2015 (37) S.T.R. 597 (Tri.

- Mumbai)
IN THE CESTAT, WEST ZONAL BENCH, MUMBAI
[COURT NO. II]
S/Shri P.R. Chandrasekharan, Member (T) and Ramesh Nair, Member (J)
GREY WORLDWIDE (I) PVT. LTD.
Versus
COMMISSIONER OF SERVICE TAX, MUMBAI
Final Order Nos. A/1337-1338/2014-WZB/C-I(CSTB), dated 30-7-2014 in Appeal Nos. ST/300 & 325/2009-Mum
Advertising Companies - Incentive received by Advertising Companies from
Media without any Contractual obligation not liable to Service Tax under Business
Auxiliary Services - Volume discount received from media whether taxable -
Revenue alleging promotion of business of print/electronic media by
canvassing/booking orders on their behalf - HELD : Assessee merely co-ordinating
between media and advertiser - Service Tax liability discharged on agency
commission received - Similarly, Service Tax liability discharged by electronic
media on consideration received for broadcasting - No agreement or
understanding or any contract between advertising agency and media for
promotion of media’s business activities - Also, no contractual obligation between
advertising agency and media for provision of any services - Tribunal consistently
observing incentives received by advertising agency from media without any
contractual obligation to render any service; cannot be levied to Service Tax under
category of BAS - Following the ratio laid in Euro RSCG Advertising Ltd. [2007 (7)
S.T.R. 277 (Tribunal)], P. Gautam & Co. [2011 (24) S.T.R. 447 (Tribunal)] and
Tradex Polymers Pvt. Ltd. [2014 (34) S.T.R. 416 (Tribunal)]; amounts received
cannot be levied to Service Tax under BAS - Section 65(19) of Finance Act, 1994.
[paras 4.1, 4.2]
Demand - Business Auxiliary Service - Demand pertaining to write back
amount of payments not claimed by print/electronic media and rate of difference
between amount actually charged from advertiser and amount paid to media -
HELD : Amounts owed to various print/electronic media yet to be claimed written
back as per provisions of accounting standards - Amounts payable to media as an
when claim lodged - Therefore, same cannot be construed as consideration
received towards services rendered - Therefore, confirmation of Service Tax
demand cannot be sustained in law - Demand set aside - Section 65(19) of Finance
Act, 1994. [paras 4.2, 4.3]
Import of service - Reverse charge basis - Demands for period prior to 18-4-
2006 on reverse charge basis - Service Tax liability discharged along with interest
for period on or after 18-4-2006 - Bombay High court judgment in Indian National
Shipowners Association [2009 (13) S.T.R. 235 (Bom.)] followed - Demand of
Service Tax under Section 66A of Finance Act, 1994 sustainable only with effect
from 18-4-2006 - Demand unsustainable - Impugned order set aside - Section 66A
of Finance Act, 1994. [para 4.3]

