Authority for Advance Rulings (Central Excise, Customs And Service Tax) New Delhi, in the case of AKQA Media India (P.) Ltd., In re* {(2016) 69 taxmann.com 390 (AAR – New Delhi)} have recently held that to be leviable to service tax, the Activity must be carried out for a consideration. In other words, to be ‘service', there must be nexus between ‘activity' and ‘consideration' and also a contractual relationship.
Since burden of proof is always on the department, and the Department in the present case, could not show what ‘activity' is undertaken by applicant resulting into Media Owner giving volume discount.
In the said case, Revenue has argued that the applicant provides Declared Service in terms of Section 66 E (e) of the Finance Act, 1944 to Media Owners. Section 66E (e) reads as under;
“66E. The following shall constitute declared services, namely;
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.”
It is observed that there is no agreement or contractual obligation between the applicant and the Media Owner to give volume discount to the applicant by the Media Owner. Volume discount is not fixed and is to be given at the discretion of Media Owner. Further, volume discount is gratuitous. Applicant/Advertising Agencies cannot claim it as a matter of right. Therefore, applicant is not providing declared services to the Media Owner.
While deciding the present case, the AAR relied on the case of Grey Worldwide India (P.) Ltd. v. CST (Order No. A/1337-1338/14/CSTB/C-1, dated 30-7-2014), wherein the Tribunal held that media giving certain incentives by way of volume discounts cannot be levied to Service Tax. Relevant portion of the Judgment is reproduced below:
“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 given these incentives.
These payments are made only as a gratuitous payment 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.”
Considering the above, AAR in the present case ruled that volume discounts from Media Owner shall not be considered to be providing a service, as defined under the Finance Act, 1994, to the Media Owner and shall not be liable to Service Tax.
