No service tax on printing of ads on PVC: CESTAT

The bench said the activity amounted to manufacture only

The respondent has no authority to make any changes

The Customs, Excise and Service Tax Appellate Tribunal’s (CESTAT) Hyderabad Bench has held that service tax could not be levied on the activity of printing advertising content on PVC material as it amounted to manufacture, legal website reported.

A two-member bench headed by Justice Dilip Gupta (President) and Technical Member PV Subba Rao said the respondent/assessee said it is into the business of wide-format printing. The customers provide “ready-to-print” advertisement content, which the respondent prints on PVC material, which could be PVC flex or PVC board, procured from the market, the order said.

The respondent, the court observed, has no authority to make any changes since his job is limited to printing. Thus, according to the respondent, it has no role in the ‘making of the advertisement’, it said.

The department had earlier issued a show cause notice to the respondent for recovery of service tax for the period April 2007 to March 2012.

The assessee argued it does not design or conceptualize the advertising content but just prints as per the designs supplied by the customers. The assessee also argued it does not have any specialisation to create design so as to be covered under the term ‘making of advertisement’.

The department had assailed an earlier order passed by the Commissioner of Customs, Central Excise and Service Tax, Hyderabad, dropping show cause notices against the respondent.

The department referred to the bills raised by the respondent, saying the consumers are deducting TDS, which clearly indicates that the activity undertaken is a service. 

The assessee, however, contended that the activity of printing of ‘ready-to-print’ advertisements on PVC flex material and the sale of printed material amounts to the sale of goods but not a service. And hence, no service tax should be payable .

According to the assessee, a person is considered an ‘advertising agency’ if he provides any service related to the creation, preparation, display, or exhibition of an advertisement. The assesse said the argument that it would come under the ambit of an advertising agency is not correct.

The CESTAT then upheld the order of the commissioner and stated that the printing activity would not be subjected to service tax.

2023 promises an interesting ride for print in India

Indian Printer and Publisher founded in 1979 is the oldest B2B trade publication in the multi-platform and multi-channel IPPGroup. While the print and packaging industries have been resilient in the past 33 months since the pandemic lockdown of 25 March 2020, the commercial printing and newspaper industries have yet to recover their pre-Covid trajectory.

The fragmented commercial printing industry faces substantial challenges as does the newspaper industry. While digital short-run printing and the signage industry seem to be recovering a bit faster, ultimately their growth will also be moderated by the progress of the overall economy. On the other hand book printing exports are doing well but they too face several supply-chain and logistics challenges.

The price of publication papers including newsprint has been high in the past year while availability is diminished by several mills shutting down their publication paper and newsprint machines in the past four years. Indian paper mills are also exporting many types of paper and have raised prices for Indian printers. To some extent, this has helped in the recovery of the digital printing industry with its on-demand short-run and low-wastage paradigm.

Ultimately digital print and other digital channels will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future. For instance, there is no alternative to a rise in textbook consumption but this segment will only reach normality in the next financial year beginning on 1 April 2023.

Thus while the new normal is a moving target and many commercial printers look to diversification, we believe that our target audiences may shift and change. Like them, we will also have to adapt with agility to keep up with their business and technical information needs.

Our 2023 media kit is ready, and it is the right time to take stock and reconnect with your potential markets and customers. Print is the glue for the growth of liberal education, new industry, and an emerging economy. We seek your participation in what promises to be an interesting ride.

– Naresh Khanna

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