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2015 (11) TMI 55 - CESTAT MUMBAI

2015 (11) TMI 55 - CESTAT MUMBAI - TMI - Business Auxiliary service - Advertisment service - Whether services provided by the appellant to M/s. Hero Honda Motors Ltd. through Cricket Celebrities namely Shri. Saurav Ganguly, Shri. Virender Sehwag, Shri. Yuvraj Singh, Shri. Harbhajan Singh and Shri Zaheer Khan is advertising services or otherwise - Held that:- All the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors .....

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ppellant is advertising services and accordingly rightly upheld the order-in original

Extended period of limitation - Held 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 .....

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ORDER Per : Ramesh Nair This appeal is directed against Order-in- Appeal No. SB(24) 24/STC/2010 dtd. 3/4/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone -1, wherein Ld. Commissioner (Appeals) upheld the Order-in-Original No. 15/STC/AC/08-09 dated 30/12/2008 and rejected appeal filed by the appellant. 2.The facts of the case is that the appellant are holding Service Tax registration and amongst others, providing advertisement services to M/s. Hero Honda Motors Ltd. during .....

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tax of ₹ 27,46,030/- on the taxable value of ₹ 5,26,70,587/- received by them during 1/4/2000 to 30/6/2003 for advertising services. The said show cause notice had been adjudicated vide Order-in-Original dated 30/12/2008 wherein it was held that the tripartite agreements between the appellant, M/s Hero Honda Motors Ltd. and the cricket players was for endorsing the products and brand of M/s. Hero Honda Motors Ltd. by the cricket players as models and advertised by the appellant thro .....

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ot informed about these services, there is suppression of facts and extended period invoked. The Original Authority thereby confirmed the Service Tax demand amounting to ₹ 27,46,030/- alongwith interest and imposed penalty under Section 76 and Section 78. Aggrieved by the said Order-in-Original dated 30/12/2008, the appellant filed appeal before the Commissioner (Appeals) which was rejected by upholding Order-in-Original. Being aggrieved by the said Order-in-Appeal appellant filed this app .....

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submits that their services were rightly classifiable under Business Auxiliary Services (BAS) which became taxable only w.e.f. 1/7/2003 therefore on the BAS, since there was no tax liability prior to 1/7/2003 no demand can be raised since the services admittedly covered under BAS and they have been paying service tax under such head w.e.f. 1/7/2003, it cannot be said that services prior to 1/7/2003 was covered under advertising services. He submits that advertising agency basically prepares con .....

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Ltd. Vs. CCE [2006 (4) STR 349 (Tri.Mum)]. (b)Trade Notice No. 99/GL-90/C.E./PRO/CAL-II/99 dated 16/9/1999 of Calcutta Commissionerate. (c)Board Circular No. 64/13/2003-S.T. dated 28/10/2003 (d)Diebold Systems Pvt. Ltd. Vs. Commissioner of Service Tax [2008(9) STR 546 (Tri. Chennai)] (e)Glaxo Smithkline Pharmaceutical Ltd. Vs. Commissioner [2006(3) STR 711(Tri.)] With regard to limitation he submits that show cause notice for the period 1/4/2000 to 30/6/2003 has been issued on 26/10/2004 i.e. a .....

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rt he placed reliance on following judgments: (a )Essel Packaging Ltd. Vs. CCE[2000(117) ELT 466(Tri)] (b) Polymers & Transmission Products Vs. CCE [2000(117) ELT 119(Tri.)] He further submits that the issue in the present case involves interpretation of law, therefore the penalties imposed under Section 76 and 78 are not correct. In support of this submission he placed reliance on following judgments: (a)Century Cement Vs. CCE [2002(150) ELT 1065(Tri)] (b)Biolwara Spinners Ltd. Vs. CCE [200 .....

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Hero Honda Motors Ltd. for publicising the product/brand of M/s. Hero Honda Motors Ltd. by displaying on the Cricket bat or by appearance on television and other electronics media. The contention of the appellant that they are not providing advertising agency and they are only arranging or introducing aforesaid celebrities to M/s. Hero Honda Motors Ltd. which does not fall under the advertising Agency which is not correct for the reason that it is composite contract under tripartite agreement b .....

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/s. Hero Honda Motors Ltd., therefore it is clearly the services of advertising. 5. We have carefully considered the submissions made by both sides. 6. The issue to be decided by us is that services provided by the appellant to M/s. Hero Honda Motors Ltd. through Cricket Celebrities namely Shri. Saurav Ganguly, Shri. Virender Sehwag, Shri. Yuvraj Singh, Shri. Harbhajan Singh and Shri Zaheer Khan is advertising services or otherwise. The definition of advertising services is as under: Advertising .....

