2007 (5) TMI 151 - AT - Service Tax

Valuation (Service tax) -Appellant(advertising agency) received the discount as incentive from the media agency and the discount consider by the revenue as commission and demand for service tax - Tribunal set aside the demand and penalty amount

Issues Involved:
1. Service Tax liability on incentives and commissions received by advertising agencies.
2. Validity of extended period invocation for Service Tax demand.
3. Legitimacy of penalties imposed under Section 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Service Tax liability on incentives and commissions received by advertising agencies:

The appellants, categorized as advertising agencies, were found to have collected incentives from a media company. The Revenue considered these receipts as extra commission and proceeded to recover Service Tax on these amounts by invoking a larger period. The Tribunal referred to similar cases, such as M/s. Marketing Consultants & Agencies Ltd. and M/s. Euro RSCG Advertising Ltd., where it was determined that the amounts received were not taxable services and did not constitute commissions. The Tribunal reiterated that the appellants had not billed or collected the amount alleged by the Revenue and that the media provided a trade discount, not a commission. The Tribunal emphasized that any amount received by the service provider from its client is liable to Service Tax, not amounts received from others, such as media discounts. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

2. Validity of extended period invocation for Service Tax demand:

The Show Cause Notice assumed that the appellants received a significant sum from the media without providing evidence. The Commissioner confirmed the amount by invoking the extended period, despite the lack of substantial proof. The Tribunal noted that the Show Cause Notice and the impugned order demonstrated non-application of mind, as there was no evidence that the appellants received the alleged sum from the media. The Tribunal highlighted that the appellants only received a discount from the media, which does not attract Service Tax. The Tribunal concluded that the extended period invocation was not justified due to the absence of evidence and the improper assumption of facts by the Revenue.

3. Legitimacy of penalties imposed under Section 78 of the Finance Act, 1994:

The Commissioner imposed a substantial penalty under Section 78 of the Finance Act, 1994, based on the assumption that the appellants received a large sum from the media. The Tribunal found that the Revenue's assumptions were baseless and lacked evidence. The Tribunal emphasized that since there was no Service Tax liability, there was no basis for imposing penalties or demanding interest. The Tribunal set aside the penalties and allowed the appeal with consequential relief.

Separate Judgment for ST/168/2006:

In a similar case, the Assistant Commissioner initially dropped the Service Tax proceedings against the assessee. However, upon review, the Commissioner reversed the order and confirmed the Service Tax demand for the periods 1997-98, 1998-99, and 1999-2000. The facts of this case were identical to the previous case. Following the same reasoning and judgment, the Tribunal allowed the appeal with consequential relief.

Conclusion:

The Tribunal set aside the impugned orders and allowed both appeals with consequential relief, emphasizing that there was no Service Tax liability on the amounts received as discounts or incentives from the media, and the penalties imposed were unjustified due to the lack of substantial evidence and improper assumptions by the Revenue.

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