Appeals allowed
CASES CITED
Commissioner v. Reliant Advertising — 2013 (31) S.T.R. 166 (Tribunal) — Referred...............................................................................................................
Euro RSCG Advertising Ltd. v. Commissioner — 2007 (7) S.T.R. 277 (Tribunal) — Followed .................................................................................................
Indian National Shipowners Association v. Union of India — 2009 (13) S.T.R. 235 (Bom.) — Followed...................................................................................
P. Gautam and Co. v. Commissioner — 2011 (24) S.T.R. 447 (Tribunal) — Followed..............................................................................................................
Tradex Polymers Pvt. Ltd. v. Commissioner — 2014 (34) S.T.R. 416 (Tribunal) — Followed....................................................................................................
REPRESENTED BY : Shri Prasad Paranjape, Advocate, for the Appellant.
Shri D. Nagvenkar, Addl. Commissioner (AR), for the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. - The appeals are directed against Order-in-Original No.
19/BR-15/ST/Th-I/2009, dated 10-9-2009 & 24/BR-20/ST/Th-I/2009, dated 22-9-2009 passed by Commissioner of
Central Excise, Thane-I. Vide the impugned orders, the adjudicating authority has confirmed a Service Tax demand
of Rs. 1,84,02,423/- for the period October 2001 to December 2006 and Rs. 10,39,061/- for the period April 2006 to
March 2007, respectively against the appellant, M/s. Grey Worldwide (I) Pvt. Ltd. along with interest thereon and also
imposing equivalent amount of penalties. Aggrieved of the same, the appellant is before us.
2. The learned Counsel for the appellant submits that they are engaged in rendering “Advertising Agency
Services” to their various clients. As per the request of the clients, they place the advertisements on their behalf in
various print media and electronic media. The print/electronic media in which the advertisements have been placed
are decided by the clients and the duration and the size of the advertisement to be placed are also decided by the
clients. The appellant, as an advertising agency, places the advertisements in the print/electronic media on behalf of
the clients, who is the advertiser and on the agency commission received, they have discharged the Service Tax
liability. The present demand is on account of volume discount received from these media, write back of the amount
in respect of payments not claimed by the print/electronic media and the rate difference between the amount actually
charged from the advertiser and the amount paid to the media. The department seeks to levy Service Tax on these
amounts under the category of “Business Auxiliary Service” (BAS) on the ground that the appellant is promoting the
business of print/electronic media by canvassing/booking orders on their behalf and therefore, these activities are
liable to Service Tax under BAS. There is also a Service Tax demand in respect of services received from outside
India on reverse charge basis. The appellant has discharged Service Tax on reverse charge basis on the services
received on or after 18-4-2006 amounting to Rs. 21,05,440/- along with interest of Rs. 30,790/- which they do not
dispute. As regards the balance demand of Rs. 75,68,236/- which is for the period prior to 18-4-2006, the said
demand is not sustainable in view of the Apex Court’s decision in the case of Indian National Shipowners Association
v. UOI - 2009 (13) S.T.R. 235 (Bom.) wherein it was held that prior to insertion of Section 66A in the Finance Act,
1994, the liability to pay Service Tax on reverse charge basis would not arise. As regards the volume discounts, the
learned Counsel submits that the appellant has not rendered any service to the print/electronic media; at the end of
the year, based on the quantum of advertisement placed on the print/electronic media, some of the media give an
incentive/discount to the appellant which is in the nature of a gratuitous payment. There is no agreement or
understanding between the appellant and the media for placement of the advertisement on behalf of their clients. It is
the clients who decide the media and size/duration of the advertisement and the appellant has no say in the matter.
Therefore, the question of appellant rendering any services to these media would not arise. Merely because they
have placed orders for advertisement in these media on behalf of their clients, it cannot be said that the appellant has
rendered any service to the print/electronic media. As far as the appellant is concerned, the client is the advertiser.
The electronic media has discharged Service Tax liability under the broadcasting services in respect of the amounts
charged for broadcasting the advertisement. The volume discount given to the appellant is only as an incentive and
not for any service rendered and therefore, the question of discharge of any Service Tax on this amount under the
category of ‘BAS’ would not arise. As regards the write back on which the Service Tax has been demanded, these
write backs are due to the fact that print/electronic media has overlooked short payments which are shown as
outstanding in the books of accounts of the appellant. If the short payments are not collected by the media, in their
books of accounts, the appellant write backs the amount and the amount is no longer shown as outstanding.
However, as an when the amounts are demanded by the media, they have to reimburse the amounts to the media
towards short payments made earlier and therefore, this cannot be considered as a consideration for any services
rendered. As regards the rate difference on which Service Tax has been demanded, this is also in the nature of a
discount between the rates originally quoted and the rates actually charged. Thus it is only a trade margin, given by
the media and therefore, this also cannot be considered as receipt for any services rendered. The learned Counsel
places reliance on the decision of this Tribunal in the case of P. Gautam & Co. v. CST, Ahmedabad - 2011 (24)
S.T.R. 447 (Tri. - Ahmd.) wherein it was held that discounts and incentives received by the advertising agency from
the print media cannot be considered as charges for the services rendered and therefore, there is no Service Tax
liability under BAS. This decision of this Tribunal was based on an earlier decision of this Tribunal in the case of Euro
RSCG Advertising Ltd. v. CST, Bangalore - 2007 (7) S.T.R. 277 (Tri. - Bang.) wherein also the incentives received by
the advertising agency in the form of cash discount from the media was held to be not taxable under BAS. In the said
decision it was held that as far as the advertising agency is concerned, the client is not the media and therefore, the
incentive, if any, granted by the media to the advertising agency is not connected to any services rendered and hence
outside the purview of Service Tax under BAS. Similarly, in a recent decision in the case of Tradex Polymers Pvt.
Ltd. v. CST, Ahmedabad - 2012-TIOL-315-CESTAT-AHM = 2014 (34) S.T.R. 416 (Tribunal), a question, arose on an
identical issue. In that case, the appellants were engaged as distributors and they get commission from the principal
