2017 (10) TMI 286 - AT - Service Tax

Levy of Service tax - incentives - the appellants are receiving commission for the promotion and marketing of the goods for various manufacturers. Over and above this commission, the appellants are paid incentives for achieving sales targets - Held that - the issue whether discounts / incentives received by the advertising agency, through print media, is subject to levy of service tax was analysed and discussed in the case of GREY WORLDWIDE (I) PVT LTD. Versus COMMISSIONER OF SERVICE TAX, MUMBAI 2014 (9) TMI 180 - CESTAT MUMBAI , where Tribunal has held that the incentives received are not liable to service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether incentives received by the appellants for achieving sales targets are subject to levy of service tax.

Analysis:
The case involved the appellants engaged in providing services to yarn manufacturers, collecting service charges in the form of commission, but not discharging service tax on the incentives received. The department issued a show cause notice demanding service tax on the incentives, leading to a confirmation of demand by the original authority. The Commissioner (Appeals) upheld the order, prompting the appeal. The appellant argued that incentives were not related to the service provided and should not be taxed, citing relevant case laws. The department contended that incentives for promotion and marketing activities were taxable. After hearing both sides, the Tribunal considered whether the incentives were subject to service tax. The Tribunal noted that while the appellants received commission for promotion and marketing, incentives were additional payments for achieving sales targets. Citing previous judgments, the Tribunal found that incentives like discounts received by advertising agencies were not liable to service tax. Consequently, the impugned order was set aside, and the appeal was allowed.

The judgment clarified that the incentives received by the appellants for achieving sales targets were not subject to service tax, distinguishing them from the commission received for promotion and marketing activities. The Tribunal's decision was based on the analysis of previous cases where similar incentives were deemed non-taxable. By aligning with the precedent set by those cases, the Tribunal concluded that the impugned order demanding service tax on incentives was unsustainable. This ruling provided relief to the appellants by setting aside the demand and allowing the appeal with any consequential relief. The judgment highlighted the distinction between commission and incentives, emphasizing that the latter were not within the scope of taxable services, thus resolving the dispute in favor of the appellants.