2006 (12) TMI 61 - AT - Service Tax

Service tax Revenue demanded service tax under two cases (i) On15% discount charge by appellant from their client provided by broadcasting agency (ii) on cash discount and target incentives Held that revenue demand is not correct and set aside penalty and interest

Summary

Issues Involved:
1. Liability of service tax on the 15% discount given by the broadcasting agency.
2. Liability of service tax on cash discounts and target incentives collected from the media.

Detailed Analysis:

Issue 1: Liability of Service Tax on the 15% Discount Given by the Broadcasting Agency

Background:
The appellants provide advertising services and receive a 15% discount from the broadcasting agency. The Revenue issued a Show Cause Notice demanding service tax on this 15% discount, alleging that the appellants received a fixed commission from the media.

Appellant's Arguments:
1. The appellants did not receive the discount amount either from the client or the broadcasting agency.
2. According to Rule 6 of the Service Tax Rules, 1994, service tax is payable only when the amount for the taxable service is received by the service provider. Since the discount was not received, no service tax is payable.
3. The Tribunal in the case of BPL Ltd. v. Commissioner of Service Tax, Bangalore held that service tax is not liable if the amount in question is not received from the customer.
4. The Show Cause Notice was issued for services rendered from January 2000 to December 2004, and the appellants have been registered and paying service tax since 2001. Therefore, the demand is barred by limitation.

Tribunal's Findings:
1. The Show Cause Notice and the impugned order assumed that the appellant received Rs. 6,52,27,619/- from the media without any evidence.
2. The legal position is that the advertising agency's client is the person or organization wanting to advertise, not the media. The media provides a discount to the advertising agency, which is not considered a commission.
3. The appellants demonstrated that they did not receive any amount from the media, only a discount.
4. Any amount received by the service provider from his client is liable to service tax, not amounts received from others.

Conclusion:
The Tribunal set aside the impugned order, stating that there is no service tax liability on the 15% discount and no question of imposing penalties or demanding interest. The appeal was allowed with consequential relief.

Issue 2: Liability of Service Tax on Cash Discounts and Target Incentives

Background:
A Show Cause Notice was issued demanding service tax, interest, and penalties on cash discounts and target incentives collected from the media.

Appellant's Arguments:
1. Cash discounts and incentives for targets achieved are not related to the services rendered to their clients and should not be included in the value of taxable services.
2. Cash discounts are received for prompt payment of bills to the media, not for services rendered to clients.
3. The commission on services rendered was introduced under business auxiliary services effective from 16-6-2005.
4. The Commissioner (Appeals) did not properly apply the Board's Circular No. 341-43-96-TRU dated 1-10-96.
5. The amounts received relate to space selling, which is not liable to service tax as per Board's Circular No. 64/13/2003-ST dated 28-10-03.
6. The appellants had a bona fide belief that they were not liable to pay service tax on cash discounts and incentives, making the invocation of the longer period unsustainable.

Tribunal's Findings:
1. The Show Cause Notice itself clarified that these amounts were received from the media, not from the clients.
2. Cash discounts are an income from the payment of bills in advance and not from services rendered to clients, thus not attracting service tax.
3. Target incentives are received from publications after achieving certain advertising targets and are not connected to services rendered to clients.
4. The lower authority acknowledged that cash discounts and incentives were not received in relation to services provided to clients but still confirmed the demand.

Conclusion:
The Tribunal set aside the impugned order, stating that there is no service tax liability on cash discounts and target incentives. The appeal was allowed with consequential relief.

Final Judgment:
Both appeals were allowed with consequential relief, and the operative portion of the judgment was pronounced in the open court.