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2016 (5) TMI 748 - CESTAT MUMBAI

2016 (5) TMI 748 - CESTAT MUMBAI - 2016 (41) S.T.R. 754 (Tri. - Mumbai), [2016] 93 VST 358 (CESTAT) - Classification - Advertisement services or Business Auxiliary services - all the cricket players are engaged through 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. - Period involved is 1-4-2000 to 30-6-2003 - Appellant submitted that they are not adve .....

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rformed 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 contention of the appellant that the services are of promotion of sale of goods of M/s. Hero Honda Motors Ltd. and therefore the same is classified as Business Auxiliary Service which became taxable only from 1-7-2003, we do not agree with this contention for the reason t .....

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edia would be a “Service”, by the advertising agency “in relation to the advertisements”. - Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibility for paying the service tax on the taxable advertising services, rendered by them during 1-4-2000 to 30-6-2003. - Imposition of penalty - Section 76 and 78 of that Act - Held that:- by applying the decision of Hon'ble Kerala High .....

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rtising services to the department and despite possessing the registration also not disclosed to the department, the provisions of services and collection of amount thereagainst - Held that:- it is a clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was .....

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Appeal No. SB(24) 24/STC/2010, dated 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 1-4-2000 to 30-6-2003. They had received ₹ 5,26,70, .....

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377; 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 through various mediums e.g. television, radio, displaying .....

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of facts and extended period invoked. The Original Authority thereby confirmed the Service Tax demand amounting to ₹ 27,46,030/- along with 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 appeal. 3. Shri R. Sundaran, ld. Counsel for the ap .....

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ifiable 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 content of the advertising material for publicity .....

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]. (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. v. Commissioner of Service Tax [2008 (9) S.T.R. 546 (Tri.-Chennai)]. (e) Glaxo Smithkline Pharmaceutical Ltd. v. Commissioner [2006 (3) S.T.R. 711 (Tri.) = 2005 (188) E.L.T. 171 (Tribunal)]. With regard to limitation he submits that show cause notice for the period 1-4-2000 to 30-6-2003 has been issued on 26-10-2 .....

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

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, Shri Harbhajan Singh and Shri Zaheer Khan to M/s. 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 .....

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d. is for promotion of the products and brand of M/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 def .....

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ary to go through the relevant clauses of the tripartite agreements 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 .....

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assigns) of the Second part. And SOURAV GANGULY, an individual residing at 2/6, Biren Roy Road, Barsha (East), Kolkata - 700008 (West Bengal). (Hereinafter 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) Her .....

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ch/series and perform his obligations under this agreement as provided for by Hero 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 bona fide professional commitments of SOURAV and provided that SOURAV shall endeavour to co-operate with Hero Honda in the co-ordination of his schedule with Hero Honda s need for his services. 4. RETAINER FEES : In consideration of the servic .....

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Income Tax Act, 1961. Each payment shall be made in favour of Percept D Mark (India) Pvt. Ltd. . Agreement of Shri Virender Sehwag This agreement is made on March 5th, 2002 by and between 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 Percept D Mark , which expression shall, unless repugnant to the con .....

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ing thereof, be deemed to include its successors and assigns) of the THIRD PART. And Collage Sports Management, 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, scooters and .....

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l have the following meanings : (a) Player s Identifications shall mean any words and/or symbols and/or photographic 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 .....

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tion for the grant of the rights by the Model, the Client/Percept D Mark shall pay to the Model, retainer fees as set 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 D Mark/the client to Collage Sports Management by Demand Draft drawn on such Indian bank account as may be designated by Collage Sp .....

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rances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products 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 Model s professional and other commitments, provided the Model shall co-operate with the Client to in the co-ordi .....

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ng shall take place, i.e. from the time of arrival to the time of departure. 6. CREATIVE 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. Percept D Mark shall send two (2) copies of the sto .....

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y combination) as part of the services, endorse his signature or initials, it being understood that the signature line shall be engraved on the 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, .....

