Tribunal sets aside service tax demand on discounts, FCT purchases, and penalties under Finance Act

The Tribunal set aside the demand for service tax on the discount passed to clients by an advertisement agency, finding compliance with the High Court judgment on paying service tax on the entire consideration. Additionally, the demand for service tax on Free Commercial Time (FCT) purchases before the introduction of relevant taxation laws was also set aside. Consequently, the demands for service tax on commission and FCT purchases, along with interest, were deemed unsustainable. Penalties under the Finance Act, 1994, were also set aside as the appellant had complied with laws. The appeal was allowed with consequential relief.

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Issues Involved:
1. Liability of service tax on the full amount of commission earned from print and electronic media.
2. Liability of service tax on Free Commercial Time (FCT) obtained from film/serial producers.
3. Confirmation of demands along with interest.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Liability of Service Tax on Full Amount of Commission Earned:
The appellant, an advertisement agency, received a 15% discount from media companies on advertisement bills, which they sometimes passed on to their clients. The show-cause notice alleged that the appellant did not pay service tax on the full commission amount received from the media. The appellant argued that they paid service tax on the actual amount received as commission, whether they retained the discount or passed it on to clients. The Tribunal found that the appellant complied with the judgment of the Hon’ble High Court of Madras in Adwise Advertising Pvt. Ltd., paying service tax on the entire consideration received for their services. Thus, the demand for service tax on the discount passed to clients was set aside.

2. Liability of Service Tax on Free Commercial Time (FCT):
The second issue involved the purchase of time slots (FCT) from film/serial producers for advertisements. The show-cause notice demanded service tax on these purchases. The appellant contended that service tax on the sale of advertisement space or time was only introduced by the Finance Act, 2006, and thus not applicable for the period in question. The Tribunal referred to CBEC Circular No.334/4/2006-TRU, which clarified that such services were not taxable before March 2006. Consequently, the demand for service tax on FCT purchases prior to this period was set aside.

3. Confirmation of Demands Along with Interest:
Given the Tribunal's findings on both issues, the demands for service tax on the commission and FCT purchases, along with interest, were deemed unsustainable and set aside.

4. Imposition of Penalties:
As the demands for service tax were set aside, the penalties under Sections 76, 77, and 78 of the Finance Act, 1994, were also set aside. The Tribunal concluded that no penalties were warranted since the appellant had complied with the applicable laws and regulations.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The operative portion of the order was pronounced in open court on 19/08/2019.

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