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M/s. Hero Motocorp Ltd. Versus C.S.T., Delhi

2015 (11) TMI 227 - CESTAT NEW DELHI

Advertising Agency service or sponsorship service - Import of service - agreements with various sports bodies located abroad and not having office in India - whether the service received by the appellant under various agreements fell under advertising agency service - Held that:- A perusal of the rights granted to the appellant under the sponsorship agreements reveals that these are agreements for sponsorship of various sports events and not for receiving advertising agency service. - Merely bec .....

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port events. - As such, it is clear that what is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and not simply providing of a place or space to the advertiser. - The expression display or exhibit does not mean the physical act of display and exhibit, but relates to the services rendered, as an expert body, to the client, for the purposes of display or exhibit. The same may involve the expertise of the provider of the services t .....

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uring the course of matches, which are going to be telecasted and by which they can popularize their products. As such, the activities amount to sale of space and not as regards advertisement. - there was no Advertising Agency Service received by the appellant from abroad except in respect of dealer advertisements - Demand set aside - Decided in favour of assessee. - Application Nos. ST/STAY/61688 61691/2013-CU[DB] & Appeal Nos.ST/60561 60564/2013-CU[DB] - Final Order Nos.52890-52893/2015 - Date .....

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service tax demand Break-up of the demand 1. 08.05.2008 (01.04.2006 to 31.12.2007) 7,06,77,958/- Details Value of taxable service Service Tax demand (approximate) 1. Sponsorship Fess under the Agreements referred to in the Show Cause Notice 473095813 5,79,64,142 1. Purchase of Tickets of World Cup, 2007 269040 32,963 1. World Sports Group Golf Tournament 88290375 1,08,17,419 1. Sponsorship Fees for Austria Cup 15209100 18,63,433 1. Total 57,68,64,328/- 7,06,77,958/- 2. 22.04.2009 (01.01.2008 to .....

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velopment International, Dubai 7,27,50,000 74,93,250 1. Asian Tour International Ltd. (World Sports Group India Pvt. Ltd.) 6,04,81,154 62,29,559 1. Total 23,88,03,654/- 2,45,96,777/- 4. 31.03.2011 (01.01.2010 to 31.12.2010) 20,21,450/- International Hockey Federation 1,96,25,735/- 20,21,450/- The aforesaid impugned demand was confirmed under Advertising Agency service [Section 65 (3) read with Section 65 (105) (e) of the Finance Act, 1994]. 2. The facts, briefly stated are, as under:- The appell .....

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under the heading Advertising and Publicity as shown in their balance-sheet. Regarding the components of demand (Rs.72,157/- and ₹ 98,171/-) pertaining to dealer advertisement, the appellant was reimbursing the cost of advertisements made by the authorised dealers in Bangladesh and Sri Lanka, Revenue alleged that the appellant received advertisement agency service [Section 65(3) / (105) (e)] on which it did not pay service tax under reverse charge mechanism and consequently confirmed the .....

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hts like naming the event after its name, display of its logo, promotional activities with or without players, post match presentations, and opening and closing ceremonies, naming the awards after the appellant, right to co-host, official parties, night parties, welcome function, right to place its name or logo on the pitch, etc., etc. (iv) The persons with whom it entered into such agreements did not provide any advertisement agency service as defined under Section 65(3) of the Finance Act, 199 .....

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171/- are sustainable. 4. Ld. Departmental Representative, on the other hand, contended that (i) the advertisement material has been defined in the agreement as under:- Advertising Material - shall mean all advertising, communications and promotional material of whatever nature and in whatever media used or to be used by or on behalf of the sponsor in relation to the official sponsor rights (OSR) In the terms of this agreement, it appears that the purpose of formulating the above terms is that d .....

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ment. Such professionalism regarding medium of advertisement can be perceived under the contents incorporated in the said agreement. (ii) The main purpose of the appellant is to advertise its product i.e. motor cycles and any other products. Without grant of any rights with regard to advertising materials as described above, no one can advertise its product during any event or shows. (iii) The manner of advertisement, size of advertisement boards and places such as welcome gates, prominent place .....

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the sports event. (vi) It is obvious that advertisements during the events promote sales of the appellants products. (vii) The gist of the agreements is also aiming towards managing the business of advertisement in various manners. (viii) Services provided by GCC and others were connected with display or exhibition of advertising material as is evident from the following provisions of the agreement with GCC:- 5.2The Global Partner covenants with, and undertakes to, GCC: (a) To submit to GCC re .....

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eemed approval of the Adverting Materials so submitted. (b) That, following approval as specified in clause 5.2(a), the Global Partner shall provide to GCC samples of all approved Advertising Materials for its records, GCC shall have the right at reasonable times and places during business hours and on reasonable notice to the Global Partner to inspect the Advertising Materials during the Term. In the event that any Advertising Materials are manufactured, advertised or distributed by the Global .....

