2014 (11) TMI 545 - AT - Service Tax

Tribunal rules in favor of advertising agencies on service tax levy for media discounts

GROUP M MEDIA INDIA PVT LTD, LINTAS INDIA PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE/SERVICE TAX THANE-I/MUMBAI-II AND COMMISSIONER OF CENTRAL EXCISE/SERVICE TAX MUMBAI-I & II Versus GROUP M MEDIA INDIA PVT LTD, LINTAS INDIA PVT LTD

The Tribunal ruled in favor of advertising agencies in a case concerning service tax levy on discounts/incentives received from media for advertisements. ... Levy of service tax on discount received by advertising agency - Whether service tax levy is sustainable in respect of discounts/incentives received by the advertising agency from the print/broadcast media in respect of advertisements placed by the said agencies on behalf of customers - Held that:- Tribunal in the case of Grey Worldwide (I) Pvt. Ltd. case, cited [2014 (9) TMI 180 - CESTAT MUMBAI], has already held that the service tax demands on these receipts are not sustainable, in the present case also, the same ratio has to be applied. Accordingly, we set aside the demands confirmed against the assessee-appellants M/s. Group M Media India Pvt. Ltd. and M/s. Lintas India Pvt. Ltd. - Decided in favour of assessee. Issues:1. Service tax levy on discounts/incentives received by advertising agencies.2. Service tax on amounts due from advertising agencies to media, pending write-back.Issue 1: Service tax levy on discounts/incentives received by advertising agenciesThe judgment involves eight appeals and three cross-objections concerning the sustainability of service tax levy on discounts/incentives received by advertising agencies from print/broadcast media for advertisements. The appeals were filed by M/s. Group M Media India Pvt. Ltd., M/s. Lintas India Pvt. Ltd., and Revenue. The central question was whether service tax could be imposed on these discounts/incentives. The Tribunal referred to a previous case involving M/s. Gray World Wide India Pvt. Ltd. and concluded that service tax was not applicable to these amounts as they were deemed incentives or accounting adjustments, not consideration for services rendered. The Additional Commissioner for Revenue acknowledged the similarity of facts with the Grey Worldwide case. Consequently, the Tribunal upheld the decision that service tax demands on these receipts were not sustainable, leading to the dismissal of Revenue's appeals and the allowance of appeals by M/s. Group M Media India Pvt. Ltd. and M/s. Lintas India Pvt. Ltd.Issue 2: Service tax on amounts due from advertising agencies to media, pending write-backApart from discounts/incentives, another issue addressed in the judgment was the service tax applicability on amounts due from advertising agencies to media, which were pending and later written back as per accounting procedures. The Tribunal's decision in the Grey Worldwide case served as a precedent, where it was held that service tax was not leviable on such amounts as they were not payments for services rendered. The Tribunal applied the same reasoning in the present case, setting aside the demands against M/s. Group M Media India Pvt. Ltd. and M/s. Lintas India Pvt. Ltd., and rejecting Revenue's appeals. The cross-objections were also disposed of in line with this decision.This detailed analysis of the judgment highlights the key issues of service tax levy on discounts/incentives received by advertising agencies and the treatment of pending amounts due from advertising agencies to media in terms of service tax applicability. The Tribunal's reliance on a previous case and consistent application of legal principles led to the dismissal of Revenue's appeals and the allowance of appeals by the concerned parties.