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claims, suits, actions, judgments and costs and expenses whatsoever, (including reasonable legal fees) arising out of, or in any way connected with (i) acts or omissions of the Client in 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 Clients breach of clause 3 above) or (iii) advertising or promotional material provided by or on be .....

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sors and assigns) of the first 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 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 .....

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reed to provide such services and licensed to promote Hero Honda brand name on Cricket Bat as per ICC regulations. (e) YUVRAJ has agreed to provide certain services 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 Her .....

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RAJ as set out hereunder. However, Hero Honda will not be liable to pay any amount in eventually of termination of agreement between YUVRAJ and Percept/authority given by 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 Indian Rupees .....

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hapat Marg, Mumbai - 400013 (hereinafter referred as PDM , which expression include its successors and assigns) of the First Part. And Mr. Yuvraj Singh, an individual residing at 5904, 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 .....

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llowing meanings : (a) The Model Identifications shall mean any words 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 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 Pe .....

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Player Identification throughout the Contract Territory during the Contract Period in connection with the advertisement and promotion of the product, including but not limited to, by way of television, radio, posters, hoarding, newspapers, magazines and other form of printed or visual material, including Player Identification in connection with advertisement on the internet. 3. RETAINER FEES In consideration for the grant of the rights by the Model , the Client shall pay to the Model , a to .....

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y be advised by The Model from time to time, and drawn 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 o .....

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mitments 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 . 8. CREATIVE 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 at .....

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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 , The 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 the use of his signature and depiction on the signature line of goods or services, such approval not to be unreasonably withheld. Agree .....

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D PART. And Sporting Frontier Pvt. Limited, a company incorporated under the Companies Act, 1956 and having its Registered Office New Bridge Business Centre, No. 40 Ulsoor Road, Bangalore-40 (hereinafter referred to as the Agent which expression 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 Pe .....

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defined herein below) on terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows : 1. DEFINITIONS : In this Agreement the following words shall have the following meanings : (a) The Model Identifications shall mean any words 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, ima .....

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l mean the material, based on the Model Identification Rights, created and/or coming into existence pursuant to the Model rendering Services as contemplated under this Agreement and shall include without limitation his photographs, audio recording, visual 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 a .....

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rtisement and promotion of the Endorsed product, including but not limited to, by way of Promotional Material television, radio, internet, posters and other forms of printed material. 3. PAYMENT In consideration for the grant of the rights by the Model and in consideration 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 l .....

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to PDM by Demand Draft favouring Percept D Mark (India) Ltd. or in any other names as may be advised by PDM from time to time and drawn on such Indian - the DD will be made, as the case may be the manner and at the times set form herein, and as stipulated in Clauses 3 and 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 Draf .....

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ducing advertising campaigns covering Television, Outdoor and Point of Purchase Material in relation to the Products, Public appearances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products. (b) These 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 provi .....

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phere, which would be conducive to appearance effort. (d) That The Model will make sure that the bat logo is neat and clean in appearance on the front and back of the bat and that the requirement will be informed to the Client /PDM for fresh/replenishment of stickers well in 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 .....

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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 First Part. And Mr. Zaheer Khan, Son of Mr. Bakhtiar Khan residing at 46, Revenue Colony, Shrirampur - 413709, District Ahmednagar, Maharashtra (hereinafter referred to as The Model ) of the .....

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ll have the following meanings : (a) The Model Identifications shall mean any words and/or symbols and/or photographic and/or graphic representations, which identify the Model and/or his name and 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) C .....

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nd exploit the Player Identification throughout the Contract Territory during the Contract Period in connection with the advertisement and promotion of the product, including but not limited to, by way of television, radio, posters, and form of audio-video and printed material. However, it is clarified that The Client shall also be entitled to use the Model Identification in connection with advertisement on the internet. 3. RETAINER FEES In consideration for the grant of the rights by the M .....

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cable laws. 6. PAYMENT Payments to be made under the provisions of this agreement will be made in Indian Rupees, and will be paid to PDM on behalf of The Model by Demand Draft favouring Percept D Mark (India) Pvt. Ltd. or any other name as may be advised by The Model from time to time, and drawn 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 .....

