TMI Blog2022 (9) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held that where the basic marketing or promotional material as per the approved design layout has been provided by the Reader s Digest to the appellant therein for getting them printed, and the appellant was only required to procure material on which it was to be printed, it would not mean that the service provided by the appellant would fall within the definition of advertisement agency . Levy of service tax on printing activity - HELD THAT:- The Commissioner was justified in holding that it would not be subjected to levy of service tax. In the first instance the activity of printing of advertisement content on PVC material which results into printed PVC flex or PVC board would amount to manufacture and, therefore, would not be leviable to service tax. Secondly, the appellant has not challenged the findings of the adjudicating authority on this aspect - or the post 01.07.2012 period, the Commissioner has held that the activity undertaken by the respondent being merely transfer of title on goods by sale and subjected to Sales Tax/VAT on the full value, would be excluded from the scope of service tax under section 65B (44)(a)(1) of the Finance Act. The sale of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to: b. Interest at the applicable rates should not be paid by them under the provisions of section 75 of the Finance Act, 1994 on the amount demanded at (i) supra. c. Penalty should not be imposed on them under section 76 of the Finance Act, 1994 for the contravention of statutory provisions, as detailed supra during the period prior to 10.05.2008. d. Penalty should not be imposed on them under section 77 of the Finance Act, 1994 for the contravention of statutory provisions, as detailed supra. e. Penalty should not be imposed on them under section 78 of the Finance Act, 1994 for mis-statement, suppression of facts and contravention of provisions of chapter V of the Finance Act or the rules made there under, with intent to evade payment of service tax as detained in the notice. 5. The relevant portion of the show cause notice is reproduced below: 5. The activity of Macromedia is to provide services related advertising/marketing campaigns of their customers though converting digital format communication media into quality wide format printing. Though Macromedia claims that they are mainly engaged in wide format printing on flex banners, they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) In respect to the bills raised by the respondent, the consumers are deducting TDS which clearly indicates that the activity undertaken by the appellant is a service; (ii) This apart, the respondent have not discharged VAT on merits, but only under a composition scheme which indicates that service is involved in the transfer of goods; (iii) From the definition of advertising agency under section 65 (3) of the Finance Act, any person engaged in providing any service connected with the making, preparation or display of advertisement would be providing advertising agency services; (iv) The Commissioner committed an error in placing reliance upon the letter of CBEC dated 16.08.1999 granting exemption to persons engaged in printing and publishing of telephone directories, yellow pages or business directories; (v) The Commissioner also committed an illegality in referring to the Circular dated 23.08.2007 which clarified that mere canvassing advertisements for publishing on commission basis is not classifiable under advertising service; and (vi) To support these contentions, the learned authorised representative placed reliance upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of advertisement do not come under the ambit of advertising agency services; Printing activity amounts to manufacture and so no service tax is payable (vi) The activity of printing of advertisement content on PVC material resulting into printed PVC flex or PVC board are considered as products of printing industry. Such printing activity results into manufacture as defined under section 2(f) of the Central Excise Act, 1944. These products are classifiable under the Tariff 4911 10 10 of the Central Excise Tariff and are exempted from levy of central excise duty; No service tax payable from 01.07.2012 onwards as printing activity is not a service (vii) The order passed by the adjudicating authority also sets aside the demand of service tax under the subsequent show cause notice for the period from 01.07.2012 to 31.03.2013. Though the appellant has preferred this appeal against the entire order, but no grounds have been stated in the appeal memo challenging the findings of the adjudicating authority that no service tax is payable for this period; and (viii) The show cause notice for the subsequent period April 2012 to March 2013 fails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respondent, noted that what was required to be decided was whether mere printing activity can be considered as advertising agency services only because the printed matter is advertisement material. After referring to various decisions of the Tribunal and the Circulars issued by the Board, the Commissioner held that the activity of printing of flex banners by the respondent as per the requirement of the customers and selling the same to the customers would not be covered under the scope of the advertising agency services for the period prior to 01.07.2012 and even for the period post 01.07.2012, the activity undertaken by the respondent, being merely transfer of goods by sale which is subject to Sales Tax/VAT on the full value, is excluded from the scope of the service tax under section 65B (44)(a)(i) of the Finance Act. The relevant portions of the order passed by the Commissioner are reproduced below: 20. I have examined the records of the case and the submissions made by the assessee carefully. The point for decision is whether or not the assessee is liable for service tax as advertising agency in respect of activities undertaken by them. The admitted facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertising agency is misleading. xxxxxxxxx 24. Board vide letter F.No. 345/4/97-TRU dated 16.08.1999 while examining the service tax liability of printing and publishing telephone directories, yellow pages or business directories, clarified that their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc., they will be liable to pay service tax on the charges made thereon . 