The Hindu Business Line : A case of missing `service' link where the taxman saw what Zee didn't

ZEE and Star don't need any intros. So, let me get straight into a case that involved both of them in a tussle with the Excise Department, and reached the New Delhi `Customs, Excise and Service Tax Appellate Tribunal' (CESTAT).

As per an agreement with a foreign TV channel Asia Today Ltd, Zee Telefilms was acting as "exclusive agent to collect dues from customers of such channel in India". Similarly, Star India P Ltd had an understanding with Star Advertising Sales BV of Netherlands. Dispute was whether Zee and Star had to pay service tax, as ad agents. Sometime back Zee was in the news for another standoff with the Department on `broadcasting' angle.

In the current case, Mr V. Lakshmikumaran, arguing for the TV companies, explained in detail his clients' work: "Providing information to the foreign companies regarding displays, arranging sale of advertising and sponsorship on the channels, collecting information about advertising client, collecting advertisement from advertisers in India, despatching the same for broadcast to the channel, collecting payment from advertiser or advertising agency and conveying the same to the foreign companies."

For the Department, the relevant provisions on service tax were the following: The definition of `advertisement' as including "any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas."

Advertising agency, defined as "any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant." And `taxable service' included any service provided "to a client, by an advertising agency in relation to advertisement, in any manner." Mr R. C. Sankhla, arguing for the Department, said that the foreign companies had appointed Zee and Star "to sell TV advertisement". To this end, they were performing `various services' — such as obtaining the necessary RBI and other approvals for effecting the remittance, maintaining the list of actual and potential clients with particulars and supplying copies of the same to the foreign companies on request. "All these duties and responsibilities of the appellants clearly reveal that they are working as advertising consultant which is covered within the definition of advertising agency," contended Mr Sankhla.

As in TV serials, there are twists and turns in cases too. Thus, it was for Mr Lakshmikumaran to counter the Department's stand; he said that Zee and Star had acted only as representative agency of the foreign channels — "for soliciting or collecting of advertisement for display and passing of readymade advertisements to them for the purpose of flashing." He asked if mere flashing of advertisement on the channel would amount to rendering service connected with display of advertising.

To support his stand there were at least four things. One, the decision of the Madras High Court in the Advertising Club case: "Where a client goes to the press media and asks for flashing of the advertisement and such advertisement is flashed in the media, this cannot be deemed to be a service provided by that media to such a client. Similarly, when a person approaches the electronic media and flashes an advertisement on the radio or television, the radio or television simply would flash the advertisement as per the instructions of the person concerned but such person will not get the advantage of the expertise of the advertising agency."

Two, there was a 1996 Circular from the Department; it had clarified that the amount paid excluding any commission by the advertising agency for space and time for getting the advertisement published in the printing media or the electronic media is not includible in the value of taxable service for the purpose of the levy of service tax.

Three, a tribunal had decided in the Contact Advertising Agency case that printing and publishing of yellow pages did not attract service tax; "tax was attracted on advertising agencies which are providing services to advertiser by conceptualising, designing, or preparing advertisement."

And four, another Circular issued only months ago by the Central Board of Excise and Customs had clarified that in case of free commercial time, selling the time allotted did not fall within the purview of ad service.

After hearing both the sides, Mr V. K. Agrawal, Tribunal Member observed: "The Revenue has not prima facie been able to show that the appellants are engaged in providing any service connected with the making, preparation, display, exhibition of advertisement." The matter got remanded back to the Department for deciding on merits. So, you can catch up `after the break'.

From garlic paste to tomato puree

LET'S say you see a tomato puree pack on a store shelf and pick it up, turn it around and find Nestle's name and address. Before you head to the cash counter, answer this question: "Are you buying a brand?" If you said, `yes', you could be wrong, going by a recent decision of the New Delhi CESTAT.

In the Nestle case, Mr B. L. Narasimhan argued that name and address had to be put on the package as mandated by the Prevention of Food Adulteration Rules; and such `mere mentioning' cannot be the basis for classifying goods as a branded one, he said, banking upon an earlier case that involved Dabur's garlic paste.

The Revenue, for its part, argued through Mr Virag Gupta who said this was an instance of brand name on the product.

The Tribunal ruled that mere mentioning of manufacturer's name on the package did not amount to using a brand name. Shall we say, then, that puree is puree is puree?

Tailpiece

FM: "Where there is a wheel there is a service."

Truckers: "Where there is a wheel there's no way!"

Detaxification@TheHindu.co.in

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