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ion seminars in relation to the Products. (b) These 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 . (c) The Model shall endeavour to mak .....

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asonable 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 unreasonably 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 writing within seven (7) days after the receipt .....

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ervices to be promoted and marketed. The Model shall 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. From the above tripartite agreements, it clearly shows that all the cricket players are engaged through 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 ce .....

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became taxable only from 1-7-2003, we do not agree with this contention for the reason that services of celebrities are nothing to do with the promotion of the sale whether sale is promoted or not, the service of celebrities is confined to display of brand and advertise the product of M/s. Hero Honda Motors Ltd., therefore, 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 hel .....

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1-4-2000 to 30-6-2003. 09. In the instant case the Appellant, had a tripartite agreement with M/s. Hero Honda Motors Ltd. and the cricket players for the endorsement of the products of M/s. Hero Honda Motors Ltd. by cricket players, as Models, in advertisements through various mediums e.g., television, radio etc. throughout the contract 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 .....

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ant to act as Model in advertisements, for the promotion of the endorsed products of Hero Honda, through television, radio, internet and other printed material (c) The Model shall be available for the purpose of conceptualizing, creating, and producing advertising campaigns in relation to endorsed products (d) Hero Honda to provide for business class travel and five star accommodation for the Model and the Appellant (e) Appellant shall have the right/responsibility, as well as duty to get all ap .....

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the Appellant/Hero Honda in relation to advertisement, promotion or sale of the endorsed products. 11. As per Sec. 65(3) of the Act, Advertising Agency means any person engaged in for providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. And 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)&e .....

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Hero Honda were to provide for business class travel and five star accommodation for both the Model and the Appellant. The Appellant had the right/responsibility 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. All the payments made under the agreement were to be made to the Appellant in Indian rupees and were subject to service tax. The appellant/Hero Honda were also to indemnify th .....

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ase of Sourav Ganguly, the Appellant were also his agents, the rest of the agreements being the same. 13. From these above referred details of the said tripartite agreements, the services rendered by them were in no way connected with any liaison work relating to the endorsement rights of the cricket players/Models, as claimed by the 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 .....

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scope of the service which is included in the tax net extends not only to any service connected with making, preparation of advertisements but also includes any service connected with display or exhibition of advertisements. The Tribunal decision in the Zee Telefilms Ltd. [2006 (4) S.T.R. 349] relating to a caterer or lawyer or cinema hall who are merely associated with an advertisement film, cited by the Appellant, is not relevant to the facts of their case, since they were not merely associate .....

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y activity of advertisement. However the said circular had also clarified that if canvassing is involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear 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. ADW .....

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as per the said tripartite agreements, they had been appointed by M/s. Hero Honda in connection with the promotion or sales and publicity of their products and were involved in conceptualizing, creating, and producing advertising campaigns, with the Models, in relation to the endorsed products. 15. (i) 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 subj .....

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t charged by the service provider of such service rendered by him and the service tax on the value of taxable services, received during any calendar month, shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month. The Board has also clarified, vide Circular 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 serv .....

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1994. M/s. Hero Honda, a manufacturer of two wheelers, was not liable to pay service tax on behalf of the service provider. Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibility for paying the service tax on the taxable advertising services, rendered by them during 1-4-2000 to 30-6-2003. 16. (i) The Appellant s submission that they are paying service tax w.e.f. 1-7-2003 u .....

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d by them during 1-4-2000 to 30-6-2003. (ii) Further, their contention that they were registered with Service Tax under Event Management services since 2002, and therefore there is no suppression and that, when interpretation of law is involved, penalty cannot be imposed, is not acceptable since the issue involved in 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 ser .....

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them. 17. As regards penalty imposed on them under Sec. 76 and Sec. 78 of the Act, in the M/s. Krishna Poduval case, [(2006) 1 S.T.R. 185] the Hon ble Kerala High Court has held that under Sections 76 and 78 of Finance Act, 1994, incidents of imposition of penalty are distinct and separate under the two 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 sup .....

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