25. Further, vide circular No.6/7/2007-ST dated 23.08.2007, the Board clarified that merely canvassing advertisements for publishing on commission basis is not classifiable under advertising services. 26. It is also noticed that the printed material is sold by the assessee to their customers and VAT is being discharged on the value. The transaction between the assessee and the customer is essentially on sale of goods. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted and published in the telephone directory, the activity will not attract service tax and it is only when persons also undertake any activity relating to making or preparation of an advertisement that service tax would be levied. The said Trade noticed dated 16.08.1999 is reproduced below: Trade Notice Service Tax Trade Notice No. 99/GL-90/C.E./PRO/CAL-II/99 Calcutta Commissionerate Dated 16-08-1999 Communicated by CBEC through 345/4/97-TRU dated 16.08.1999 Attention of the Trade and Field Formations are invited to the fact that doubts have been raised as to whether persons engaged in the activity of compilation, printing and publishing of telephone directories, Yellow pages and business directories are covered under the definition of advertising agency and accordingly liable to pay service tax. 2. The matter has been examined by the Ministry of Finance, Department of Revenue (Tax Research Unit). It has been decided that in the case of persons, who are printing and publishing telephone directories, Yellow pages or business directories, their activity is essentially of printing a readymade advertisement from the advertisers and pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax, the said Circular mentions that it would not be taxable under section 65(105) (e) of the Finance Act. The relevant portion of the Circular is reproduced below: Circular 96/7/2007-ST dated 23.08.2007 Master Circular clarifying technical issues relating to taxation of services Circular No. 96/7/2007-S.T., dated 23.08.2007 F.No. 354/28/2007-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi xxxxxxxxxx Reference Code Issue Clarification (1) (2) (3) 004.01/ 23.08.07 Persons/agencies canvass advertisements for publishing, on commission basis. Such persons/agencies do not provide any other services like making, preparation, display or exhibition of advertisement. Whether merely canvassing advertisement for publishing on a commission basis by persons/agencies is classifiable as Advertising Agency service [section 64(105)(e)] or not? Merely canvassing advertisement for publishing, on commission basis, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had provided services of procurement of material including paper, personalizing the papers, get printed the subject matter, quality control of the final product and posting/dispatching the material as per the mailing schedule. For providing the above services, the assesssee has outsourced activities such as printing, scoring, inserting in covers, etc. Further they have deputed a person for co-ordinating the entire operations with the vendors and Reader s Digest. Having made these observations and analyzed the definitions of advertising agency service , business auxiliary service and mailing list compilation and mailing service , the adjudicating authority concludes, in the same paragraph, that service provided by appellants to Reader s Digest merits classification as taxable services provided by an advertising agency in relation to the advertisement under Section 65(105)(e) of the Act. 5.4. We are unable to fathom these conclusions of the lower appellate authority. Surely it cannot be said of the appellants that they had prepared advertising material on their own. On the other hand, the facts clearly indicate that the basic market promotional material as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring for the appellant, however, placed reliance upon the judgment of the Kerala High Court in Zodiac Advertisers . The High Court held that all commercial concerns engaged in any of the activities connected with advertisement, which includes making, preparation displaying or exhibition of advertisement, answer the description of advertising agency. The High Court also distinguished the Circular dated 16.08.1999 by observing that in the present case the respondent was not engaged in printing work only. 25. It further needs to be noticed that against the decision of the High Court in Zodiac Advertisers, the department filed an appeal before the Supreme Court and the Supreme Court set aside the order passed by the Tribunal as well as the High Court. The Supreme Court remitted the matter to the Tribunal to examine whether the appellant undertook the work of conceptualising, visualising and creating the advertisement or whether it was only complying with the instructions of the clients. The relevant portion of the judgment of the Supreme Court is reproduced below: 2. Having heard learned counsel on both sides, we are of the view that an important question of law does a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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