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2023 MarsdenLR 1824
HIGH COURT MALAYA KUALA LUMPUR
REDBERRY AMBIENT SDN BHD – Appellant
Versus
TRIBUNAL RAYUAN KASTAM & ANOR – Respondent
[Originating Summons No: WA-24-26-05/2022]
The arrangement for renting advertising space is deemed a taxable advertising service under the Service Tax Act, as the media owner retains control over the advertising content.
Headnote:(A) Service Tax Act 2018 - Section 81 - Appeal against Customs Appeal Tribunal's decision regarding service tax applicability on advertising space rental - Tribunal upheld the Director General of Customs' decision, concluding that the arrangement constituted advertising services subject to service tax. (Paras 2, 12, 14)
(B) Taxable Services - Definition and interpretation of taxable services under the Service Tax Act - The agreement's substance determines tax liability, with the media owner retaining control over advertising space. (Paras 16-24)
Facts of the case:
The appellant rented advertising space from TGV Cinemas Sdn Bhd for advertising purposes and disputed the service tax imposed on this arrangement. The Director General of Customs deemed the rental arrangement as taxable under service tax regulations. (Paras 5-9)
Findings of Court:
The court found that the Tribunal's interpretation of the agreement was correct and that the service provided constituted advertising services subject to service tax. (Paras 22-24)
Issues: The main issues were whether the rental of advertising space constituted a taxable service and if the Director General's decision was valid. (Paras 14, 15)
Ratio Decidendi: The court held that the substance of the agreement indicated that the appellant was providing advertising services, and thus, the service tax applied. The terms of the agreement demonstrated that TGV retained control over the advertising content. (Paras 22-24)
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. dismissal of appeal against service tax decision. (Para 1 , 2 , 3) |
| 2. details of agreement and service tax implications. (Para 5 , 6 , 7 , 8 , 9) |
| 3. review process and tribunal's decision. (Para 10 , 11 , 12) |
| 4. contestation of service tax applicability. (Para 14 , 15) |
| 5. interpretation of taxable service under sta. (Para 16 , 18 , 19) |
| 6. court's analysis of agency and control in agreement. (Para 20 , 21 , 22 , 23 , 24) |
| 7. conclusion affirming tribunal's decision. (Para 25) |
Introduction
[1] On 14 March 2023, I dismissed the appellant's, Redberry Ambient Sdn Bhd (formally known as Focus Media Network Sdn Bhd) appeal against the decision of the Customs Appeal Tribunal dated 24 March 2022 ("the Tribunal") brought by way of an originating summons pursuant to O 55A r 1, Rules of Court 2012.
[2] The Tribunal had dismissed the appellant's appeal under s 81 of the Service Tax Act 2018 (" STA ") and maintained the Director General of Customs' ("DGC") decision that the letting of advertising space between the appellant and TGV Cinemas Sdn Bhd ("TGV") based on an arrangement reflected in the agreement between the parties is subject to service tax ("the impugned decision"). The agreement commenced on 1 January 2018.
[3] In the originating summons, the appellant had applied for the following orders:
(a) the appellant's appeal be allowed and the impugned decision be set aside;
(b) a declaration that the services provided by TGV to the appellant under the said agreement for the rental of advertising space ("the services") are not subject to service tax under the STA ;
(c) consequently, the sum of RM352,491.78 paid to the Royal Malaysian Customs Department on the count of service tax chargeable on the services be refunded to the appellant together with:
(i) interest at the rate of 5% per annum or such other rate as this Court fit, from 18 November 2020 (ie the date the appellant filed its appeal to the Tribunal) up to the date of judgment; and
(ii) interest on the sums to be refunded and the amount stated in paragraph (i) above at the rate of 5% per annum from the date of judgment up to the date of full settlement; and
(d) that costs of this appeal be paid to the appellant.
[4] I now state the reasons for my decision.
The Salient Facts
[5] The appellant provided taxable services under the STA and was registered for the purposes of the with effect from 1 September 2018. In order to provide its services to its customers, the appellant averred that it rents advertising space from vendors to place the advertisements of its customers. In providing this service, the appellant charges 6% service tax to its customers on the digital and cinema advertising space from vendors to place the advertisements of the appellant's customers.
[6] The appellant had entered into the said agreement with TGV for the letting of advertising space at TGV's Multiplexes. The relevant terms of the agreement are as follows:
(i) The preamble state that TVG which carries on the business of film exhibition and operates Multiplexes while the appellant is in the business of providing premium out of home TV media services and that TGV is desirous to let out all its advertising space at the multiplexes to the appellant for selling and marketing of advertising space to advertisers (defined as any person who wishes to have his advertisement displayed in the multiplexes) for display of advertisement and the appellant is desirous of such appointment upon the terms and conditions as agreed.
(ii) Clause 2.1 of the agreement state that "TGV hereby lets out its advertising space at the Multiplexes to the appellant for the purpose of selling and marketing all the advertising space to the advertisers" and "in relation thereto the appellant is hereby appointed as the sole agent to market and sell all the advertising space subject to the terms and conditions of this agreement".
(iii) Clause 2.2 of the agreement state that, "notwithstanding Clause 2.1, the appellant
