TMI Blog2006 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... against a common Order-in Appeal Nos. BR/07 to 08/m-IV/2005, dated 25-1-2005 passed by the Commissioner of Central Excise (Appeals), Mumbai-IV are being disposed by this common order. By the impugned Order, the Commissioner (Appeals) upheld the demand of Service Tax, on the amounts received for activities under taken for the principals (who are broadcasting agencies not having office in India),as an 'advertising agency' service provider. 1.2 The details of the impugned order are tabulated below: Particular M/s. Zee Telefilms M/s. Star India Date of SCN 28-12-2001 1-12-2000 and 21-11-2001 Period of dispute 1-11-1996 to 15-7-2001 1-11-1996 to 31-3-1999 1-4-1999 to 15-7-2001 Amount of Service Tax demanded Rs. 14,75,89,500/- Rs. 7,66,13,907/- Penalty Rs. 14, 75, 89,500 + Rs. 500 + Rs. 1,000 + (Rs. 200 for every day of delay till the date of payment of service tax) Rs. 7,66,13,907/- + 500+ Rs. 1,000+ (Rs. for every day of delay till the date of payment of service tax) Interest Under Section 75 - not quantified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply the programming and dubbed programming in languages specified by ATL on a video suitable for the channel and capable of broadcasting. (b) Programming shall be either produced by ZTL or purchased by TL or the rights thereto otherwise licensed by ZTL. (c) ZTL shall identify ATL against all claims, liabilities or losses arising in relation to any alleged infringement of copyrights, broadcasting or other rights in relation to the programming. (d) ZTL shall retain the copyrights and all broadcasting and other intellectual property rights. (e) ZTL will be solely responsible for providing the programming and dubbed programming and if any their party provide any sponsored programme. (f) ZTL shall deliver programming and dubbed programming to ATL, CIF Hong Kong. (g) ZTL shall maintain records relating to performance of the agreement which may be reviewed and audited by ATL or its professional accountants on reasonable notice and at all reasonable times. (h) ZTL shall obtain any required registration and approvals from Government of India's various departments and Associations for production, development and acquiring rights of programme software including feature films ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tches by the advertisers to EXPAND in Singapore. (d) ZTL shall be paid a fee equal to 8.5% of the sum equivalent to the advertisement tariff otherwise payable by the advertisers calculated by reference to the appropriate rate card. 2.3 Extract of the relevant statutory provision of Chapter V of Finance Act, 1994 relating to advertising agency service, as they exist, at the material time are: (i) Section 65(2) defines "advertising agency" as under:- "advertising agency" means, any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisements and includes an advertising consultant. (ii) Section 65(48) defines "taxable service" as under: "taxable service" means any service provided, (e) to a client, by an advertising agency in relation to advertisements in any manner." (iii) Section 67 of the Act defines value of taxable services for charging service tax, as under:- "For the purpose of this Chapter, the value of taxable services, - (d) in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency from the client for services in relation to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition is not to be taken to as destroying the essential meaning of the term defined. A definition merely employing apt and readily intelligible words. Keeping this in mind, it is to be held that Ordinary accepted version of words "advertising agency" would be an Agent who acts for a producer of goods or services, planning, designing and managing producer of goods or services of advertisement i.e. an Agents office, which plans, designs and manages advertising for other companies as per Dictionary of marketing (third edition) by Bloomsbury. It has to be an organisation which specializes in providing services such as media selection, creative work, production and campaign planning to clients. Circular dated 16-8-1999 describes services of an advertising agency as designing, visualizing, conceptualizing etc. "However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing, etc. then they will be liable to pay service tax on the charges made thereon". Therefore, the definition of 'advertising agency' cannot be read literally and out of context, if done so then every person some way connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued clarified this position as under:- "5…. In case of loreign satellite TV channels, their head office may be located outside India. However, they have their branch offices or subsidiary companies located in India. In some, case, they have appointed agents. These branch offices/subsidiary companies/agency act on behalf of these channels, selling time slots and recovering service charges and remitting the same to their head office/holding Company/principals as the case may be. In such cases, these branch offices/subsidiary companies, agencies are rendering the services in relation to broadcasting and therefore, they are liable to pay the service tax and comply with all other procedural formalities relating to service tax". Finance Act, 2002 carried out a retrospective amendment effective from 16-7-2001 by amending the definition of broadcasting agency or organisation as under:- "Section 65(15)…… in the case of a broadcasting agency or organisation, having its head office situated in any place outside India, includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been registered as 'Broadcasting Agency' and are paying Service tax on the amount received net of commission paid to advertising agency such as Lintas, Ulka, Hindustan Thompson etc. Therefore in the facts herein, relying upon in Glaxo SmithKline Pharmaceuticals Lid. reported at 2005 (188) E.L.T. 171 (Tri.