2019 (8) TMI 1103 - AT - Service Tax

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 ... Levy of service tax - advertisement services - discount given by the media who sold space in print media to the appellant for advertisement and which they pass on to their client advertisers - HELD THAT:- The service tax has been discharged on the entire amount received by the appellant from their client-advertisers for the services rendered by them. This is in compliance with the judgment of the Hon’ble High Court of Madras in the case of ADWISE ADVERTISING PVT. LTD. VERSUS UNION OF INDIA [2001 (3) TMI 1 - MADRAS HIGH COURT] inasmuch as they have discharged service tax on the entire consideration which they received for their services - the amount which they have not received as consideration i.e., the amount which they got as discount and passed on their client advertisers, is not chargeable to service tax as the same is not charged for their services - demand set aside. Levy of service tax - advertisement services - appellants have purchased time-slots (FCT) from film producers and serial producers for advertisement in electronic media - HELD THAT:- The same has been made taxable only with effect from Finance Act, 2006 as indicated in CBEC Circular No.334/4/2006-TRU dated 28.2.2006 - Since the entire demand is for the period prior to March 2006, i.e., before the charging Section was introduced on this count, the same cannot be sustained. Accordingly, the demand on this account also needs to be set aside - Accordingly, demand of service tax on both counts in the impugned order needs to be set aside. Appeal allowed - decided in favor of appellant. 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.