ST - Appellant places ads for clients in various media - On volume discounts, rate difference and amounts written back, demands under BAS cannot be sustained as these are either incentives or accounting adjustments and not consideration for any services: CESTAT
By TIOL News Service
MUMBAI, OCT 29, 2014: THERE are eight appeals & three cross-objections involving common issues.
Of the eight appeals, three have been filed by M/s. Group M Media India Pvt. Ltd. and M/s. Lintas India Pvt. Ltd. ; and five appeals have been filed by Revenue.
The quantum of Service Tax involved in these proceedings is around Rs.13 crores.
In respect of the Stay application filed by M/s. Group M Media India Pvt. Ltd. ( Appeal No.ST/269/2009-Mum), the Tribunal had by a Majority waived the pre-deposit and ordered a Stay in the matter. We had reported this order as 2012-TIOL-804-CESTAT-MUM.
The case – The a ppellant rendered the services of advertising agency and discharged service tax on the commission received by them from their client, the advertiser. The transaction involves three parties, the advertiser, the advertising agency and the media which puts out the advertisement. Print media has been exempted from service tax while the broadcasting media is not and they have discharged service tax under the broadcasting services on the consideration received. In certain cases, the media (broadcaster) gave a volume discount to the advertising agency based on the volume of business given by the advertising agency, at the end of the year which was shown as income in the books of accounts of the advertising agency.
The revenue was of the view that the volume discount received by the advertising agency is for the services rendered by the agency to the media, for promotion of the business of the latter, which falls under the category of "business auxiliary service" and the advertising agency is liable to pay service tax on this amount received.
Held: ST is not leviable on discounts received by advertising agency from media - A discount is reduction in price given to buyer of goods or services - a receiver of services cannot be considered as agent of service provider so as to be charged to Tax under BAS - Stay ordered: CESTAT by Majority
In respect of the Stay application filed by M/s Lintas India Pvt. Ltd. [Appeal No.ST/644/11-Mum] , the Tribunal had ordered a pre-deposit of Rs.34 lakhs (approx.). See 2012-TIOL-982-CESTAT-MUM.
The case – THE applicant undertook advertising work for their clients and which comprised of the following - (i) creation of advertising material and (ii) placement of advertising material in the media for display. For providing this service to their client i.e advertising they are getting certain commission and discharging the service tax liability. There is no dispute on that. The dispute is regarding the payments received by applicant for media cost. For example out of Rs.100/- billed to the client, Rs.85/- is as media cost and Rs.15/- as commission (which is taxable). Out of Rs.85/- only Rs.80/- is actually paid to the media/broadcaster. As the applicants are paying less amount to the broadcaster and keeping some amount with them which has been written off in the books of accounts as "write backs", a service tax demand was issued and the same has been confirmed under the category of "advertising agency service", the amount involved is Rs.1,36,84,668/-. Another demand of Rs.84,58,513/- has been confirmed under the category of "Business Auxiliary Services" on discounts received by the applicant from media for giving bulk "volume" advertisement to them.
Held: "… the applicant is liable to pay service tax on the amount which they have retained with themselves i.e. the amount received from the client less amount paid to the media. Same view has been expressed by the Board's Circular which is relied upon by the learned A.R. In view of the observation prima facie we are of the view that the applicant has failed to made out a case for 100% waiver of pre-deposit of the demand confirmed against them on account of "Write backs". Accordingly, we direct the applicant to make a pre-deposit of 25% of Rs.1,36,84,668/- within eight weeks from today.
7. Further, we find that the learned C.A. has been able to show us that in the present case also the advertising agency is not at the liberty to decide the advertiser. Therefore, the facts are somehow same to the facts of Group M Media India Pvt. Ltd. (supra) wherein this Tribunal has granted unconditional waiver of pre-deposit. Therefore, we waive the requirement of pre-deposit of tax of Rs.84,58,513/- demanded on account of Volume discounts.."
When the appeals were heard recently the appellant submitted that the issues involved have been examined at length in an identical matter pertaining to M/s. Grey World Wide India Pvt. Ltd. [2014-TIOL-1650-CESTAT-MUM] and the Tribunal had come to the conclusion that service tax is not leviable on these amounts inasmuch as these are either incentives or accounting adjustments and not consideration for any services rendered .
The AR confirmed that the facts involvedin the present appeals are also identical to those decided in the case of Grey Worldwide (I) Pvt. Ltd. cited supra.
The Bench, therefore, held -
"5. In view of the fact that the Tribunal in the case of Grey Worldwide (I) Pvt. Ltd. case, cited supra, 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. and allow the appeals filed by them. The appeals filed by the Revenue are rejected. Cross-objections are also accordingly disposed of."
In passing : Perhaps, Picture abhi baaki hai mere dost!
(See 2014-TIOL-2125-CESTAT-MUM )