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nts between appellant, M/s. Hero Honda Motors Ltd. and Cricket players. Relevant paras of said agreements are extracted below: Agreement of Shri Sourav Ganguly This agreement made this day of 21st June, 2002 at New Delhi between M/s. Hero Honda Motors Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi (hereinafter as Hero Honda, which expression shall, unless repugnant to the context or meaning thereof, be deem .....

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at 2/6, Biren Roy Road, Barsha (East), Kolkata- 700008(West Bengal).( Herein after referred as SOURAV) of the Third Part. WHEREAS (A) SOURAV is an outstanding cricketer of the world repute; (B) Percept has necessary authority to represent SOURAV in matters which are the subject matter of this Agreement; (C) ICC is the governing World body, monitoring the game of Cricket, known as the International Cricket Council. (D) Hero Honda is desirous of engaging the services of SOURAV through Percept and .....

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ro Honda as per ICC regulations. SOURAV shall make himself available and render his Services and perform obligations mentioned in this agreement subject to any other prior bonafide professional commitments of SOURAV and provided that SOURAV shall endeavor to co-operate with Hero Honda in the co-ordination of his schedule with Hero Hondas need for his services. 4. RETAINER FEES: In consideration of the services to be rendered by SOURAV through Percept and the obligations undertaken by SOURAV as .....

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reement of Shri Virender Sehwag This agreement is made on March 5th, 2002 by and between M/s. PERCEPT DMARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai 400013 (hereinafter referred as Percept DMark, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the First Part. Mr. Viren .....

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gement, partnership firm and having its office at 56, Community Centre, East of Kailash, New Delhi-1100065 (hereinafter referred as Collage Sports Management which expression shall include its successors and assigns) of the FOURTH PART. WHEREAS Percept D Mark has been appointed by the Client as the agency in connection with the promotion of the products which includes motorcycles, scooter and mopeds; AND WHEREAS Collage Sports Management India, interalia, carriers on the business of Sports Manag .....

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ographic and/or graphic representations, which identify the Player and/or his name and likeness, in connection with the Product. (b) Product shall mean two wheelers, which includes motorcycles, mopeds and scooters under the Hero Honda brand, which will be advertised or promoted in connection with the Player Identification. 2. GRANT OF ENDORSEMENT RIGHTS. The model grants to the Client, subject to and on the terms of this Agreement, the right and license to use and exploit the Player Identificati .....

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out hereunder:- (b) All payments under this Agreement will be made in Indian Rupees and subject to the deduction of taxes as required under law, from time to time. Payments made under this Agreement or pursuant thereto shall be made by Percept DMark/the client to Collage Sports Management by Demand Draft drawn on such Indian bank account as may be designated by Collage Sports Management/ Model in the manner and at the times set forth herein, and as stipulated in clause 3& 4 of this Agreem .....

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cts and to perform his obligations under this Agreement as set out in schedule hereto (the Services ). Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments, provided the Model shall co-operate with the Client to in the co-ordination of his schedule with the Clients need for his Services, and subject to the Client provided for all travel, meal and accommoda .....

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le approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of the Model and to words spoken by or attributes to him, and provided further that The Model shall not unreasonable withhold his approval. Percept D Mark shall send two (2) copies of the storyboard in print form for approval to Collage Sports Management/the Model and if Percept D Mark does not receive any disapprovals in writi .....

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services to be promoted and marketed[ and the Company may affix or attach the Player Identification in any manner to the Products themselves or to the associated packaging or any promotional material in relation thereto) (d) Upon expiry or sooner termination of this Agreement, Percept D Mark/the Client shall immediately cease to advertise, promote, distribute or sell any item whatsoever in connection with the use name, likeness, design, logo, trademark or trade name of the Player Endorsement. F .....

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cts or omissions of the Clientin relation to the advertisement, promotion or sale of the Products (ii) loss of damage to property, personal injury or, death resulting from the use of the Products (including, but not limited to Percept D Mark/ The Clientsbreach of clause 3 above) or (iii) advertising or promotional material provided by or on behalf of Percept D Mark/ The Client in relation to the advertisement or promotion of the Products. Agreement of Shri Yuvraj Singh This agreement made this d .....

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istered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai 400013 (hereinafter referred as Percept, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the Second part. And Mr. Yuvraj Singh, an individual residing at 5904, Duplex Houses, Modern Housing Complex, Mani Majra, Chandigarh- 160101 (Herein after referred as SOURAV) of the Third Part. WHEREAS (a) Yuvraj is an outstanding crick .....