on which they discharged Service Tax liability. The amounts due to the principal was collected and remitted by the
appellant after retention of early payment incentive. The question for consideration was whether such early payment
incentive is liable to Service Tax or not. This Tribunal held that such incentives are not liable to Service Tax under
BAS and set aside the demands. In view of the above, it is pleaded that the demands be set aside and the appeals
allowed.
3. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterates the
findings of the adjudicating authority. It is his contention that the availment of discount and rate difference retained by
the appellant in respect of the transactions undertaken with media has to be deemed as a consideration received for
the services rendered and would merit Service Tax levy under BAS. By placing the advertisement of the clients with
print/electronic media, the appellant has also promoted the business of the print/electronic media and hence, these
incentives and rate difference retained by the appellant should form consideration received for the services rendered.
Accordingly, it is his contention that Service Tax is leviable on these amounts under the category of BAS. In the case
of amounts written back in the books of accounts, it is his submission that so long as the amounts are not
reimbursed, the amount outstanding to be paid to the media would acquire the character of a consideration for the
services rendered and hence they would come within the scope of BAS. The learned AR places reliance on the
decision of this Tribunal in the case of CCE, Chandigarh v. Reliant Advertising - 2013 (31) S.T.R. 166 (Tri. - Del.). In
the said case the respondent/assessee was recovering Service Tax from its clients and had suppressed the value of
advertising services provided by it and deposited only a portion of the amount of Service Tax. The demand of Service
Tax was confirmed under the category of sales/advertisement in print/electronic media and in that context, the
Tribunal upheld the Revenue’s appeal by upholding the levy of Service Tax. It is the contention of the learned AR that
the ratio of the said decision would apply in the present case also.
4. We have carefully considered the submissions made by both the sides.
4.1 From the nature of the transactions undertaken in the present case, it is seen that the appellant is
rendering advertising agency services to various clients who are the advertisers. On behalf of these advertisers, the
appellant has placed advertisements in the print/electronic media. The choice of the print/electronic media is with the
advertiser and not with the advertising agency, who merely co-ordinates between the media and the advertiser. On
the agency commission received, they have discharged Service Tax liability. Similarly, the electronic media also
discharges Service Tax liability on the consideration received for broadcasting which includes incentives, if any, to be
paid. Thereafter, at the end of the year, depending upon the volume of business given by the advertising agency, the
media gives certain incentives by way of volume discounts/rate difference. There is no agreement or understanding
or any contract between the advertising agency and the media for promotion of the media’s business activities. There
is also no obligation on the part of the media to give these incentives. These payments are made only as a gratuitous
payments for the advertisements placed on the media. There is no contractual obligation between the advertising
agency and the media for provision of any services. In the absence of such a contractual obligation, it is difficult to
accept the Revenue’s contention that on the incentives received, the appellant is liable to Service Tax under BAS.
This was the view taken by this Tribunal consistently in a series of decisions starting from Euro RSCG Advertising
Ltd. (cited supra). In the said case, the Tribunal observed that;
“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.”
4.2 The same view was reiterated by the Tribunal in the case of P. Gautam & Co. (cited supra). In the said
case the Tribunal observed that :
“It is seen and as correctly pointed out by the learned counsel that the Coordinate Bench of the Tribunal in
the three cases as cited herein above, have held that the discounts/incentives received by the assessee from the
print media will not be liable for Service Tax under the category of advertising agency services. If that be so, the said
discounts/incentives itself cannot be considered for the purpose of taxability under the head business auxiliary
services as the amounts which are received are in respect of the services provided under the category of advertising
agency services and the amount are discounts and incentives and not as charges for services”.
Again in the case of Tradex Polymers Pvt. Ltd. these views were reiterated. Therefore, it can be seen that the
Tribunal has been consistently taking the stand that incentives received by an advertising agency from the media
without any contractual obligation to render any service cannot be levied to Service Tax under the category of BAS.
Following the ratio laid down in these decisions, in the present case also, we hold that the demands on the amounts
received from the media cannot be levied to Service Tax under BAS. As regards the amounts of write backs, these
are amounts which the appellant owed to the various print/electronic media which are yet to be claimed by the media.
After showing these amounts as amounts payable for some time, the amount has been written back as per the
provisions of accounting standards. These amounts are in any case payable to the media as and when the claim is
lodged and therefore, this amount cannot be construed as consideration received towards services rendered.
Therefore, the confirmation of Service Tax demand on these amounts, i.e. volume discounts, rate difference and
amounts written back cannot be sustained in law and accordingly, we set aside the same.
4.3 As regards the Service Tax demand on services received from outside India, the appellant has already
discharged the Service Tax liability along with interest for the period on or after 18-4-2006. In the Indian National
Shipowners Association case (cited supra), the Hon’ble Bombay High Court held that demand of Service Tax under
Section 66A on the services received from abroad on reverse charge basis would sustain only with effect from 18-4-
2006 when Section 66A was inserted in the statute. Inasmuch as the appellant has discharged the Service Tax
liability in this regard for the period on or after 18-4-2006, the demands for the previous period will not sustain.
5. In view of the above discussion, we set aside the impugned orders and allow the appeals with
consequential relief, if any, in accordance with the law.
(Operative part of the order pronounced in Court)
_______
2016 (42) S.T.R. 739 (Tri. - Del.)
IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI
Justice G. Raghuram, President and Shri C.J. Mathew, Member (T)
JOSHI AUTO ZONE PVT. LTD.
Versus
COMMISSIONER OF C. EX., CHANDIGARH
Final Order No. ST/A/53953/2015-CU(DB), dated 30-10-2015 in Appeal No. ST/1860/2010

