2006 (3) TMI 138 - AT - Service Tax

To constitute an advertising agency all the activities mentioned in the definition 65(2) should be carried out by the person. While advertising the intention is to influence the mind of the people who watch the advertisement. There are various ways of advertisement. Advertisement is done through books and magazines. Advertising Agency - appellants merely undertake the screen printing of the advertisement hoarding- Since no creative activity is involved the same is not liable to service tax

Summary

Issues:
1. Interpretation of the term 'advertisement agency' under the Finance Act, 1994.
2. Determination of liability to pay Service Tax for a company engaged in screen printing activities.
3. Application of relevant case laws in deciding liability for Service Tax.

Issue 1: Interpretation of the term 'advertisement agency' under the Finance Act, 1994:
The case involved a dispute regarding whether a company engaged in screen printing activities could be classified as an 'advertisement agency' under the Finance Act, 1994. The Commissioner of Customs & Central Excise had imposed a penalty on the company for not paying Service Tax, considering their activities as falling under the definition of an 'advertisement agency'. The Commissioner (Appeals) upheld this decision, citing the definition of 'advertisement agency' under section 65(2) of the Finance Act, 1994. The appellants contested this classification, arguing that their activities did not constitute providing services as an advertisement agency. The Tribunal analyzed the definition of 'advertisement agency' and emphasized the creative and professional aspects involved in advertisement services, including conceptualization, visualisation, and designing. The Tribunal concluded that the company, engaged in screen printing, did not meet the criteria of an 'advertisement agency' as they were not involved in the creative process of advertisement development. The Tribunal also referred to a Board's clarification stating that certain activities, like printing telephone directories, may not fall under the definition of an 'advertising agency' unless they include specific advertising services. Based on these considerations, the Tribunal allowed the appeal and set aside the original order.

Issue 2: Determination of liability to pay Service Tax for a company engaged in screen printing activities:
The Tribunal examined whether the company, despite being named as M/s. Zodiac Advertisers, was liable to pay Service Tax as an 'advertisement agency'. The company was registered as a small-scale unit for screen printing activities, and the Revenue argued that their activities fell under the definition of an 'advertisement agency'. The Tribunal considered the nature of advertisement services, highlighting the creative and professional elements involved in providing such services. It noted that the company primarily undertook screen printing of advertisement hoardings based on provided instructions and specifications, without engaging in creative activities like conceptualization and designing. The Tribunal distinguished between the role of an advertisement agency, which involves creative input and service provision, and that of a screen printing company, which mainly manufactures products as per instructions. By analyzing the specific activities of the company and the definition of an 'advertisement agency' under the Finance Act, 1994, the Tribunal concluded that the company's screen printing activities did not qualify them as an 'advertisement agency', thereby absolving them from liability to pay Service Tax as claimed by the Revenue.

Issue 3: Application of relevant case laws in deciding liability for Service Tax:
The Tribunal considered the arguments presented by both parties, including references to relevant case laws. The appellants relied on case laws such as CCE v. Team UPD Ltd. and Star Neon Singh v. CCE to support their contention that specific activities, like allowing site usage for advertisements or preparing signboards, do not necessarily classify a company as an 'advertisement agency'. The Revenue, on the other hand, emphasized the definition of 'advertisement agency' under the Finance Act, 1994, to assert that the company's activities met the criteria for being considered an 'advertisement agency'. The Tribunal analyzed these arguments in light of the statutory definition and the creative aspects associated with advertisement services. Ultimately, the Tribunal's decision to allow the appeal and overturn the original order was based on the lack of evidence showing that the company engaged in activities characteristic of an 'advertisement agency', as defined under the relevant law and clarified by the Board's notification.