Whether discounts given to an advertising agency would be leviable to service tax under business auxiliary services?

PJ/Case Law/2013-14/1839

Case:-P. GAUTAM & CO. VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD

Citation:- 2011(24) S.T.R. 447 (Tri.-Ahmd.)

Brief Facts:-These two stay petitions are filed for the waiver of pre-deposit of the following amounts.
Service tax demand of Rs. 98,037/- penalties of Rs. 200/- per day under Section 76 and Rs. 5000/- under Section 77. Since the issue involved in both these stay petitions is identical and is of the same assessee, these two stay petitions are disposed of by a common order.
The above said amounts have been confirmed by the adjudicating authority and upheld by the first appellate authority as service tax liability on the discounts/incentives that are received by the appellant as an advertising agency from the media would be liable for the service tax under the category of business auxiliary services.

Appellant Contentions:-Learned counsel would draw our attention to the fact that the issue is decided in the following cases :

(1) Kerala Publicity Bureau [2007 (10) STT 457 (CESTAT-Bang.) = 2008 (9)S.T.R. 101 (Tri.-Bangalore)]
(2) Euro RSCG Advertising Ltd. - [2008 (16) STT 232 (CESTAT-Bang.)] = 2007 (7)S.T.R. 277 (Tri.)
(3) Marketing Consultants & Agencies Ltd. - [2007 (6) STT 318 (CESTAT-Bang.) = 2006 (4)S.T.R. 136 (Tri.)]
All passed by the same Bench, in an identical issue wherein the Bench had held in favour of the assessees.

Respondent Contentions:- Learned departmental representative reiterates the findings of the lower authorities and submits that they are liable to pay the service tax as confirmed.

Reasoning of judgment:-After hearing both sides for some time on the stay petitions, we find that the appeals themselves could be disposed of as a Coordinate Bench of the Tribunal has taken the view in an identical issue. In view of this, the stay petitions filed for the waiver of the pre-deposit of the amounts involved are allowed and appeals themselves are taken up for disposal.
On perusal of the impugned orders, we find that in para 8, learned Commissioner (Appeals) has recorded the following findings.

“8. The whole issue revolves around the question as to whether service tax is leviable on the discounts/incentives that the appellants (an advertising agency) receive from the print media for the advertisements that the former get published on behalf of clients. The argument advanced by the appellants is that no service tax can be leviable thereon as this is not a service provided to their clients. From the emphasis placed on this argument it appears that the appellants have overlooked a fundamental issue, that is, the ability to provide different kinds of services to different clients. It is nowhere laid down that merely because an assessee provides one set of services to one set of clients; it is precluded from providing any other services to any other clients. Though the appellants are into business of providing advertising service they can also provide different services, for which classification would depend on the nature of services being provided. In the instant case as mentioned in the impugned order and also as stated by the appellants’ they get discounts for volume of business or advance payments. The business they provide to the print media, for which they get the incentive/discount, is the service they provide to their client i.e. the business they provide to the print media, for which they get the incentive/discount, is the service they provide to their client i.e. the print media. This service has been held to be a taxable service under the category of “Business Auxiliary Service” in the impugned order. It is therefore apparent that for different services rendered, any assessee could have different seats of clients.”
It can be seen from the above reproduced findings that the issue regarding whether discounts/incentives given to the appellant as an advertising agency would be liable for the service tax under the business auxiliary services. It is seen and as correctly pointed out by the learned counsel that the Coordinate Bench of the Tribunal in the three cases as cited herein above, have held that the discounts/incentives received by the assessee from the print media will not be liable for service tax under the category of advertising agency services. If that be so, the said discounts/incentives itself cannot be considered for the purpose of taxability under the head business auxiliary services as the amounts which are received are in respect of the services provided under the category of advertising agency services and the amount are discounts and incentives and not as charges for services.

In view of the foregoing, respectfully following the view taken by the Coordinate Benches in an identical issue, we are of the considered view that the impugned orders are liable to be set aside and we do so. The impugned orders are set aside and appeals are allowed. Stay petitions are also disposed of.

Decision:-Appeal allowed.

Comment:- The essence of this case is that discounts/incentives received by the assessee from the print media will not be liable for service tax under the category of “Business Auxiliary Services” in view of precedent decisions of the Tribunal on even issue wherein it was held that such discounts are amounts received with respect to advertising agency services.

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PJ/Case Law/2013-14/1839

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