Whether the amount retained by advertising agency as “write backs” cannot be treated as a part of service tax as the same is of the cost of the media and the same shall not be includable in their taxable amount?

PJ/Case Laws/2012-13/1185

Case:- M/s LINTAS INDIA PVT LTD Vs COMMISSIONER OF SERVICE TAX, MUMBAI-II

Citation: - 2012-TIOL-982-CESTAT-MUM

Issue: Whether the amount retained by advertising agency as “write backs” cannot be treated as a part of service tax as the same is of the cost of the media and the same shall not be includable in their taxable amount?

Brief fact: -The brief facts of the case are that the applicant undertook advertising work for their clients on two components (i) creation of advertising material and (ii) placement of advertising material in the media for display. For providing this service to their client i.e Applicant are getting certain commission and discharging the service tax liability. There is no dispute regarding discharging of the service tax liability on commission received. The dispute is regarding the payments received by applicant for media cost. For example out of Rs.100/- billed to the client, Rs.85/- is as media cost and Rs.15/- as commission (which is taxable). Out of Rs.85/- only Rs.80/- is actually paid to the media. The allegation is that sometimes out of the media cost of Rs.85/- payable to the broadcaster, the applicant paid less than Rs.85/- to the broadcaster. As the applicants are paying less amount to the media and keeping some amount with them which has been written off in the books of accounts as “write backs”. The service tax demand on this count has been confirmed for Rs.1,36,84,668/- under the category of advertising agency service. Another demand of Rs.84,58,513/- has been confirmed on discounts received by the applicant from media for giving bulk volume advertisement to them. This demand has been confirmed under the category of Business Auxiliary Services. The appellant before us is seeking waiver of pre deposit of the impugned demands.

Appellant Contention: - The Appellant submits that the amount of “write backs” is payable by them at any time as asked by the persons on behalf of the short payment is made i.e broadcaster or by the advertiser. He further submitted that the main activity of the applicant is advertising agency and for that they receive a commission. On that they are discharging Service Tax liability. He further submits that the amount which they have to pay to media for advertisement is by error/dispute; therefore, the amount was paid less. Therefore, the said amount shall not form a part of taxable service.

Appellant further submitted that the amount retained by them as “write backs” cannot be treated as a part of service tax as the same is of the cost of the media and the same shall not be includable in their taxable amount. In support of their contention, he relies on the judgment of the Hon'ble High Court of Bombay in the case of Commissioner of Income vs. Heros Publicity Services – 2001 (248) ITR 256 (Bom.). He further submitted that most of the demands are barred by limitation.

He further submitted that in the case of Group M Media India Pvt. Ltd. vs. CST vide order no. M/436/11/CSTB/C-I dated 20.10.2011 = (2012-TIOL-804-CESTAT-MUM), this Tribunal has granted unconditional waiver of pre-deposit. Therefore, he takes support of that decision and advanced arguments on the same line for this matter also.

Respondent contention:- The Respondentsubmitted that as per Board's Circular no. 341/43/96 dated 31.10.1996, it is clarified that the service tax is to be computed on gross amount charged by the advertising agency less amount paid to the print media. Admittedly, in this case the applicant has retained more amounts apart from the amount on which they have discharged the service tax liability, therefore, the difference of the amount which they retained without paying the service tax; they are liable to pay service tax.

He further submitted that in the case of Group M Media India Pvt. Ltd. (supra), this Tribunal has granted unconditional waiver of pre-deposit on the facts that the client will decide the advertiser and the liberty was not given to the applicant, if same is the case of the applicant then the decision of Group M Media India Pvt. Ltd. (supra)is applicable.

Reasoning of Judgment: The Tribunal is of the view that the applicant is liable to pay service tax on the amount which they have retained with themselves i.e the amount received from the client less amount paid to the media. Same view has been expressed by the Board's Circular which relied upon by the respondent. In view of the observation prima facie they are of the view that the applicant has failed to made out a case for 100% waiver of pre deposit of the demand confirmed against them on account of “Write backs”. Accordingly, Tribunal direct the applicant to make a pre-deposit of 25% of Rs.1,36,84,668/-.

The Tribunal contended that the facts are somehow same to the facts of Group M Media India Pvt. Ltd. (supra) wherein this Tribunal has granted unconditional waiver of pre-deposit. Therefore, Tribunal waive the requirement of tax of Rs.84,58,513/- demanded on account of Volume discounts. In the above term, the stay application is dispose of.

Decision: - Stay application disposed off.

Comment:- In this decision, the service tax is demanded on write back. But there is reverse situation also. The advertising agencies pass on the certain part of commission to the client. In that case, whether the service tax is to be paid on the amount actually received by the advertising agency from the pring media. This is being demanded by the department. Else, the actual amount received from the client is to be taken as taxable value. The definition of “value of taxable service” also says that the amount charged from the client. Hence the service tax is to be paid on this amount. But this is not acceptable to the department.

Comments

PJ/Case Laws/2012-13/1185

Post a Comment

Query