2010 (9) TMI 594 - AT - Service Tax

Trade discounts treated as commission taxable under Business Auxiliary Service; Tribunal rejects appellant's principal-to-principal argument.

The Tribunal upheld the lower authorities' decision, ruling that trade discounts received by the appellant should be treated as commission and are taxable ... Waiver of predeposit - Demand - Whether the trade discount amounts received by the appellant to be treated as commission and taxable under the Business Auxiliary Service or not - The liability in that regard is essentially to be decided on the basis of the provisions of law comprised under the service tax statute - Besides the provisions of the said rules which are brought to our notice rather than disclosing principal to principal relationship between the publisher of the newspaper and the appellants, overall reading of the said rules disclose certain disciplinary control by the Newspaper Society over the appellants as far as it relates to advertising services are concerned which would, prima facie, disclose the trade discount to be in the nature of commission to the agents. Prima facie, do not find any infirmity in the concurrent findings in that regard arrived at by the authorities below - Direct the appellants to deposit a sum of Rs. 5 lakhs (Rupees five lakhs only) within a period of eight weeks while waiving the balance amount demanded under the impugned order. Issues: Whether trade discount amounts received by the appellant should be treated as commission and taxable under Business Auxiliary Service.Analysis:1. The appeal arose from an order passed by the Commissioner (Appeals), Hyderabad confirming the appellant's liability to pay service tax based on an order by the Adjudicating Authority. However, the liability was restricted to one year due to limitation issues beyond that period.2. The appellant argued that they provide advertising agency services as members of the Indian Newspaper Society, governed by specific rules. They claimed that the trade discount received was not in the form of commission but as part of principal-to-principal transactions, exempting them from service tax under the definition of taxable services.3. The Departmental Representative (DR) referred to a Board clarification stating that advertising services are liable to service tax under Business Auxiliary Service, regardless of the nature of the trade discount received. The DR supported the impugned order based on this clarification.4. The appellant highlighted a notice from the Indian Newspaper Society, emphasizing the fixed 60-day limitation for payment of monthly bills by society members, irrespective of client payments. This was presented to support their argument against the tax liability on trade discounts.5. The Tribunal analyzed the issue, considering the provisions of the service tax statute and the rules governing advertising agencies. Despite the appellant's claim of a principal-to-principal relationship, the rules indicated a level of control by the Newspaper Society over the appellants, suggesting the trade discount resembled commission. The Tribunal upheld the lower authorities' findings, directing the appellant to deposit a specified amount within a timeframe, while waiving the remaining balance demanded under the impugned order. Compliance was set for a specific date.This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the arguments presented and the Tribunal's decision regarding the tax treatment of trade discounts received by the appellant.