Principal Commissioner of CGST & Central Excise-Delhi-IV Vs Nexus Alliance Advertising & Marketing Pvt Ltd (CESTAT Delhi)
The CESTAT Delhi bench has ruled that service tax is not applicable on incentives or volume discounts received by an advertising agency from print media or other media channels. The Tribunal held that such incentives, given for achieving certain business targets while the agency is working for its clients (advertisers), do not constitute a ‘declared service’ under Section 66E(e) of the Finance Act, 1994, as there is no underlying obligation on the agency towards the media houses.
The case involved an appeal filed by the Principal Commissioner of CGST & Central Excise, Delhi-IV, challenging an Order-in-Original dated March 1, 2019, passed by the Commissioner (Adj) of CGST, Delhi South Commissionerate. The Commissioner’s order had dropped proceedings initiated against M/s Nexus Alliance Advertising & Marketing Pvt Ltd and its director, Shri Jogesh Bhutani, through a show cause notice dated October 17, 2018.
Nexus Alliance Advertising & Marketing Pvt Ltd (referred to as the respondent) is an entity registered with the service tax department, providing advertising agency services and involved in the buying and selling of space and time slots for advertisements.
The investigation, conducted by the Director General of GST Intelligence (DGGI), found that the respondent booked advertisements for various advertisers to be published in print media or broadcast on radio, television, etc. The respondent entered into agreements with advertisers, undertaking media planning and media buying on their behalf across different platforms, including print, radio, and online. The respondent paid service tax on the agency commission received from these advertisers, which was not in dispute. It was also acknowledged that buying or selling of space in print media was in the negative list during the relevant period and thus not subject to service tax.
