The Mumbai bench of the Customs Excise & service tax appellate tribunal(CESTAT) has held that service tax is not leviable on volume discounts/incentives received from media owners at end of Financial year for publication purpose.
The Respondent M/s. Group M Media (India) Pvt. Ltd. has been engaged in placement of advertisements in media on behalf of its various clients. For placing orders in the print and broadcasting media, the Respondent prepares media plan, seeks approval of its plans, takes note of its suggestion, seeks choices of Media House for publication purpose and publishes the same.
The Respondent does not promote or canvass for any media houses for placing advertisement by its clients and depending on the media house chosen by the clients, the Respondent places order for publication, charges Service Tax against commission received by it for such publication, applicable Service Taxes were charged by media house on the cost of media publication, which in turn was passed on directly to the advertisers’ by the Respondent for payment.
The dispute relates to the volume discount/incentives received by the Respondent from the media house at the end of the year for providing voluminous advertisements. Respondent claims the same as completely gratuitous in nature while the Appellant- Department claims it to be of Business Auxiliary Service in reverse flow provided by the Respondent as an intermediary.
On the strength of show-cause notice, duty demand was raised against the Respondent that has suffered adjudication process but the findings of the Commissioner referred above have gone in favour of the Respondent.
It was viewed that there was no agreement or understanding or contract between the advertising agency and the media house for promotion of media business activity, such receipt of commission/volume discount are voluntary and gratuitous in nature without any obligation on the part of media house to pay such incentive to the Respondent for which interference by the Tribunal in the order passed by the Commissioner is uncalled for.
Service Tax has been discharged on the basis of invoice raised by the media house by the clients/ advertisers on the entire consideration amount and against service commission received by the Respondent from the advertisers, service tax was also discharged but because of large volume of advertisement was facilitated by the Respondent, as a token of gesture/gratitude, media house passed on certain discount/incentives to the Respondent against which Service Tax was already discharged by themselves.
A two member bench of Dr. Suvendu Kumar Pati, Member (Judicial) and Mr. Anil G. Shakkarwar, Member (Technical) held that any reward/incentive or discount received as an expression of gratitude or generosity is held consistently as not taxable.
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