late fee, penalty, non-payment of administrative charges towards collection of such taxes inasmuch as such collections are not relating to providing space for advertising.

++ Part of the demand i.e approximately Rs. 16 lakhs is in respect of charges collected by the applicant in the form of rent for providing for erection of structures to various advertising agencies.

++ The advertising agencies are further providing space for advertisement for various customers and paying appropriate taxes in respect of the service provided by them. As the applicants are only collecting rent facilitating to erect structures, therefore, it cannot be said that the applicants are providing space for advertisement which is chargeable to service tax.

++ The demand of Rs.11 lakhs in respect of charges collected by the applicants for providing space to various persons for displaying advertisement on the street light pole owned by the Corporation; as providing street lights for the public by Corporation is a statutory function, providing space for advertisement is only incidental to their statutory function and not a deliberate activity.

++ Since the adjudicating authority has not imposed any penalty by invoking Section 80 of the FA, 1994, the allegation of suppression of facts with intent to evade payment of tax is also not sustainable and hence major portion of the demand is time barred.

The CESTAT while ordering pre-deposit of only rupees eight lakhs observed -

"9. … In the present case, where the applicants are collecting taxes or license fee in respect of the permission granted for putting up advertisement boards on the private properties, we find that the applicants have prima facie a strong case. In respect of advertising boards which were on the street light poles and in respect of the rent which is given to the advertising agency to set up advertising board, we find that the applicants have not made out a case for total waiver of service tax.

10. As the adjudicating authority by invoking the provision of Section 80 of the Finance Act, 1994 on the reasonable belief have waived the penalty, therefore, taking the demand in respect of the land which is given for setting up structures for advertising and in respect of advertisement on the street light on the poles for the normal period, the applicants are directed to deposit Rs.8.00 lakhs (Rupees Eight lakhs only) within eight weeks …."

We reported this stay order as 2012-TIOL-1461-CESTAT-MUM.

The appeal was heard in June this year and an order has been passed recently.

The appellant inter alia placed reliance on the Board Circular  No. 96/7/2007-S.T. dated 23-8-2007 point No. 999.01/23-8-07 and also adverted to the Gujarat High Court decision in case of Selvel Media Services of Private Limited Vs. - 2010-TIOL-978-HC-AHM-ST to submit that fees, taxes and similar recoveries would not attract service tax. It is also submitted that the demand is time barred.

The AR supported the order of the CCE.

After considering the submissions, the Bench adverted to the definition of taxable service contained in Section 65(105)(zzzm) of FA, 1994 and observed -

++ In the present case there are two categories of activities; one-PCMC is providing their own property such as land, building to the advertising agency for advertisement purpose, in this case activity clearly covered under the aforesaid provisions, therefore whatever space of land, building was provided by PCMC to the advertising agency it is liable for service tax.

++ However in a case where PCMC is charging fees/taxes by giving permission for providing space by private parties to advertising agency is a statutory levy for which PCMC has got power from the provisions under the constitution. Therefore such levies will not amount to provision of any service. [Selvel Media Services of Private Limited - 2010-TIOL-978-HC-AHM-ST relied upon]

++ From the impugned order it is observed that there is no bifurcation of both types of receipts, therefore, matter needs to be remanded back to the Adjudicating authority for correct quantification of demand.

The matter is remanded.

(See 2017-TIOL-4268-CESTAT-MUM)