2008 (1) TMI 137 - AT - Service Tax

Issues:
- Whether service tax should be levied on the commission received by the advertising agency from authorized broadcasting and print media.
- Whether the discount received by the advertising agency from the media should be included in the gross taxable value for service tax calculation.
- Whether the penalty imposed under various sections of the Finance Act 1944 is justified.

Analysis:

Issue 1: Service Tax on Commission Received
The appeal was filed against an order demanding service tax on the commission received by the advertising agency from authorized broadcasting and print media. The Tribunal emphasized that service tax is levied on the gross amount received by the service provider from the recipient of the service. In this case, the appellant was the service provider offering advertising services. The Tribunal held that the commission received by the appellant from the media should not be included in the gross taxable value for service tax calculation. It was clarified that the media giving a discount to the advertising agency does not impact the gross amount received by the agency from their clients. The Tribunal cited a previous decision where a similar issue was decided in favor of the appellants, highlighting that only amounts received from clients are liable to service tax.

Issue 2: Inclusion of Discount in Taxable Value
The Tribunal reiterated that the relationship between the advertising agency and the media involves the agency paying the media for advertisement insertions, not the other way around. Therefore, any discount received by the agency from the media should not be considered part of the taxable value for service tax calculation. The Tribunal emphasized that the service provider should only pay service tax on amounts received from their clients for the services rendered.

Issue 3: Justification of Penalties
The Tribunal also addressed the penalties imposed under various sections of the Finance Act 1944. Since it was established that there was no service tax liability on the commission or discount received from the media, the Tribunal ruled that there was no basis for imposing penalties or demanding interest. The impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant advertising agency, highlighting that service tax should only be levied on amounts received from clients for the services rendered, not on commissions or discounts received from media entities. The penalties imposed were deemed unjustified in the absence of any service tax liability on the disputed amounts.