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2024 MarsdenLR 1627
COURT OF APPEAL PUTRAJAYA
REDBERRY AMBIENT SDN BHD – Appellant
Versus
TRIBUNAL RAYUAN KASTAM & ANOR – Respondent
[Civil Appeal No: W-01(A)-162-03/2023]
The rental of advertising space, when coupled with an agency relationship and revenue-sharing mechanism, constitutes taxable advertising services under the Service Tax Act 2018.
Headnote:(A) Service Tax Act 2018 - Sections 7 and 8 - Service Tax Regulations 2018 - Item 8, Group I - Appeal against High Court's dismissal of service tax applicability on advertising space rental - Appellant contended rental agreement should not incur service tax; court found agreement constituted advertising services subject to tax - Revenue sharing and agency relationship established advertising service provision. (Paras 86-89)
Facts of the case:
The appellant, providing digital and cinema advertising services, contested service tax applicability on an agreement with TGV Cinemas for advertising space rental, asserting it was not subject to service tax under the STA. (Paras 3-10)
Findings of Court:
The court affirmed the High Court's decision that the agreement involved advertising services subject to service tax, emphasizing the agency role and revenue sharing mechanism. (Paras 86-89)
Issues: Whether the agreement constituted a rental arrangement or advertising services subject to service tax. (Paras 21-22)
Ratio Decidendi: The court ruled that despite being couched as a rental agreement, the terms indicated the provision of advertising services, supported by the agency relationship and revenue sharing mechanism. (Paras 86-89)
Result: Appeal dismissed, affirming High Court's decision.
JUDGMENT
Introduction
[1] This is an appeal against the judgment of the High Court which had dismissed the appellant's appeal against the decision of the first respondent tribunal affirming the decision of the second respondent imposing service tax on an advertising arrangement involving the appellant.
[2] Having heard the appeal, examined the appeal records and considered the submissions by parties, we unanimously decided to affirm the decision of the High Court, and therefore dismiss the appeal, for the reasons which we set out herein.
Key Background Facts
[3] The appellant, Redberry Ambient Sdn Bhd (formerly known as Focus Media Network Sdn Bhd (FMN)) provides digital and cinema advertising services and is registered under s 13 of Service Tax Act 2018 ("the STA ") effective 1 September 2018. It thus charges 6% service tax to its customers on the services provided.
[4] The first respondent is the Customs Appeal Tribunal and the second respondent is the Director General of Customs ("the DG of Customs").
[5] The appellant had entered into an agreement with TGV Cinemas Sdn Bhd ("TGV") dated 1 January 2018 ("the Agreement"), which according to the appellant was essentially for the renting by the appellant of advertising space at TGV's multiplexes to place the appellant's customers advertisements.
[6] TGV in consideration issues invoices and charges 6% service tax to the appellant for the payment of the sum payable under the Agreement.
[7] On 8 May 2020, the appellant wrote to the Bahagian Cukai Dalam Negeri (SST) to obtain confirmation in respect of the service tax treatment for the said rental of advertising space by TGV to the appellant. The response came on 2 June 2020 which however confirmed that the rental charged by TGV to the appellant is subject to service tax.
[8] This led the appellant filing a review application under s 81(1) of the STA which however was dismissed by the second respondent - the DG of Customs, on 23 October 2020. The appellant then filed an appeal on 18 November 2020 to the first respondent - the Customs Appeal Tribunal, which in turn in its Form G dismissed the appeal. Thus, the first respondent's decision ("the Impugned Decision") is to maintain the second respondent's ruling that the letting of advertising space by TGV to the appellant based on the arrangement reflected in the Agreement is subject to service tax.
[9] The appellant then proceeded to invoke the provision of O 55A r 1 of the Rules of 2012 - concerning appeals to High Court under written law - and s 141W of the Customs Act 1967 (which permits any person aggrieved by the decision of the Customs Appeal Tribunal to appeal to the High Court on a question of law or of mixed law and fact) to appeal against the Impugned Decision of the first respondent to the High Court by way of an originating summons.
[10] Essentially, the appellant had sought a declaration that first, the Impugned Decision be set aside, and secondly, that the services provided by TGV to the appellant under the Agreement for the rental of advertising space was not subject to service tax under the STA , such that the sum of RM352,491.78 paid to the Royal Malaysian Customs Department ("the RMCD") for such purpose be refunded to the appellant, together with interest. This was again, dismissed on 14 March 2023, by the High Court, thus affirming the first respondent's Impugned Decision. Hence the appeal now before us.
Grounds Of Appeal
[11] In its memorandum of appeal the appellant listed the reasons for appealing, as reproduced follows:
1. The learned Judge erred in law and/or fact in dismissing the Appellant's appeal against the decision of 1st Respondent (ie the Customs Appeal T ribunal) that the services provided by TGV Cinemas Sdn Bhd ("TGV") to the Appellant under the Agreement between the Appellant and TGV ("Agreement") for the rental of the advertising space ("Services") amount to "advertising services" which are subject to service tax under the Service Tax