Business Auxiliary Service - Authorized Service Station as automobile dealers

providing table space to financial institutions - Taxability - Appellants being mere
provider of table space, in view of Larger Bench decision in 2014 (33) S.T.R. 506
(Tri. - LB), no Service Tax leviable on considerations received of allocation of such
space - Section 65(19) of Finance Act, 1994. [para 3]
Demand - Business Auxiliary Service - Commission received from finance
companies - Appellant, an automobile dealer receiving commission for activities of
sales promotion of product of finance companies by employees of said dealer -
Non-retention of this commission and passing it on entirely to his employees is an
internal matter between said dealer and its employees - Nature of transaction viz.
processing of loan applications being incidental to promotion of services offered
by finance companies, said commission taxable under aforesaid services - Demand
of ` 1,26,508 on this count confirmed - Section 65(19) of Finance Act, 1994. [paras
4, 5]
Penalty - Availing of inadmissible credit on demo cars - Demand on
commission received from finance companies - Said credit having been availed
under mistaken impression of eligibility and having been reversed long back,
penalty not imposable on this count - However, having been held liable to demand
of Service Tax on commission received from finance companies, penalty to extent
of demand confirmed, i.e., ` 1,26,508, imposable - Section 78 of Finance Act, 1994.
[para 5]

Appeal disposed of
 CASE CITED
Pagariya Auto Centre v. Commissioner — 2014 (33) S.T.R. 506 (Tribunal-LB) — Relied on....................................................................................................

REPRESENTED BY : Shri B.L. Narasimhan, Advocate, for the Appellant.

Smt. Suchitra Sharma, Commissioner (AR), for the Respondent.

