2023 (7) TMI 202 - AT - Service Tax

Levy of Service tax - Business auxiliary services - Appellant approach the print media like various daily newspapers and get these advertisements published, material to be published in the print media is given by clients - HELD THAT - From the documentary evidence, it is seen that for getting the advertisement published, the Appellant gets an invoice from the print media wherein they are giving discount of 10%-15%. After the advertisement is published, the Appellant is raising the invoice on Government of Andhra Pradesh and other clients wherein he is charging the full amount. The difference between the invoice raised by the Appellant on their clients and invoice raised on the Appellant by the print media is the margin which is available to the Appellant - In this case, it is seen that it is a kind of trading activity in services. The Appellant first books the space by getting certain discount and sells the same at a higher rate to their clients. Therefore, the discount being received by him from the print media is nothing but a profit margin and not any commission received from the print media. In the case of GREY WORLDWIDE (I) PVT LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2014 (9) TMI 180 - CESTAT MUMBAI it is held it can be seen that the Tribunal has been consistently taking the stand that incentives received by an advertising agency from the media without any contractual obligation to render any service cannot be levied to Service Tax under the category of BAS. The amount of incentive received by the Advertising Agency from the print media has been under litigation and the Tribunals have been consistently holding that such incentives or discounts cannot be termed as Business Auxiliary Service. On going through the case law relied upon by the Revenue, MALAR PUBLICATIONS LTD. VERSUS COMMISSIONER OF SERVICE TAX 2018 (1) TMI 1058 - CESTAT CHENNAI ), it is seen that the facts are different. There the Appellants were canvassing advertisements for the publications like Daily Thanthi, Rani Weekly etc., and were getting fixed retainership fee for their work. Therefore, the decision arrived at by the Tribunal in the case of Malar Publications Ltd is distinguishable and cannot be applied to the facts of the present case. The confirmed demand on the ground that the Appellant was providing Business Auxiliary Services to the print media cannot legally sustai - Appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the Appellant.
2. Applicability of Service Tax on the services provided.
3. Interpretation of discounts received by the Appellant from the print media.

Summary:

1. Classification of Services Provided by the Appellant:
The primary issue was whether the services provided by the Appellant, who is registered as an Advertising Agency, fall under "Advertising Agency Services" or "Business Auxiliary Services." The Appellant argued that their services involve the sale of space for advertisements in print media, which is exempt from Service Tax under Section 65(105)(zzzm). The Department initially classified the services under "Advertising Agency Services" but later reclassified them under "Business Auxiliary Services" to overcome the exemption.

2. Applicability of Service Tax on the Services Provided:
The Appellant contended that they act as intermediaries between clients (mostly the Government of Andhra Pradesh) and print media, paying the advertising charges upfront and receiving a discount of 10%-15% from the print media. This discount, they argued, is a profit margin and not a commission, as there is no service provider-client relationship between them and the print media. The Department, however, claimed that the discount is a commission and should be taxed under "Business Auxiliary Services."

3. Interpretation of Discounts Received by the Appellant from the Print Media:
The Tribunal examined whether the discount received by the Appellant from the print media could be considered a commission. It was determined that no evidence showed the Appellant was acting as an agent for the print media. The Tribunal cited several case laws, including EURO RSCG Advertising Ltd vs. CCST, Bangalore, and Kerala Publicity Bureau vs. CCE, which consistently held that discounts or incentives received by advertising agencies from print media are not taxable under "Business Auxiliary Services."

Conclusion:
The Tribunal concluded that the Appellant's activities are a form of trading in services, where the discount received from the print media is a profit margin and not a commission. The confirmed demand for Service Tax on the grounds of providing "Business Auxiliary Services" was found unsustainable. The Appeals filed by the Appellant were allowed with consequential relief as per law.

Pronouncement:
The judgment was pronounced in the Open Court on 04.07.2023.