ORDER
S.L. Peeran, Member (J)
1. Both these appeals pertain to the same issue and hence, they are taken up together for disposal as per law.
ST/148/2006
2. This appeals arises from OIA No. 45/2006-ST dated 15.03.2006 by which the Service Tax demand of Rs. 30,917/- under Section 75 of the Finance Act has been confirmed besides penalty of like sum under Section 78 of the Act.
3. The brief facts of the case are that the appellants were covered under the category of advertising agencies. The Audit found that they had collected incentives from M/s. Malayala Manorama. The Revenue has considered these receipts as extra commission and had proceeded to recover Service Tax on these amounts by invoking larger period. In this case, by Stay order No. 881/2006 dated 25.08.2006, this Bench was pleased to grant waiver of pre-deposit following the ratio of earlier stay Order No. 476/2006 dated 17.05.2006 rendered in similar matter as in the case of Marketing Consultants & Agencies Ltd. v. The Commissioner of Service Tax.
4. The learned Chartered Accountant submits that the above cited case along with the case of Euro RSCG Advertising Ltd. v. The Commissioner of Service Tax, on this very issue, was decided by this bench in assessees favour. He produced a copy of the Final Order Nos. 60 and 61/2007 dated 27.12.2006 and prays for following the ratio by allowing the appeal. He points out that the Tribunal has clearly held that what was received was not taxable service and it was not a commission. The same facts are seen in the present case and prays for allowing the appeal.
5. The learned JDR reiterated the departmental view.
6. On a careful consideration, I notice that the facts in the present case are identical to the one decided by the Division Bench in the case of Euro RSCG Advertising Ltd. and Marketing Consultants & Agencies Ltd. v. CST by Final Order Nos. 60 & 61/2007. The findings recorded in paras 9 to 11 are reproduced herein below.
9. We have gone through the records of the case carefully. In respect of the first appeal, the Show Cause Notice has made the following allegations against the appellants in Para 2 (b). We are reproducing the said Paragraph herein below:
2. (b) the assessee have not paid Service Tax amounting to Rs. 55,05,725/- on a taxable value of Rs. 6,52,27,619/- (as indicated in Annexure II to this notice) which is the fixed commission earned on monthly basis by the assessee from the media for releasing advertisements of certain customers during the period from January 2000 to December 2004;
We are also reproducing the said Annexure II mentioned in the Show Cause Notice:
ANNEXURE II
Details of cases where the service provider is receiving a lump sum amount from their client as agency fee every month and hence are not collecting commissions on Individual Invoices and therefore no service tax is paid on Individual bills
Intel
TV
Others
Bill @ net
Bill @ Gross
Commn. @ 15%
ST Payable
Up to May 03
0
0
0
0
0
0
0
From Jun 03 to Sep 04
160929754
108149442
2366691
271445887
319318102
47902215
3832177
From Oct 04 to Dec 04
23303363
44376048
1355000
69034411
81216954
12182543
1242619
Dell
Up to May 03
1306447
0
0
1306447
1536996
230549
11527
From Jun
03 to Sep
04
20793437
0
0
20793437
24462867
3669430
293554
From Oct 4 to Dec 04
6491450
0
0
6491450
7637000
1145550
116846
Crane
Up to May 03
0
0
0
0
0
0
0
From Jun 03 to Sep
04
238743
0
0
238743
280874
42131
3370
From Oct 04 to Dec 04
312800
0
0
312800
368000
55200
5630
65227619
5505725
The appellants pleaded before the original authority that they had not billed nor collected the amount of Rs. 6,52,27,619/- from the clients and this cannot be taken as the value of the taxable services provided by the agency. They had also stated that the broadcasters gave agency commission through trade discount on percentage basis at 15%. The Commissioner has given the following findings.
The contention of the assesses is not legally sustainable in respect of liability of service tax on payment received by them towards retainership arrangement. The assessee interalia stated that they charge lump sum amount of fee on periodic to their clients and that the amount of service tax due on such receipts is deposited. The evidences on record do not corroborate the contention of the assessee. Annexure II to the Show Cause Notice clearly mentioned that the assessee received retainership payment/agency fee to the tune of 6,52,27,619/- from their clients (up to May 03, from June 03 to Sep 04 and Oct 04 to Dec 04). The service tax liability on the aforesaid amount of agency fee/lump sum payment was computed to be Rs. 55,05,725/- and the assessee could not adduce any documentary evidence to substantiate their claim that the service tax amount due on such receipts had been duly paid. There is no evidence regarding payment of Rs. 55.05 lakhs (approx.) towards service tax during the aforesaid period. No evidence has been brought on record by the assessee to the effect that the service tax liability on the lump sum payment received from the clients was discharged by them, in duly prescribed manner. Since Service Tax was legally paid on the said lump sum payment and the assessee received payment from their clients as shown in Annexure II, the amount of Service Tax not deposited/not paid to the Government account, is recoverable from them under the provisions of law.