[Order per : C.J. Mathew, Member (T)]. - The appellant, M/s. Joshi Auto Zone Pvt. Ltd. is engaged in
providing ‘authorised service station’ and ‘business auxiliary service’ as defined in Section 65(9) and (19) of the
Finance Act, 1994. The appellant is in receipt of incentives/commission from M/s. Maruti Udyog Limited and other
finance companies. During the period 1st July 2003 to 31st March 2005, the appellant received an amount of
` 4,72,15,282/- while reporting a taxable value of ` 73,44,579/- as commission received from M/s. Maruti Udyog
Limited and other financial companies. Likewise for the said period the appellant received an amount of ` 14,40,385/-
from M/s. Maruti Udyog Ltd. as incentives without reporting the same as a taxable value. Accordingly, the original
authority confirmed demand of short-paid amount of ` 37,33,287/- for the said period and disallowed Cenvat credit
availed to the extent of Rs. 4,77,429 on ‘demo’ cars claimed as capital goods. Penalties under Sections 76 and 78 of
the Finance Act, 1994 were also imposed. This order was challenged before the Commissioner of Central Excise &
Customs (Appeals), Chandigarh-II.
2. Vide the impugned Order No. 133/CE/CHAND-I/2010, dated 10th September 2010, the first appellate
authority reduced the total demand to ` 10,04,929/- (inclusive of the wrongly availed Cenvat credit) with interest
thereon and, while upholding the imposition of penalty under Section 76, reduced the penalty under Section 78 to
` 10,04,929/-. The specific receipts that were held to be taxable were the commission or remuneration from finance
companies (other than Maruti Finance who had discharged the tax liability) and insurance companies, as well as
processing fees and incentives received by the executives of the appellant from finance companies.
3. Heard the rival submissions. Our attention was drawn to the decision of a Larger Bench of this Tribunal in
Pagariya Auto Center v. Commissioner of Central Excise, Aurangabad [2014 (33) S.T.R. 506 (Tri-LB) which has held
that consideration for allocation of ‘table space’ for accommodation of representative of financial institutions in the
premises of automobile dealer do not fall within the ambit of ‘business auxiliary service’. The Larger Bench has held
that the nature of the transactions, to the extent that it was not limited to providing ‘table space’, would determine the
leviability under the head of ‘business auxiliary service.’ It is seen that the records do not indicate that the claim of the
appellant that they are mere provider of ‘table space’ and that these receipts are in the nature of consideration for
such allocation can be controverted. Therefore, the tax levied on such remuneration is liable to be set aside.
4. The commission paid through the appellant to their executives is, admittedly, remuneration for the efforts
made by the employees of the appellant to promote the products of the finance companies. Admittedly, they are
employees of the appellant and, thereby, not free agents. Their promotional efforts cannot be delinked from that of
the appellant; the fact that payments are made over to the appellant is sufficient to deduce so. That the appellant
chooses not to retain any of the commission and instead passes them on to the executives is an internal policy of the
appellant that need not concern the tax authority. Processing fees are the consideration for handling the loan
applications and it is, undoubtedly, incidental to promotion of the service that is offered by the finance companies.
Having made the claim that receipts on account of ‘table space’ is not taxable and that claim having been accepted, it
stands to reason, and within the coverage of the decision of this Tribunal in re Pagariya Auto Centre, that the dividing
line between taxability and non-taxability lies in the nature of the transactions. The commission and processing fees
can be inferred to be the remuneration for rendering services within the meaning of Section 65(19) of Finance Act,
1994.
5. Accordingly, the impugned order is modified to the extent of setting aside the demand of ` 4,00,992/- on
commission/remuneration received by the appellant from the financial companies. It is seen that the Cenvat credit
taken on ‘demo’ cars has been reversed by deposit of like amount on 29th March 2006. The availing of credit does
appear to have its genesis in the mistaken impression of eligibility. We are of the opinion that imposition of penalty for
this mistake would be unduly harsh. Penalty is restricted to that tax demand of Rs. 1,26,508 that survives. Penalties
imposed also stands reduced to Rs. 1,26,508.
6. Appeal is accordingly disposed of.
(Pronounced in Court)
 
_______
 
Appellant contends that ` 81,35,813/- and ` 1,21,47,133/- for the two periods has been wrongly
subjected to tax because the agreement between the appellant and M/s. Toyota Kirloskar Motor Limited
is one of supply of vehicles by the latter on ‘principal-to-principal’ basis on which title and risk, as per
Agreement, are passed on to appellant when the vehicles are excise cleared and placed on common
carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which
are designated as commission/incentive merely as a management terminology. Learned Chartered
Accountant for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles
Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTAT-MUM = 2016 (41) S.T.R. 311
(Tri.)], Sai Service Station Limited v. Commissioner of Service Tax, Mumbai [2013-TIOL-1436-CESTAT-
MUM = 2014 (35) S.T.R. 625 (Tri.)], Tradex Polymers Private Limited v. Commissioner of Service Tax,
Ahmedabad [2014 (34) S.T.R. 416 (Tri.-Ahmd.)] and Garrisson Polysacks Private Ltd. v. Commissioner of
Service Tax, Vadodara [2015 (39) S.T.R. 487 (Tri.-Ahmd.)]. In re Jaybharat Automobiles Limited, the
Tribunal held that

2014 (34) S.T.R. 416 (Tri. - Ahmd.)