-Mum.) when it was held as under:- "When an existing Tariff definition remains the same, then the introduction of new Tariff entry would imply that the coverage under the new Tariff for purpose of Tax is an area not covered by the earlier entry The new entry is extension of the scope of coverage if Service Tax and not carving out a new entry, from the erstwhile entry of "Management Consultancy Service"." (Emphasis Supplied) The activities carried on by the appellants were specifically covered by the definition of "broadcasting agency" with effect from 16-7-2001 while the definition of 'advertising agency' remains the same. Therefore, coverage under the new category is an area not covered by the earlier category of 'advertis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE v. Team UPD - 2006 (3) S.T.R. 427 (Tribunal) = 2005 (179) E.L.T. 469 (iv) CCE v. Team UPD - 2005 (184) E.L.T. 389 (v) The Madras High Court in Advertising Club v. CBEC reported at 2006 (2) S.T.R. 457 (Mad.) = 2001 (131) E.L.T. 35 (Mad.) in para 21, noted as under: "…….The decision as to how and in what format the advertisement should be, how it should be projected, at what point of time it should be flashed, in which areas it should be exhibited or the manner in which it should be drafted and exhibited has got nothing to do with the press media or electronic media. That would be the task of "advertising agency" alone. Therefore, when we consider the situation where a client goes to the press media and asks for flashing of the advertisement and such advertisement is flashed in the media this cannot be deemed to be a service provided by that media to such a client. Similarly, when a person approaches the electronic media and flashes an advertisement on the radio or television, as the case may be, the radio or television simply would flash the advertisement as per the instructions of the person concerned but such person will not get the advantage of the expertise of the adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comments, the Commissioner states that the applicant will not only be providing the value added service to its clients who advertise with it with respect to display or exhibition of an advertisement but will also be providing service with respect to preparation of an advertisement; its sales representatives personally help the clients design the advertisement in case the proposed expenditure is more than $ 4000 a month as could be seen on the website http://services.google.com/ads inquiry/en. When a client or an advertiser is spending more than $30 in a month, the applicant has "jumpstart" offer where the campaign is personalized and the applicant helps to create the campaign via e-mail (see http://adwords.gooele.com/select/jumpstart welcome?) Thus it is clear that through jumpstart offer and with the help of sales representative, the applicant would be trying to create a platform to provide service of an advertising agency to its advertiser. Whether the advertisers actually avail the facility or not is not an important factor, what is important is the fact that the applicant would be providing service of preparing advertisement campaign which is enough to make it chargeable to ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Service Tax. 3. On the other hand, canvassing' may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the news paper/periodical/magazine, negotiating the price, informing the general layout of the advertisement that would finally appear in such newspaper etc. In such cases the term 'canvassing' would certainly fall within the phrase 'any service provided…… in any manner connected to making, preparing, displaying and exhibiting and would be taxable service', (Emphasis supplied) Para 2, of this circular, is relevant to the facts of the present case. It recognizes an agent merely procuring an order for advertisement for a principal namely print media is not an advertising agency. The appellants' activity being only this and nothing more, therefore, cannot bring them classify them to be an Advertising Agency. (ii) This circular dated 28-10-2003 only clarifies that if the canvassing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready advertisements". It only provides, that, if the advertiser chooses to pay out of EEFC account, the advertiser should directly dispatch the media containing advertisement, as also amount directly to the foreign broadcasting agency and Zee Telefilms would guide them for such dispatch. Such activity surely has nothing to do with making, preparation or display of the advertisements at best it is providing 'Transport Assistance'. Thus, we do not find any reason to arrive at, that any clause of the agreement enjoins preparation of Advertisements or Advertising Material in any manner to being in the levy of Service Tax in this case. (k) It has been contended, by the department, that Star had authority to reject the advertising material if it does not meet with the technical specifications, stipulated by the foreign broadcasting agency. The Broadcaster to ensure that the advertisement does not contain any objectionable/obscene material etc. has to ensure that it should also be technically not deficient i.e. having defective picture and sound quality etc. Star India would refuse to send such Advertisement film to the principal. Evidently, in ensuring such quality, Star India is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts v. CCE [1988 (35) E.L.T. 543] to uphold extended period. The relevant extract of the same is reproduced below:- "7……Now adverting to the question of time bar, we find that the authorities have issued a Trade Notice holding Agarbatties as eligible for the benefit of exemption under Notification No. 55/75. It is pertinent to note that they have not held that the Dhoop is also eligible for the benefit of this Notification No. 55/75. The Dhoop sticks etc. we have held above are a product different from Agarbatties even though the two may belong to the same category. If the process of manufacture of the two is different, obviously, the two will have to be treated differently for the purpose of application of the benefit of notification. The clarification given in the context of Agarbatties cannot be made applicable to the Dhoop sticks etc. Inasmuch as appellants had manufactured the goods without informing the Central Excise authorities and had been removing them without payment of duty, these will have to be taken to attract the mischief of the provisions of Section 9(2) and the duty demanded for the longer time period is maintainable." However, the Hon'ble Supreme Court vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was not responding to the Revenue's demand to take out a licence and submit accounts was clear and overt and the Revenue could have taken action based thereon. The show cause notice, therefore, must be held to be beyond time". (Emphasis supplied) Thus, the department, in spite of having full knowledge, of the appellants' activities, failed to respond with provisions of law enabling them to take necessary action, within the time prescribed under Section 73(b) cannot now plead helplessness to result involve the larger period for demands. They cover up the inaction failure by making allegations of suppression on the appellants when none exist. (m) When, the demand for Service Tax is not sustainable on merits limitations, hence no interest is recoverable. Further, recovery of interest is ordered under Section 75 of the Finance Act, 1994. At the relevant time the Section read as: Section 75 - "Every person responsible for collecting Service Tax and Paying it to the credit of the Central Government in accordance with the provisions of Section 68, who fails to credit the tax or any part thereof to the account of the Central Government within the period specified in ..... 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