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he services provided by the GCC and others were in the nature of advertising agency service. 5. Both parties agreed during the hearing of the stay applications that as the case was covered by the judgement of CESTAT in the case of BCCI Vs. CST, Mumbai (supra), the appeals themselves could be disposed of and accordingly the order was pronounced in the open court. However, in his written submissions submitted subsequently on 25.06.2015, ld. Departmental Representative stated that as the case was l .....

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ELT 483 (Del.)], (v) Hero Honda Motors Ltd. CESTAT, New Delhi [2014 (303) ELT 364 (Bom.)], (vi) HPCL Vs. Union of India [2010 (250) ELT 212 (Bom.)] (vii) Aircomp Enterprise Vs. Union of India [2014 (305) ELT 353 (Guj.] (viii) HSBC Ltd. Vs. CC (Adj.), Mumbai [2009 (243) ELT 518 (Tri-Mum.)] (ix) Govind Sharma Vs. CC, Nhava Sheva [2007 (213) ELT 585 (Tri. Mum)] (x) Gold Plast Vs. CCE, Coimbatore[2003 (156) ELT 524 (Tri. Chennai)] 6. We have considered the contentions of both sides. As regards Reven .....

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that final disposal of appeal by a cryptic order at the stage of consideration of stay application was unsatisfactory. CESTAT judgement in the case of HSBC Ltd. Vs. CC (Adj.), Mumbai (supra) cited by Revenue involved a situation where the consent of Departmental Representative was not obtained for disposing of the appeal itself. 7. As the issue involved in this case is whether the service received by the appellant under various agreements fell under advertising agency service, it is useful to r .....

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n 65 (105) (e) [to any person], by an advertising agency in relation to advertisement, in any manner; A perusal of the rights granted to the appellant under the sponsorship agreements reveals that these are agreements for sponsorship of various sports events and not for receiving advertising agency service. For example, the agreement dated 8.7.2002 between the appellants and Global Cricket Corporation Pvt. Ltd. (GCC) clearly shows that under the said agreement, on account of the global partnersh .....

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reof . Further, clause 7 of the said agreement deals with the obligations of GCC towards the appellant. None of these clauses can be construed to mean that GCC has provided any advertising agency service to the appellant. Merely because there is a mention of expression advertising material and the same is defined in the agreement, it cannot be said that GCC has provided advertising agency service to the appellant. Further, Schedule 4 to the said agreement deals extensively about the global par .....

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CC (and similarly others) would fall under the category of advertisement agency service because without the advice and approval of GCC, no advertisement would be displayed. As per 5.2(a) of the agreement with GCC (reproduced above), GCC was to endeavor to advice the Global Partner whether or not such advertising materials have been approved within ten working days of receipt of the same. Thus, it was the advice in the nature of intimating whether the approval has been granted. It was not an advi .....

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, taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. In this regard, it is pertinent to note that sale of space or time for advertisement and sponsorship services was introduced with effect from 01.05.2006 without any amendment to the definition of advertisement agency or advertising agency service and therefore in the given circumstances, it cannot be asserted that it was part of the advertisement agency service prior to 01.05.2006 and was ca .....

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e also would like to deal with the scope of individual services provided by the appellant and alleged to be as advertising services. The Revenue has sought to tax the sale of telecast rights of cricket matches conducted by the appellant to various broadcasting agencies. We would like to ask ourselves a question as to by selling the television rights to various channels which service relatable to advertisement is being provided by the appellant? Firstly, there is no advertisement involved and sec .....

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CI is being sold for viewership of millions of peoples and there is no client to which such service in relation to advertisement is being provided. We have examined the condition of contract entered into by the appellant with the broadcaster, which require them exhibit of the matches above 50 million homes; the telecast of opening and closing ceremonies of cricket match etc. which may be fetters by BCCI to ensure compliance by the broadcaster. At the most, the rights in the cricket match owned b .....

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Will such sale of performance rights coverage would convert the seller into an advertising agency, providing any service in relation to advertisement to a client. The answer is emphatic No . As such, we are of the considered opinion that such sale of television/telecasting rights would not be covered by a taxable service in relation to advertisement. 12. As regards sponsorship and logo money, it has been strongly contested that the appellant is not connected, in any way, with conceptualizing, de .....

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n the Trade Notice No. 1/96-ST dated 31.3.2003, No. 54/301/03-ST dated 28.10.03 and Ministrys Letter No. 345/4/97-TRU dated 16.8.99, clarifying that canvassing with client to sponsor the event and persuade them to give advertisement in particular newspaper/periodical/magazine would not amount to rendering of services in connection with advertisement As such, it is clear that what is being taxed is planning and expertise involved in making, preparing display or exhibiting the advertisement and n .....

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