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD
[COURT NO. II]
Shri M.V. Ravindran, Member (J) and Dr. P. Babu, Member (T)
TRADEX POLYMERS PVT. LTD.
Versus
COMMISSIONER OF S.T., AHMEDABAD
Final Order No. A/2277/2011-WZB/AHD and Stay Order No. S/1723/2011-WZB/AHD, dated 21-12-2011 in
Application No. ST/Stay/11/2011 in Appeal No. ST/03/2011

Stay/Dispensation of pre-deposit - Business Auxiliary Service - ‘Early

payment incentive’ received by the Distributor on distribution of goods of the
Principal and retained by them - HELD : No service is involved as such retention of
incentive is nothing but a discount received by the assessee - Section 35F of
Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance
Act, 1994. [2011 (24) S.T.R. 447 (Tribunal) relied on]. [paras 3, 4]

Appeal allowed
CASE CITED
P. Gautam and Co. v. Commissioner — 2011 (24) S.T.R. 447 (Tribunal) — Followed..............................................................................................................

REPRESENTED BY : Shri Nirav Shah, Advocate, for the Appellant.

Shri R. Nagar, AR, for the Respondent.

[Order per : M.V. Ravindran, Member (J)]. - After hearing both sides for some time on the Stay Petition, we
find that the appeal itself can be disposed off as the issue is covered by the decision of this Tribunal in the case of P.
Gautam & Co. v. CST, Ahmedabad - 2011 (24) S.T.R. 447 (Tri. - Ahmd).
2. In view of the above, we allow the Stay Petition and take up the appeal for disposal.
3. We find that it is not disputed that the appellants are distributors and they get commission from their
principals on which they are discharging Service Tax liability under the category of “Business Auxiliary Services”. At
the same time, the appellants are also collecting the amount due to the Principal and remit the amount back to the
principal after retaining an amount as early payment incentive. Revenue authorities are of the view that such early
payment incentive retained by the assessee is taxable as the same has to be passed on to the purchaser of the
goods. We do not find any merit in the arguments raised by the lower authorities on this context. Retaining early
payment incentive is not any service rendered but a discount to the assessee. We find that the decision of this
Tribunal in the case of P. Gautam & Co., has laid down the ratio that any incentive/cash discount which has been
given will not be covered for liability of Service Tax under Business Auxiliary Service. We may reproduce the relevant
paragraphs No. 7 & 8 below.
“7. On perusal of the impugned orders, we find that in para 8, learned Commissioner (Appeals) has
recorded the following findings.
“8. The whole issue revolves around the question as to whether service tax is leviable on the discounts/incentives
that the appellants (an advertising agency) receive from the print media for the advertisements that the former get
published on behalf of clients. The argument advanced by the appellants is that no service tax can be leviable
thereon as this is not a service provided to their clients. From the emphasis placed on this argument it appears that
the appellants have overlooked a fundamental issue, that is, the ability to provide different kinds of services to
different clients. It is nowhere laid down that merely because an assessee provides one set of services to one set
of clients; it is precluded from providing any other services to any other clients. Though the appellants are into
business of providing advertising service they can also provide different services, for which classification would
depend on the nature of services being provided. In the instant case as mentioned in the impugned order and also
as stated by the appellants’ they get discounts for volume of business or advance payments. The business they
provide to the print media, for which they get the incentive/discount, is the service they provide to their client i.e. the
business they provide to the print media, for which they get the incentive/discount, is the service they provide to
their client i.e. the print media. This service has been held to be a taxable service under the category of “Business
Auxiliary Service” in the impugned order. It is therefore apparent that for different services rendered, any assessee
could have different seats of clients.”
8. It can be seen from the above reproduced findings that the issue regarding whether discounts/incentives
given to the appellant as an advertising agency would be liable for the service tax under the business auxiliary
services. It is seen and as correctly pointed out by the learned counsel that the Coordinate Bench of the Tribunal in
the three cases as cited herein above, have held that the discounts/incentives received by the assessee from the
print media will not be liable for service tax under the category of advertising agency services. If that be so, the said
discounts/incentives itself cannot be considered for the purpose of taxability under the head business auxiliary
services as the amounts which are received are in respect of the services provided under the category of advertising
agency services and the amount are discounts and incentives and not as charges for services.”
4. In view of the above ratio and peculiar facts of this case, we find that the impugned order is liable to be
set aside. We, accordingly, set aside the impugned order and allow the appeal.
(Dictated & Pronounced in Court)
_______