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ervices to Hero Honda through Percept and has agreed to execute this Agreement, subject to such terms and conditions appearing hereunder. 1. SCOPE OF SERVICES: YUVRAJ shall render his services to Hero Honda by using Hero Honda logo on the bat for every match/series and perform his obligations under this agreement as provided for by Hero Honda as per ICC regulations. YUVRAJ shall make himself available and render his Services and perform obligations mentioned in this agreement subject to any othe .....

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YUVRAJ to Percept. Subject to other terms & conditions in this agreement, the above fee is payable to PERCEPT on behalf of YUVRAJ from the date of this contract irrespective of Hero Honda getting the ICC permission. 5. TAXES: All payments to be made under the provisions of the Agreement shall be made in India Rupees and shall be subject to service tax and all other taxes applicable and also the deduction of Income under the Indian Income Tax Act, 1961. Each payment shall be made in favour of .....

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, Duplex Houses, Modern Housing Complex, Mani Majra, Chandigarh- 160101 (hereinafter referred to as The Model) of the Second Part. And M/s. Hero Honda Motors Ltd, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, 110057 ( hereinafter as referred to as Client ) of the THIRD PART. WHEREAS PDM has been appointed by the Client as one of the agencies, the agency in connection with the promotion or sales and publicity of th .....

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d likeness, in connection with the Product. (b) Product shall mean any model of two wheelers manufactured by The Client (c) Endorsed Products shall mean the Product of The Client which is advertised or promoted in connection with the Model Identification. (d) Contract Territory shall mean India. (e) Contract Period shall mean a period of (12) months commencing from 1st September, 2002 and concluding on 31st August, 2003 or on such earlier date as this Agreement may be terminated in accordance wi .....

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levision, radio, posters, hoarding, newspapers, magazines and other form of printed or visual material, including Player Identification in connection with advertisement on the internet. 3. RATAINER FEES. In consideration for the grant of the rights by the Model, the Clientshall pay to the Model, a total retainer fees to the tune of ₹ 15.00 lacs as set out hereunder: 5. TAXES All payments to be made under the provisions of this Agreement shall be subject to deduction of Income Tax under the .....

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times set forth herein, and as stipulated in clause 3& 4 of this Agreement. Time is of the essence in relation to all payments under this Agreement. 7. SERVICES OF THE MODEL (a) The Model agrees to be available for Six(6) days during the Contract Period for the purpose of conceptualizing, creating and producing advertising campaigns covering Television, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promot .....

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EATIVE APPROVAL The Model has the right of reasonable approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of The Model and to words spoken by or attributes to him, and provided further that The Model shall not unreasonable withhold his approval. PDM shall send two (2) copies of the storyboard in print form for approval to The Model and if PDM does not receive any disapprovals in wr .....

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ll be engraved on the actual goods and services to be promoted and marketed. The Modelshall have the right of approval of the use of his signature and depiction on the signature line of goods or services, such approval not to be unreasonably withheld. Agreement of Shri Harbhajan Singh This agreement is made on October28, 2002 by and between M/s. Hero Honda Motors Ltd, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, .....

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ion shall unless repugnant to the context or meaning thereof, be deemed to include its successors) of the THIRD PART. And M/s. PERCEPT D MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai 400013(hereinafter referred as PDM , which expression include its successors and assigns) of the FOURTH PART. WHEREAS PDM has been appointed by the Client as one of the .....

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s and/or symbols and/or photographic and/or graphic representations, which identify the the Model and/or his name and likeness, in connection with the Endorsed Product, and shall include, without limitation, audio recordings, visual recordings, image, caricature, sobriquet, autograph, lieness, portrait, voice, silhouette of the Model. (b) Product shall mean any model of two wheelers manufactured by The Client. (c) Endorsed Products shall mean the Product of The Client , which is advertised or pr .....

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ual recordings, films, illustrations, line drawing, internet sites, websites and all other advertising and sales promotional materials used in connection with the exhibition of the Endorsed Product through mass media advertising consisting, inter alia, of various form of packaging and merchandising, including, but without limitation, television, radio, internet, website and press commercials in the Contract Territory during the Contract Period. 2. GRANT OF ENDORSEMENT RIGHTS. (a) The model throu .....

