T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIA No. 22/2003-ST dated 31.03.2003 passed by the Commissioner of Customs & Central Excise (Appeals), Cochin.
2. The appellants M/s. Zodiac Advertisers, Cochin are engaged in the manufacture of Screen Printed Materials. They had obtained registration as a small scale unit from the District Industries Centre, Ernakulam for printing of stickers, labels, visiting cards, etc. using raw materials such as paper, gum, card, ink, plastic sheet, aluminium sheet and C.T. sheets. Revenue proceeded against the appellants on the ground that they were engaged in the business of running an advertisement agency and had not paid the Service Tax for the period from 1.11.1996 to 31.03.2001. The original authority confirmed the demand of Rs. 41,40,792/- towards Service Tax payable for the above period. He imposed a penalty of Rs. 50,000/- under Section 76 and Rs. 10,000/- under Section 77 of the Finance Act, 1994 for failure to furnish the prescribed returns. Interest under Section 75 was also passed on the demand. The appellants challenged the original order before the Commissioner (Appeals). The Commissioner (Appeals) upheld the original order with the following observations in para 7 of the impugned order:
Under Section 65(2) of the Finance Act, 1994, ‘advertisement agency’ is any commercial concern engaged in providing any service with making, preparing, display or exhibition of advertisement. Further, ‘advertisement’ is defined as one including any notice, circular, label, wrapper, document, hoarding or in any other audio or visual representation made by light, sound, smoke or gas, From the facts narrated earlier, it is seen that the appellants are engaged in screen printing and preparation of labels, documents, hoardings, visual representation etc. Therefore, their activity would very much get covered by the term ‘advertisement’ and they being by virtue of the scope of the definition, ‘advertisement agency’. I do not thus see any infirmity in the order of the lower authority in coming to such a conclusion.
The appellants strongly challenge the above findings.
3. Shri S. Raghu, the learned Advocate appeared for the appellants and Shri Ganesh Havanur, the learned SDR for the Revenue.
4. The learned Advocate informed the Bench that the appellants are purchasing the required materials and carry out the activity of screen printing. Even though the appellants are known as M/s. Zodiac Advertisers, the name is a misnomer in the sense that the appellants are not advertisement agencies. In this connection, our attention was invited to Board’s clarification reproduced in Trade Notice dated 16.09.1999 of the Calcutta Commissionerate wherein it has been clarified that persons engaged in the activity of compilation, printing and publishing of telephone directorates, Yellow pages and business directories are not covered under the definition of ‘advertising agency’ and accordingly are not liable to pay service tax. It has further been stated that if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualising, conceptualising etc., then they will be liable to pay service tax on the charges made thereon. He pointed out that in the light of this clarification, the appellants are not liable for payment of service tax as they have not rendered any service of advertisement agency. Further, the learned Advocate relied on the following case-laws:
(i) CCE, Chennai v. Team UPD Ltd. 2005 (179) ELT 469(Tri-Chennai) wherein it has been held that when the appellants allowed their site to be used for display of advertisement of other party, against payment of rental charges, they cannot be called as Advertising Agency as they had not conceptualised, visualised and designed such advertisement.
(ii) Star Neon Singh v. CCE, Chandigarh wherein it has been held that preparing sign boards at the behest of customers is not a service provided by an advertising agency.
5. The learned SDR, pointing out to the definition of ‘Advertisement Agency’ under Section 65(2) of the Finance Act, 1994, said that the appellants are covered under the above definition as by their activities, they are preparing the advertisement material and it can be construed that they are providing a service of making and preparing the advertisement. He supported the reasoning of the lower authorities.
6. We have gone through the records of the case carefully. Advertisement, according to the understanding of laymen, is promotion of goods, services, companies and ideas. Modern advertisement is carried out in various ways and it is a very highly professionalised area. When a company wants to promote its product, normally, the work is entrusted to an advertisement agency. Advertisement is a highly creative work. Quite a bit of cerebral input is needed. There is conceptualisation, visualisation, designing etc. While advertising, the intention is to influence the mind of the people who watch the advertisement. There are various ways of advertisement. Advertisement is done through books and magazines. There are ubiquitous advertisement hoardings in all the modern cities. Advertisement is done through radio and TV channels. Now let us turn to the definition of ‘advertising agency’ as per the Finance Act, 1994.
Advertising agency” means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant.
As can be seen from the above definition, the ingredients of the service of advertising agency consists of the following:
(a)Making; (b) Preparation and (c) Display or exhibition of advertisement
There are various steps involved in the completion of an advertisement. The making and preparation of the advertisement is the most important and difficult part as it involves conceptualisation, visualisation and designing. The printed material is only a product. To produce the product, several input services are required and these services are rendered by Advertisement Agencies. In the present case, the appellants merely undertake the screen printing of the advertisement hoarding. In other words, they are not part of any creative activity. The actual advertisement agencies develop the concept for the advertisement and provide service to the concerns for developing the designs for the purpose of advertising their products. It can also be appreciated that in any advertisement, various agencies may be involved. The appellant is getting the work order for making items such as vinyl stickers, corrugated light boxes, PVC balloons, vehicle tyre stepney covers along with the art work given. The appellant merely manufactures the products as per the instructions and specifications of the job undertaken. Moreover, the appellant is not carrying out any exhibition of advertisement. It is seen that the appellants who merely manufacture screen printed products as per the directions of the advertiser, cannot be called as an Advertisement agency in the absence of any creative activity and services relating to preparation, making and display of advertisement on his part. To be called as an ‘advertising agency’, all the activities mentioned in the definition should be carried out by the person. We can provide one analogy. There is always a difference between a fashion designer and a tailor. A fashion designer may not do the actual stitching. He or she may provide all creative input in designing garments. A tailor simply executes the design. In our view, there is no evidence to show that the appellant is undertaking any advertising agency work in accordance with the definition given in the Finance Act, 1994. The Board’s clarification mentioned in the Trade Notice is also squarely applicable. Hence, we allow the appeal with consequential relief, by setting aside the impugned order.
(Pronounced in open Court on 10 MAR 2006)