Supreme Court To Examine If ABCL Is Liable To Pay Service Tax For Promoting Brands Through Advertisements

The Supreme Court on Monday agreed to examine if M/S AB Corp Ltd (ABCL) was liable to pay service tax for the purpose of promoting brands through advertisements that featured Bollywood actor Amitabh Bachchan. 

Observing that the matter would need examination, a division bench of Justice DY Chandrachud and Justice MR Shah told additional solicitor general (ASG) Vikramjit Banerjee who appeared for the department that, 

“Okay, we will examine the matter. We are granting leave and we will hear it later.”

Vikramjit Banerjee learned Additional Solicitor General, relied on the definition of the expression, “advertising agency” which refers to any person engaged in providing any service connected with the making, preparation, display, or exhibition of advertisement and to include an advertisement consultant. He further placed reliance on the terms of the contract, especially, clauses 2.4 and 2.6 which have been extracted in the order of the Tribunal to submit that with regards to the width of the definition of the expression, “advertising agency”, a taxable service would be implicated.

The bench in the present matter was hearing an appeal by the service tax department against the 2019 order passed by the service tax appellate tribunal.

The service tax department in February 2005 had issued a show-cause notice wherein it was mentioned that ABCL was liable to pay Rs 4.6 crore in tax after it received Rs 28.74 crore for brand promotion service by engaging Bachchan for advertisements and activities between 2003-2005.

It is pertinent to mention that the actor's wife and Rajya Sabha MP Jaya Bachchan is one of the directors in ABCL.

Case Title: Commissioner Of Service Tax Mumbai Ii V. M/S A.B. Corp. Limited