CESTAT: SERVICE TAX NOT PAYABLE ON INTERMEDIARY IN THE SALE OF SPACE OR TIME FOR MEDIA AGENCY ON COMMISSION BASIS

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal in the case Drishty Communication Private Limited Versus C.C.E. & S.T.-Rajkot observed and has held that the 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 comprising of Judicial Member, Ramesh Nair and the Technical Member, Raju in the case has observed that no evidence has been placed before the court to establish that the appellant was providing “advertising agency services.” Thus, the role of the appellant was being limited to an intermediary in the sale of space and time for media agencies on a commission basis. In the present case, it has been provided by the appellant or assessee the customised advertising services and is a member of “The Indian Newspaper Society” (INS). However, they were remitting 85% of the total amount received from their customers for getting space or time from media agencies, various publications, or newspapers. Thus, they were retaining 15% of the remaining amount as their commission and the service tax was being paid by the appellant on the commission amount. The court issued a show cause notice to the appellant wherein seeking to classify the service provided by them under the definition of “advertising agency service,” which being a taxable service under Section 65(105)(e) of the Finance Act 1994. It has been alleged in the said notice that one M/s. Surya Publicity was one of their sub-agents that had not obtained the registration of service tax and was not paying the service tax as they were claiming the benefit of the threshold exemption under Notification No. 06/2005-ST dated 01.03.2005 with the effect from January, 04, 2005. Therefore, the appellant had consequently not charged and paid any service tax for the services rendered to their subagent, M/s. Surya Publicity. It has been alleged in the notice that although the services provided by the subagent, M/s. Surya Publicity, to their clients and customers which are being exempted by way of a notification, the services provided by the appellant to M/s. Surya Publicity was not being exempted because the appellant was also not exempted. Further, it has been argued by the appellant that he had provided any services to their client. It has also been argued that only the sub-agent, M/s. Surya Publicity, provided services to their client, and because the services are not being provided of by the appellant, there being no question about the payment of any service tax. However, the appellant relied on Circular No. 96/7/2007-ST dated August 23, 2007, wherein it is 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 being liable to service tax under business auxiliary services. Accordingly, the appeal was allowed by the tribunal and the court has quashed the demand.