CESTAT: Service Tax is not levied on Intermediary in Sale of Time and Space for Media Agency

CESTAT: Service Tax is not levied on Intermediary in Sale of Time and Space for Media Agency

The Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad (in short CESTAT) by its division bench comprising of Justice Ramesh Nair (Judicial Member) and Raju (Technical Member) observed that service tax cannot be levied on intermediaries in the sale of space or time for media agencies on a commission basis.

The bench had noted that no evidence was found on record that could establish that the appellant- Drishty Communication Private Ltd. was engaged in 'advertising agency services.' It was noted that the role of the appellant was only restricted in the capacity of an intermediary in the sale of space and time for media agencies on a commission basis.

In the aforementioned case, the appellant/assessee was engaged in providing advertising services and was also a member of the 'Indian Newspaper Society' (in short INS). The appellant was paying eight five per cent of the total amount received from their customers for getting space or time from media agencies, newspapers, or various publications and fifteen per cent of the remaining amount was retained as commission. The appellants were paying Service Tax on the said commission amount.

A Show Cause Notice were issued to the appellant seeking to classify the service provided by them under definition 'Advertising Agency Service' taxable service under Section 65(105) (e) of the Finance Act 1994. In the notice it was alleged that one M/s. Surya Publicity was one of their sub-agents that had not obtained service tax registration and was not paying service tax as they were claiming the benefit of the threshold exemption under Notification No. 06/2005-ST dated 1 March, 2005 with effect from 1 April, 2005.

The appellant had consequently not charged and paid any Service Tax for the services rendered to their sub agent M/s. Surya Publicity. The notice alleged that although the services provided by the sub agent M/s. Surya Publicity to their client/customers were exempted by way of said Notification, the services provided by the appellant to M/s. Surya Publicity were not exempted as the appellant were not exempted under said notification.

The appellant argued that he had not provided any services to their client. It has been argued that only the sub-agent, M/s. Surya Publicity, provided services to their client, and because the appellant did not provide service, there is no question about the payment of any service tax.

The appellant relied on Circular No. 96/7/2007-ST dated 23 August, 2007, which stated that merely canvassing advertisements for publishing on a commission basis is not classifiable under the taxable service falling under Section 65(105) (e); such services are liable to service tax under business auxiliary services.

The Appellate Tribunal found that the instant case M/s. Surya Publicity was providing Advertising Services to its client. M/s. Surya Publicity was not discharged any service tax liability as the same was liable for the levy of Service Tax. M/s. Surya Publicity was purchasing time and space in the newspaper / media companies through the appellant. The amount paid by M/s. Surya Publicity to the appellant for purchase of time M/s. Surya Publicity to the appellant for purchase of time and space was sought to be tax by revenue under the category of Advertising Service.

Accordingly, the Appellate Tribunal allowed the appeal.