DIAMOND PUBLICITIES PVT. LTD. vs BANGALORE SERVICE TAX-II

Service Tax Appeal No. ST/1952/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2

Service Tax Appeal No. 1952 of 2012
[Arising out of Order-in-Original No. 20/2012 dated 09.04.2012 passed by
the Commissioner of Central Excise, Bangalore – II Commissionerate]
M/s. Diamond Publicities Pvt. Ltd.
No. 27, Primrose Road
Bangalore – 560 025 ............ Appellant(s)

VERSUS
Commissioner of Service Tax
Bangalore - I
4th Floor, TTMC, BMTC Bus Stand
Building, Old Airport Road
Bangalore – 560 071 .............. Respondent(s)

APPEARANCE:
Mrs. Gomathi Srinivas, Advocate for the Appellant
Mr. M.A. Jithendra, Assistant Commissioner (AR) for the Respondent

CORAM:
HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL)
HON’BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL)

FINAL ORDER NO. 21019 /2026
Date of Hearing:13.04.2026
Date of Decision: 04.09.2026
PER: P.A. AUGUSTIAN

The issue in the present case is regarding sustainability of
demand of service tax under the heading of 'Advertising Agency Service'
up to 30.4.2006 and from 01.05.2006 under the heading 'Sale of Space
or Time for Advertisement Service’ on the consideration received by the
appellant for renting of hoarding to other advertising agencies for
displaying the advertisement.
2. The brief facts are alleging non-payment of service tax,
proceedings were initiated and show-cause notice (SCN) dated
04.10.2010 was issued for the period from 01.04.2005 to 30.09.2007.
Thereafter, adjudication authority as per the impugned order dated
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Service Tax Appeal No. ST/1952/2012
09.04.2012, upheld the demand of Rs. 44,65,842/- under the heading
of 'Advertising Agency Service' for the period 01.04.2005 to 30.04.2006
and Rs.82,10,787/- under the heading of 'Sale of Space or Time for
Advertisement Service’ for the period from 01.05.2006 to 30.09.2007
along with interest and imposed penalties under various provisions of
Finance Act, 1994. Aggrieved by said order, present appeal is filed.
3. When the appeal came up for hearing, Learned Counsel for the
appellant drew our attention to letter dated 22.07.2003 where issue
regarding taxability of advertisement hoarding booked by advertising
agencies was clarified by the office of Commissioner of Central Excise,
Chennai as under:-
“ Thus, when a Hoarding company provides a service of Display of
an advertisement to an advertiser, the hoarding company is the
'service provider and the advertiser is the 'client'. The gross
amount charged by the hoarding company to the client is liable to
service tax. But when the hoarding company is billing an
Intermediary i.e. an advertising agency, which in turn bills the
clients, then the advertising agency /intermediary is the service
provider who is liable to pay tax.
In view of the above it is clarified that if the hoarding company
bills their clients directly then they have to pay service tax. If the
hoarding company chooses to bill the advertising agency since the
hoardings were booked by the advertising agency, then the
hoarding company need not pay service tax. But it is the
advertising company who is responsible to pay service tax on the
gross bill amount including the money paid to the hoardings
company, as they are actually billing the clients. The hoarding
company should however ensure that the person, to whom the
board is let out, is registered with Service Tax as an Assessee ”.
4. Learned Counsel further submits that for the period up to
30.04.2006 issue is covered as per the decision of Tribunal in the
matter of CCE, Ludhiana Vs. Azad Publications - 2004 (167) E.L.T
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Service Tax Appeal No. ST/1952/2012
59 (Tri.-Del.) . As regards the demand after 01.05.2006, learned
Counsel submits that issue is of revenue neutral situation. Learned
Counsel further submits that the 'Sale of Space or Time for
Advertisement Service’ became a separate service w.e.f 01.05.2006 but
appellants continued to follow the practice by paying service tax
wherever they provided hoardings or space for advertisement to
persons other than advertising agency and wherever they provided
service such as hoardings or sale of space to advertising agencies, they
were not paying tax since the advertising agency was paying the tax
including the amount paid to them for leasing the hoardings or space.
Learned Counsel further submits that if separate service tax is
demanded from the appellant in the absence of CENVAT credit that can
be availed by the advertising agency, it would amount to double
taxation. In such a situation, the demand could not have been made by
invoking extended period of limitation. Learned Counsel also drew our
attention to the stay order and submits that on said ground of
limitation, the requirement of pre-deposit has been waived and stay
against recovery has been granted during the pendency of appeal.
