2012 (7) TMI 631 - AT - Service Tax

Waiver of pre-deposit Service Tax demand along with interest and various penalties - appellant was receiving income by way of incentives from media in form of volume discount Held that - Appellant cannot function as a business auxiliary service agent of the media who can promote the business of the media - incentive is received by way of discount, whether prompt payment discount or volume discount - discount is the reduction in the price given to the buyer/receiver of the goods/services - Merely because the transaction is routed through the advertising agency, should the treatment be different - definition of business auxiliary service given in the Finance Act, 1994 does not warrant such a view - service tax is not leviable on the iscounts/incentives received by the advertising agency from the media - waiver of pre-deposit of the entire dues has been granted to the applicants during the pendency of the appeal

Issues Involved:
1. Jurisdiction of the Commissioner to adjudicate the case.
2. Liability of the applicant to pay service tax on volume discounts received from media.
3. Invocation of the extended period of limitation for issuing the show-cause notice.
4. Requirement of pre-deposit during the pendency of the appeal.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner to Adjudicate the Case:
The applicant contended that the Commissioner of Service Tax, Mumbai, lacked jurisdiction to adjudicate the case. However, this specific issue was not elaborated upon in the judgment, and the primary focus remained on the substantive issues of tax liability and pre-deposit.

2. Liability of the Applicant to Pay Service Tax on Volume Discounts Received from Media:
The applicants, registered as an advertising agency, were involved in placing advertisements in media for their clients. They received volume discounts from media houses based on the volume of business provided. The department argued that these discounts constituted income from promoting the media's business and should be taxed under "business auxiliary service." The applicants countered that the discounts were not for promoting media business but were volume-based incentives not specific to any client, and thus, not taxable.

The Tribunal examined the facts and previous case laws:
- Lintas India P. Ltd. vs. CST: Held that discounts cannot be considered as commissions.
- Euro RSCG Advertising Ltd. vs. CCE: Established that amounts received from clients are taxable, not discounts from media.
- Tata Motors Insurance Service Ltd. vs. CST: Supported the view that discounts are not commissions liable for service tax.

The Tribunal found no written agreement between the applicants and media for promoting business. The discounts were given based on the volume of ads placed, not as a commission for promoting media business. Therefore, the Tribunal concluded that the applicants had a prima facie case for waiver of service tax on these discounts.

3. Invocation of the Extended Period of Limitation:
The show-cause notice was issued invoking the extended period of limitation, covering July 2003 to October 2006, issued on 23.03.2007. The applicants argued that the extended period was not invocable as there was no suppression of facts. The Tribunal deferred the decision on this issue to the final hearing, focusing on the immediate matter of pre-deposit.

4. Requirement of Pre-deposit During the Pendency of the Appeal:
There was a difference of opinion between the members on whether the applicants should be required to make a pre-deposit. Member (Judicial) opined that the applicants had made a prima facie case for a 100% waiver of pre-deposit, citing the lack of an agreement and the nature of the discounts. Member (Technical) disagreed, suggesting a 50% pre-deposit based on precedents like the Grey Worldwide case, where volume discounts were considered taxable under business auxiliary services.

The matter was referred to a third member, who concurred with the Judicial Member, emphasizing that the discounts were not for promoting media business and referencing the P. Gautam & Co. case, which supported the applicants' position.

Final Decision:
In view of the majority decision, the Tribunal granted a waiver of the entire pre-deposit amount during the pendency of the appeal, acknowledging the applicants' strong prima facie case against the service tax demand on volume discounts received from media.

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