TMI Blog2019 (4) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ibid. However, the Sale of Space or Time for Advertisement simpliciter, being only a sale of goods, that cannot be brought into the fold of taxability under the above provisions of the Finance Act, 1994. The lower authorities have confirmed the tax liability on this activity of the appellant on the mistaken premise that any person who provides space in their website for advertisement through internet is squarely covered as providing a taxable service under this category of service - the lower authorities have been found to be erroneous - demand do not sustain. Support Services of Business of Commerce - demand of service tax - Held that:- As admitted by the appellants themselves in their reply dated 27.07.2009 to the Show Cause Notice dated 01.04.2009, The website belongs to them (assessee), where various e-transactions are concluded and executed by Mercado. Since the transactions emanate from their website, they are entitled for a margin out of the sale proceeds . The arrangement of sharing of net margins equally on all executive orders is only a quantification of the charges that would be payable to the appellant by Mercado for each successful transaction. Mercado is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Show Cause Notices were issued to the appellants which culminated in the impugned Orders confirming the tax liabilities under Sale of Space or Time for Advertisement Service and Business Support Service with interest thereon and imposition of penalties. Aggrieved by such orders, the appellants have filed these appeals before this forum. 2.4 The brief details of the Show Cause Notices, periods involved, impugned Orders and related appeals is given in the chart below : Sl. No Appeal No. Impugned Order No. Dt. SCN/ SOD No. Dt. Period Service tax (in Rs.) Penalty (in Rs.) 1. ST/185/2011 O-I-O No. 21/2010 dt. 31.12.2010 104/2009 Dt. 01.04.2009 01.05.2006 to 31.03.2008 72,84,602/- (72,32,995/- under Sale of Space for Advertisement Service + ₹ 51,606/- under Business Support Service) with interest 72,48,602/- under Sec. 78 of the Finance Act, 1994 442/2009 dt. 12.10.2009 01.04.2008 To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net being goods , capable of being bought and sold, cannot be treated as service. (ii) Even assuming but not conceding that the transaction attracts service tax, in respect of payments received from M/s. Google Inc. in foreign currency, the same would amount to Export of Service and consequently, the service tax demand on this score is not sustainable in view of Rule 3(1)(iii) of Export of Services Rules, 2005. (iii) For the demand under Business Auxiliary Service, nothing was available on record that the appellant was providing any operation marketing assistance to M/s. Mercado. On the other hand, as can be seen from salient points of the MoU extracted in Order-in-Original No. 3 and 3/2014 dated 29.10.2014, it was a mere joint venture with Mercado in the nature of partnership for which the net margin shall be shared equally. Reliance is placed on the decision of the Tribunal in the case of M/s. Mormugao Port Trust Vs. Commr. of Cus., C.Ex. S.T., Goa reported in 2017 (48) S.T.R. 69 (Tri. Mum.) wherein at para 21 it was held as follows :- What the partner/co-venturer does is for his own benefit cannot ipso facto be considered as a service rendered to the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At times, the space provided in the web page invites internet users to click them which leads to the web page of the concerned client whose advertisement is flashed. As per the agreement, they cannot display any Ad Unit on a page that contains advertisements associated with another Google Adsense customer, unless authorized to do so by M/s. Google Inc. (iii) Payment is not made for the provision extended to M/s. Google Inc. by putting up a search box to enable users to access Google web content or space for advertisement or teaser but for valid clicks, valid impressions, the browser make in the search box to view the advertisements and/or valid completions of Referral Events initiated through Referral buttons as per Clause 11 of the Agreement. (iv) Tax is attracted for provision of service in relation to Sale of Space or Time for Advertisement in the different media referred to in the Section. Because of the appellant providing space in their webpage, the browser/user is able to view the advertisement of M/s. Google Inc. clients. (v) The appellant cannot claim that there is no sale of space to M/s. Google Inc. by them. There is no doubt that the appellant receives payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2006, is reproduced as under : (zzzm) to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation. Explanation 1. - For the purposes of this sub-clause, sale of space or time for advertisement includes, - (i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet; (ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and (iii) aerial advertising. [Explanation 2. - For the purposes of this sub-clause, print media means, - (i) newspaper as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867 (25 of 1867); (ii) book as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867 (25 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can have two components, namely, activity undertaken by a person pertaining to his performance and skill and, secondly the person who avails the benefit of the said performance and skill. In the said context, the two concepts, namely, activity and the service provider and service recipient gain significance. 7.2.3 The Finance Act, 1994 provides only for taxation of services connected with Sale of Space or Time for Advertisement and not the Sale of Space or Time per se. True, the inclusive definition of Sale of Space or Time for Advertisement in Explanation-1 to Section 65(105)(zzzm) ibid includes providing space or time, as the case may be, for display, advertising or showcasing of any product or service, inter alia, on the internet. However, this definition is only for amplifying the meaning of the words Sale of Space or Time per Advertisement in Section 65(105)(zzzm) ibid., and not to convey, in any manner, that such sale will be exigible to service tax liability. 7.2.4 The combined takeaway from the analysis of the above legal provisions will only result in the conclusion that only services provided in relation to Sale of Space or Time for Advertisement on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation. - For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;] (Emphasis added) 10.2 From the facts on record, the appellants were in understanding with M/s. Mercado. They had entered into a Memorandum of Understanding (MoU) offering their website to include online shopping amongst others. In our view, this would be a clear case of providing operational assistance for marketing to M/s. Mercado, albeit on the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, the appeals filed by the appellants in respect of these demands are dismissed. 12.2 However, coming to the penalties imposed in respect of the tax demands under Business Support Services, as has already been discussed hereinabove, the provision of Business Support Service on the internet world is definitely a new business concept and understandably, a recent business foray for the appellants. It is evident that the appellants were under the bona fide belief that it was a mere joint venture with Mercado in the nature of partnership and no service tax would be attracted on that account. Hence, there is a case for setting aside the penalties imposed in respect of these demands. This being so, while we confirm the demands with interest under the category of Business Support Service in all these three appeals, the related penalties imposed in respect of those demands under the Finance Act, 1994 cannot be sustained and are set aside. The appeals against imposition of penalties is allowed. 13. To sum up : I. Appeal No. ST/185/2011 : (a) Demands of ₹ 72,32,995/- for the period from 01.05.2006 to 31.03.2008 and ₹ 38,73,853/- for the period from 01.04.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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