Learned Counsel further submits that the Appellant has fully discharged
the service tax due from services provided directly to clients. As
regarding service provided to agencies, the agencies are the principal
service providers who collect the consideration from the client, pay tax
on the same, and out of such taxed consideration, pay the Appellant.
Since the amount which the Appellant receives as consideration from
the agencies has suffered service tax in the hands of the agencies, the
Appellant was under a bona fide belief that no further service tax was
payable.
5. As regards the demand confirmed by invoking extended period of
limitation, Learned Counsel submits that the show cause notice (SCN)
was issued on 04.10.2010 for the period 2005-2007, which is fully
outside the normal period of limitation. Learned Counsel further submits
that the show cause notice does not allege any positive act of
concealment, and the entire demand is derived from statutory records
maintained by the Appellant. There is no clandestine activity by the
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Service Tax Appeal No. ST/1952/2012
Appellant, and the Appellant was filing ST-3 returns regularly and
declaring all its income in good faith to the best of its understanding.
The CBEC, vide Circular No. 113/7/2009-ST dated 23.04.2009, has
established a standard operating procedure for scrutiny of ST-3 returns
by the assessing officer. Given that the Appellant was filing ST-3 returns
regularly, a mere bald allegation of suppression cannot be ground to
invoke the extended period. The Appellant in this regard relies upon the
ratio in Pushpam Pharmaceuticals Co. Vs. Collector of Central
Excise, Bombay [1995 (78) ELT 401 (SC)]. Learned Counsel further
submits that the issue is one of interpretation and not solely procedural.
Further, to add to the Appellant's confusion, there were conflicting
judicial views where the question of tax liability on a subcontractor was
undecided. Extended limitation requires positive act of suppression with
intent to evade; mere non-payment under bona fide belief does not
constitute willful suppression. In this regard, Learned Counsel relies
upon the ratio of the judgment in the case of Padmini Products Vs.
CCE [1989 (43) ELT 195 (SC)] . Thus, the demand confirmed by
invoking extended period of limitation is unsustainable. In this regard,
Learned Counsel relied on the following case-laws:
i. Indian National Shipowners’ Association Vs. UOI [2009
(14) S.T.R. 289 (Bom.)]
ii. Suchitra Components Vs. CCE, Guntur [2008 (11) S.T.R.
430 (S.C)]
iii. CCE, Chennai Vs. Team UPD Ltd. [ 2005 (179) E.L.T. 469
(Tri.-Chennai)]
iv. Oikos Vs. CCE, Bangalore – III [2007 (5) S.T.R. 229
(Tri.-Bang.)
v. Semac Pvt. Ltd. Vs. CST, Bangalore [2006 (4) S.T.R. 475
(Tri.-Bang.)
6. Learned Authorized Representative (AR) for the Revenue
reiterated the findings in the impugned order.
7. Heard both sides and perused the records.
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Service Tax Appeal No. ST/1952/2012
8. We find that for the period up to 30.04.2006 issue is covered as
per the decision in the matter of Azad Publications (supra) where it
is held mere sub-letting site to an advertising agency without providing
services of the nature defined under the Finance Act would not make
the respondent liable to pay service tax. As regards the demand after
01.05.2006, we find that the issue is of revenue neutral situation. The
appellant was paying service tax wherever they provided hoardings or
space for advertisement to persons other than advertising agency and
wherever they provided service such as hoardings or sale of space to
advertising agencies, they are not paying tax since the advertising
agency was paying the tax including the amount paid to them for
leasing the hoardings or space. In the present case, the show cause
notice does not allege any positive act of concealment, and the entire
demand is derived from statutory records maintained by the Appellant.
As held in the matter of Pushpam Pharmaceuticals Co. (supra), a
mere bald allegation of suppression cannot be ground to invoke the
extended period. Further we find that the issue is one of interpretation
and not solely procedural. There were conflicting judicial views as
regards the question of tax liability on this issue. Since SCN was issued
on 04.10.2010 for the period 2005-2007, the demand is beyond the
normal period of limitation. Hence demand confirmed along with
interest and imposition of penalty by invoking the extended period of
limitation by Adjudication Authorities are unsustainable, hence the
impugned order is liable to be set aside.
9. Accordingly, impugned order is set aside, and appeal is allowed
with consequential relief, if any, in accordance with law.
(Order pronounced in Open Court on 04.09.2026)

(P. A. AUGUSTIAN)
MEMBER (JUDICIAL)


(PULLELA NAGESWARA RAO)
MEMBER (TECHNICAL)
iss...
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