Service Tax Not Payable On Intermediary In The Sale Of Space or Time For Media Agency On Commission Basis: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on intermediaries in the sale of space or time for media agencies on a commission basis.

The two-member bench of Ramesh Nair (judicial member) and Raju (technical member) has observed that no evidence has been placed on record to establish that the appellant was providing "advertising agency services." The role of the appellant was limited to being an intermediary in the sale of space and time for media agencies on a commission basis.

The appellant or assessee provides customised advertising services and is a member of "The Indian Newspaper Society" (INS). They were remitting 85% of the total amount received from their customers for getting space or time from media agencies, newspapers, or various publications. They were retaining 15% of the remaining amount as their commission. The appellants were paying service tax on the commission amount.

A Show Cause Notice was issued to the appellant seeking to classify the service provided by them under the definition of "advertising agency service," a taxable service under Section 65(105)(e) of the Finance Act 1994.

The notice 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 01.03.2005 with effect from 01.04.2005.

The appellant had consequently not charged and paid any service tax for the services rendered to their subagent, M/s. Surya Publicity. The notice alleged that although the services provided by the subagent, M/s. Surya Publicity, to their clients and customers, were exempted by way of a notification, the services provided by the appellant to M/s. Surya Publicity was not exempted because the appellant was not exempted.

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 August 23, 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 tribunal allowed the appeal and quashed the demand.

Case Title: Drishty Communication Private Limited Versus C.C.E. & S.T.-Rajkot

Citation: Service Tax Appeal No. 135 of 2012

Date: 05.01.2023

Counsel For Appellant: Advocate Paresh Sheth

Counsel For Respondent: Assistant Commissioner (Authorized Representative) Tara Prakash

Click Here To Read The Order