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nsideration of the services to be rendered by the model under this agreement, the client shall pay to PDM a total sum of ₹ 12,50,000/- (Rupees Twelve Lacs Fifty thousand only) subject to the diction of taxes as required under law, who in turn shall pay such amount, to the Agent for and on behalf of the Model as retainer fees at the times set out herein below and in the manner set out in the Clause 5 herein below. The service tax as applicable shall be paid by The Client . 5. MODE OF PAYMEN .....

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4 of this Agreement. PDM shall, within fifteen days from receipt of payment from the client as provided in Clauses 3 and 4 hereinabove, make payment of the said amounts to the Agent on behalf of the Model by way of Demand Draft drawn in favour of Sporting Frontier[ ] Limited or in any other name as may be advised by the Agent/Model from the time to time, and drawn on such Indian bank account as may be designated by the Agent/Model or any other party in whose favour the DD will be made. Time is .....

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Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for The Model and a PDM representative. One full day shall mean a shift of eight (8) hours and shall b .....

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advance. 8. LABELS/SIGNATURE LINE It is agreed that The client has the right to create a signature line or to affix or attach the Model Identification in any manner or to endorse products themselves or to the associated packaging. As a part of the goods and services of The Client , Model shall engrave his signature/initials, it being understood that the signature line shall be engraved on the actual goods and services to be promoted and marketed. The Model shall have the right of approval of .....

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uccessors and assigns) of the First Part. And Mr. Zaheer Khan, Son of Mr. Bakhitar Khan residing at 46, Revenue Colony, Shrirampur - 413709, District Ahemed-nagar, Maharashtra (hereinafter referred to as The Model) of the Second Part. And M/s. Hero Honda Motors Ltd, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, 110057 (hereinafter as referred to as Client ) of the THIRD PART. AND WHEREAS The Model has agreed to .....

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o wheelers manufactured by The Client . (c) Endorsed Products shall mean the Product of The Client , which is advertised or promoted in connection with the Model Identification. (d) Contract Territory shall mean India. (e) Contract Period shall mean a period of (12) months commencing from 23rd September, 2002 and concluding on 22nd September, 2003 or on such earlier date as this Agreement may be terminated in accordance with the terms here of. (f) Contract Year shall mean the period of twelve su .....

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However, it is clarified that The Client shall also be entitled to use the Modeldentification in connection with advertisement on the internet. 3. RATAINER FEES. In consideration for the grant of the rights by the Model , the Client shall pay to the Model , a total retainer fees to the tune of ₹ 12,50,000/-(Rs. Twelve Lakhs and Fifty Thousand Only) as set out hereunder: (a) ₹ 6,25,000 payable on the signing of this Agreement. (b) The balance sum of ₹ 6,25,000 payable after 6 mo .....

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awn on such Indian Bank account as may be designated by PDM or any other party in whose favour the DD will be made, as the case may be, in the manner and at the times set forth herein, and as stipulated in clause 3 & 4 of this Agreement. Time is of the essence in relation to all payments under this Agreement. 7. SERVICES OF THE MODEL (a) The Model agrees to be available for Six(6) days during the Contract Period for the purpose of conceptualizing, creating and producing advertising campaigns .....

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accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for The Model . (c) The Model shall endeavor to make best efforts and co-operate in every way The Client and in the public appearance use of his judgment in choice of language and demeanor to create and atmosphere, which would be conclusive to appearance effort. (d) That The Model will make sure that the bat logo is neat and clean in appearance on the fro .....

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roval. PDM shall send two (2) copies of the storyboard in print form for approval to The Model and if PDM does not receive any disapprovals in writing within seven (7) days after the receipt of these materials by The Model, they will deem to have been approved by the Model. 9. LABELS/SIGNATURE LINE It is agreed that The client has the right to create a signature line or to affix or attach the Model Identification in any manner or to endorse products themselves or to the associated packaging. As .....

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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 c .....

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refore services are clearly of advertising services and not of BAS. 6.1. We observed that considering the facts and terms of agreement Ld. Commissioner (Appeals) has rightly held that service of celebrities to M/s. Hero Honda Motors Ltd. through appellant is advertising services and accordingly rightly upheld the order-in original. The findings of the Ld. Commissioner (Appeals) are reproduced below: 07. I have gone through all the records of the case including the written and oral submissions ma .....

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act territory during the contract period only. The Appellant's contention is that the services rendered by them were only in the nature of liaison work and not advertising services since they are not involved in making, preparation, display or exhibition of advertisements, as defined under Sec 65(3) of the Act. 10. From the copies of tripartite agreements signed with various cricketers, and submitted by the Appellant, it is seen that as per these agreements, (a) Appellant has been appointed .....

