Case Law Details
Display of logo for promoting a brand not taxable under ‘Business Auxiliary Services’ but ‘Promotion of Brand of Goods, services, events, business entity, etc.’ w.e.f. 01.07.2010.
M/s Sahara Airlines Limited, which was taken over by M/s Jet lite (India) Limited, the Appellants, entered into an agreement with its group company. M/s Sahara Airlines India Commercial Corporation Ltd. (‘Sahara’) engaged in developing, constructing and sale of immovable properties, for printing logo of Sahara on the air tickets, boarding passes, baggage tags, news paper advertisements, hoardings etc. for fixed consideration. The department issued a show cause notice (‘SCN’) for the period July’03 to Jan’07 alleging that such activity resulted into brand building of Sahara which promoted the marketability of the services provided by Sahara and was taxable under the category of ‘Business Auxiliary Services’ (BAS). The demand was confirmed by the Commissioner in the Order-in-Original and hence the present appeal was filed by the appellants.
Contentions of the Appellants
The Appellants put forth the following contentions:
• The activity involved mere display of the logo of the group company and not rendering any service to Sahara. The agreement in question did not relate to any services rendered by Sahara to its customers, hence, mere display of logo cannot be said to have been covered under BAS.
• There is no evidence on record to suggest that mere use of the word ‘Sahara’ amounted to provision of promotion or marketing services to Sahara.
• During the relevant period, Sahara was not rendering any service and hence question of promotion and marketing of such services does not arise at all.
• Brand promotion and sale of space have been made taxable subsequent to the relevant period and hence they cannot be held liable to a period prior to the levy of service tax.
• The SCN merely stated about display of logo of Sahara and no evidence has been gathered on record to establish provision of any service for promoting or marketing in respect of any of the services provided by Sahara. A bare reading of the order along with the SCN would disclose that the Commissioner has clearly travelled beyond the scope of the SCN.
Contentions of the Respondents
The contentions of the respondents were as follows:
• It was clear from the agreement that the same was for promoting the business activity of Sahara and that was clearly reflected from the SCN. Further, it is a settled law that the intention of the party to a contract has to be gathered from the language used in the agreement and the agreement in question clearly disclosed the service for promoting of the business activities of Sahara.
• The language of the agreement clearly reveals that Sahara wanted the appellants to give extensive publicity to their activities in order to promote their business and area of operation.
• Sahara was engaged in the provision of taxable services and was also registered under various categories of services for service tax and that the sole object as envisaged by the agreement was promotion of services rendered by the client of the appellants.
• The contention that mere use of logo served no useful purpose is inconceivable as no monetary consideration would have been paid without any purpose or motive.
Observations of the CESTAT
The following observations were made by the CESTAT:
• The SCN was completely silent about the services rendered by Sahara, therefore, the findings of the Commissioner in respect of the services being rendered by Sahara is beyond the scope of the SCN.
• The agreement was executed for wide activities of Sahara; however, the agreement did not specify any particular business of Sahara which could be said to be the subject matter of publicity and/or promotion thereof. The same has been contended by the Department on the basis of the memorandum and Articles of Association of Sahara. However, it cannot be of any help to establish rendering of service by the appellants under BAS.
• To classify under BAS it needs to be proved that the service recipient is engaged in rendering some services to others and the service provider have rendered his service for promotion or marketing of such services provided by service recipient to others.
• If the Department establishes that any services are rendered in the nature of processing fee or documentation charges, etc. that could form part of the services rendered and may constitute taxable services subject to service tax. Whereas the SCN relates to only sale of immovable properties and not to any service being rendered by Sahara. Therefore, the Department has travelled beyond the scope of the SCN and has failed to produce any evidence to justify classification of the activity of display of logo by the appellants under BAS.
• Mere promotion of a brand by itself did not amount to promotion or marketing of services till specific entry in that regard was made in the Act and to bring the same into the tax net, new entry has been introduced in the year 2010. It is only consequent to the said entry that mere display of brand could amount to promotion of services rendered by the client and not otherwise.
• It is a settled law that with the introduction of new entry without any bifurcation of the old entry and without disturbance of any old entry would disclose non-inclusion of the subject of the new entry in the old existing entries. Since clause under Section 65(105)(zzb) in relation to taxable service under BAS was not disturbed, it would be evidently clear that during the relevant period the activity of promotion or marketing of logo or a brand of service of the client was not forming part of BAS.
• It was for the Department to establish the positive effects of display of logo and it was not for the assesse to prove the negative.
Conclusion:- Based on the above discussion, the CESTAT held that the adjudicating authority did travel beyond the scope of the SCN while deciding the matter. As the activity of the appellant comprised of mere display of logo and the entry relating to mere display of logo resulting in promotion and marketing of the business of the client having been introduced subsequent to the relevant period, the activity of the appellants cannot be said to fall under BAS.
