The appellants render advertising services to various clients in the form of creative agency wherein they create advertisement by themselves or their third party media agency wherein they do media printing and /or buying for advertisement to be published in print/ electronic media. They were receiving 15% agency commission from authorized broadcasting and print media during the period April 2000 to March 2001. The appellants had passed on the above mentioned commission to their clients.
According to the department, the appellants should have included the whole amount of commission received by them in the gross taxable value. Proceedings were initiated against the appellants for recovery of the differential service tax. The adjudicating authority confirmed the demand of service tax to the tune of Rs. 1,16,29,505/- under Section 73 read with Section 78, 76 and 77 of the Finance Act 1944. read with Rule 6(1) of the Service Tax Rules. He demanded interest under Section 75. A penalty of Rs, 100/- per day was imposed under Section 76 of the Act. Penalty of Rs. 1,16,29,505/- was imposed under Section 78 of the Act for proposing the value of taxable services. Further, a penalty of Rs, 1,000/- was imposed under Section 77 of the Act.
The Tribunal observed,
The basic point which should be borne in mind is that service tax is levied on the gross amount received by the service provider from the recipient of the service for the services rendered. In this case, the appellant is the service provider. The appellant being an advertisement agency rendered advertising service by engaging print, electronic media etc. The tax authorities should see whether the appellants had discharged duty liability on the gross amount received from their clients. In this case, the various media are not clients of the appellant namely, the advertising agency. If the media gives discount of 15% to the appellant, that amount has nothing to do with the gross amount received by the appellant from their clients to whom they rendered advertisement services. Therefore, there is no logic in demanding service tax on the discount of 15% received by the appellant from print media.
For a subsequent period the Service Tax Commissioner has passed in his order dated 17.1.2008 dropped the proceedings initiated against the appellants.
So the Tribunal set aside the impugned order.