After making above observations, the Commissioner has confirmed the amount invoking extended period. He has also imposed a huge penalty of Rs. 70 lakhs under Section 78 of the Finance Act, 1994. Both the Show Cause Notice and the impugned order show total non-application of mind. The Show Cause Notice has just assumed that the appellant received an amount of Rs. 6,52,27,619/- from the media. There is absolutely no evidence that the appellants had received the above mentioned sum from anybody. It is not understood on what basis Annexure II to the Show Cause Notice was prepared by the authority who issued the Show Cause Notice. At this point let us be very clear on the legal position. The appellant is an advertising agency. The taxable service in respect of advertising agency is defined in Section 65(105)(e) in the following manner:
to a client, by an advertising agency in relation to advertisement in any manner.
In the present case, a person or an organization who wants to advertise their product approaches an advertising agency. Therefore such a person/organization who wants to avail the services of advertising agency becomes the client of the advertising agency. The advertisement can be done in various ways either through Print Media or through Radio or Television, etc. in order to fulfill the requirements of his client the advertising agency which is the service provider gets in touch with the appropriate media. In other words as far as the advertising agency is concerned, its client is not the media. In order to provide advertising services the advertising agency charges certain amounts from the clients. Such amounts are liable to service tax. With regard to the relationship between the advertising agency and the media, the advertising agency has to pay amount to the media and not the other way. To put it differently, the media such as broadcasting agency charges the advertising agency for insertion of the advertisement either in Print Media or in Television. In the present case, the media gives a discount of 15% to the advertising agency. If the Tariff rate is Rs. 100/-, it is sufficient the advertising agency pay the media Rs. 85/- along with service tax. The service tax component received from the advertising agency in turn is remitted to the exchequer by the media agency. The appellants have demonstrated that they have not received any amount from the media. They got only a discount from them. Perhaps the word “commission” is misleading. There is actually no evidence that the said amount has been received by the appellant from the media. In any case, any amount received by the service provider from his client only is liable to service tax and not amounts received from others. The adjudicating authority has neither considered the factual position nor the legality of the entire issue. The impugned order 12/2005 dated 27.4.2005 has no merits. Since there is no service tax liability, there is no question of imposing penalty and demanding interest. Hence we set aside the same and allow the appeal with consequential relief.
10. As regards the second appeal, the service tax has been demanded on the amounts received as (i) cash discount (ii) target incentives. The Show Cause Notice dated 17.2.2005 itself makes it clear that these amounts have been received from the media. Since these amounts have not been received from the clients of the service provider (the appellants) there is no liability of service tax on these amounts. What is this cash discount? The appellants have stated that some of the publications request for their payments before the advertisements are released and have agreed discount on these advance payments. These discounts on the bills are received from the publications and not from the clients. Thus cash discount is an income from payment of bills in advance and not from services rendered to clients and does not attract service tax. In addition to this cash discount, the appellants received incentives from certain publications after they reached certain targets of advertising business given to them. This incentive is called target incentive. It is in no way connected to the service rendered to the clients nor is billed to the clients. In fact the lower authority in the Order-in-Original dated 27.2.2005 has observed “there Is no dispute that the cash discount and incentives are not received by the in relation to the service provided by them to their clients.” We are surprised that after making such observations the authority has chosen to confirm the demand. In view of the above findings, the impugned Order-in-Appeal confirming the Order-in-Original does not have merit. We set aside the impugned order and allow the appeal with consequential relief.
11. In fine, we allow both the appeals with consequential relief.
Respectfully following the ratio of the above noted judgment, the impugned order is set aside and appeal allowed with consequential relief, if any.
ST/168/2006
This appeal arises from Order-in-Revision No. 3/2006-ST dated 22.03.2006. The Assistant Commissioner was satisfied with the submission of the assessee with regard to the non-levy of the Service Tax and dropped the proceedings initiated by the Show Cause Notice. However, on Review, the Commissioner has reversed the order and confirmed the Service Tax demand of Rs. 22,398/- for the periods 1997-98, 1998-99 and 1999-2000 along with similar amount of interest. The facts are identical to the above case. By following the above noted judgment, this appeal is also allowed with consequential relief, if any.
(Pronounced and dictated in open Court)