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business class travel and five star accommodation for the Model and the Appellant (e) Appellant shall have the right/responsibilio., as well as duty to get all approval of all materials provided, relating to depiction of Hero Honda and any product/models/programme under the Hero Honda umbrella (f) All payments under this agreement shall be made to the Appellant in Indian rupees and shall be subject to service tax (g) upon expiry of this agreement, Hero Honda shall cease to use the Model identif .....

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as per Sec 65(105) (e) "taxable service" means any service provided, to any person, by an advertising agency in relation to advertisement, in any manner. 12. (i) As per, the tripartite agreements, vide para 10 above, the Appellant had been appointed by M/s Hero Honda in connection with the promotion or sales and publicity of their products and, as per the said agreement, the cricket players, were required to act as 'Models and work with the Appellant, in conceptualizing, creating, .....

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the payments made under the agreement were to be made to the Appellant in Indian rupees and were subject to service tax The Appilllant/Hero Honda were also to indemnify the Models for any damages rising out of any act of the Appellant/Hero Honda in relation to the advertisement, promotion or sale of the endorsed products. Further, upon expiry of these agreements, M/s Hero Honda would cease to use the Model identification promotional material to advertise their endorsed products. (ii) As per eac .....

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Appellant. Contrary to their submissions, the Appellant in having been appointed by M/s Hero Honda in connection with the promotion or sales and publicity of their products they were in fact, involved in the making, preparation, display or exhibition of advertisements, as defined under Sec 65(3) of the Act. The Board Circular No. 341/43/96-TRU, dated 31-10-1996, had clarified that, The expression "advertising agency" has been defined to mean any commercial concern engaged in providing .....

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ma hall who are merely associated with a advertisement film, cited by the Appellant, is not relevant to the facts of their case, since they were not merely associated but were, in fact, involved with conceptualizing, creating, and producing advertising campaigns, with the Models, in relation to the endorsed products, as per the said tripartite agreements. 14. The Appellant, in their submissions, have stated that their case was covered under the Board's clarification, vide circular No 64/13/2 .....

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in the newspaper then such activity would be liable to service tax under the category of Advertising Agency Services, The Madras High Court, in the case of M/s ADWISE ADVERTISING PVT. LTD [2001 (131) E.L.T. 111 529 (Mad.)], has held that, "selection of a particular print media or a particular electronic media would also be a part of the services because the advertising agency would be expected to advise its clients as regards the media through which such advertisements should be flashed. Th .....

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As per the tripartite agreements, all the payments made under the agreement were to be made to the Appellant, by M/s Hero Honda, in Indian rupees and were subject to service tax or subject to deduction of all taxes required under the law and that service tax shall be paid by Hero Honda. Therefore, the submissions of the Appellant that, in their case there was no consideration and the question of payment of service tax did not arise, is neither based on facts nor as per the requirements of servi .....

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cular No. 341/43/96-TRU, dated 31-10-1996, that the advertising agency is legally bound to collect and pay service tax. However, if the advertising agency fails to collect the service tax, the responsibility for payment of tax lies on the advertising agency. The advertising agency, therefore, cannot claim any exemption from payment of service tax on the ground that the same was not paid by the client. (iii) In having received payments from M/s Hero Honda, for rendering advertising services, as p .....

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taxable advertising services, rendered by them during 01.04.2000 to 30.06.2003. 16. (i) The Appellant's submission that they are paying service tax w.e.f. 01.07.03. under 'business auxiliary services', in relation to promotion or marketing of goods or services of clients, as per definition under Sec 65(19) of the Act, and that the Tribunal in the case of M/s Diebold Systems Pvt Ltd [2008 (9) STR 546] and M/s Glaxo Smithkline Pharma Ltd. [2006 (3) STR 711] have held that introduction .....

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the instant case is suppression of facts relating to the taxable advertising services, rendered by them. 'Event Management services' and 'Advertising services' are two distinct services and a person providing both these services has to pay service tax separately on both the services rendered by him, as per service tax law. The instant case is based on facts and not on interpretation of law. Contrary to facts, based on the tripartite agreements, the Appellant by stating that, in .....

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wo provisions and even if offences are committed in course of same transaction or arise out of same act, penalty imposable for ingredients of both offences and that person who is guilty of suppression deserve no sympathy. This decision of the Hon'ble Kerala High Court squarely applies to the facts of the Appellant's case since, despite providing taxable advertising services, during the period 01.04.2000 to 30.06.2003, they had suppressed the fact that the amount realized by them was for .....

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