Appellant, a service provider under advertising Agency Service — Department of the view that the appellant did not discharge service tax liability and also had wrongly availed CENVAT credit — Terms of agreement stated that the appellant was entitled to 10% commission on gross amount spent which included print advertisement and also other expenses incurred — Held, all such expenditure or cost shall be treated as consideration for the taxable service provided and shall be included in the value fo<

Appellant, a service provider under advertising Agency Service — Department of the view that the appellant did not discharge service tax liability and also had wrongly availed CENVAT credit — Terms of agreement stated that the appellant was entitled to 10% commission on gross amount spent which included print advertisement and also other expenses incurred — Held, all such expenditure or cost shall be treated as consideration for the taxable service provided and shall be included in the value for the purpose of charging service tax on the said service — CENvAT credit allowed for the same — Penalty waived.

The appellant was a service provider falling under the category of ‘Advertising Agency Service’. On scrutiny of records, it was found that the appellant had not discharged the service tax liability on the gross amount received by them in respect of services rendered and further they wrongly availed CENVAT credit on vehicle maintenance/insurance. Accordingly, service tax was demanded disallowing the credit and also demanded interest and penalty. The client had appointed the appellant to act as an advertising agent/consultant on the terms set out in the agreement and the agreement stated that the appellant will act as an exclusive creative agency of the clients for certain brands specified in the agreement. The terms of agreement also indicated that the appellant was entitled for an agency commission of 10% on gross media spent which included print advertisement, outdoor hoardings and all other expenses incurred on behalf of the client, third party, etc. The appellant got only the agreed commission from the customers and they had discharged service tax on the said commission income and also the appellant did not avail any service tax credit on the service tax paid by the advertisers.

Held:

It was held that if any expenditure or costs are incurred by the appellant i.e., the service provider in the course of providing taxable service, all such expenditure or cost shall be treated as consideration for the taxable service provided and shall be included in the value for the purpose of charging service tax on the said service. However, the appellant was held eligible to take credit of the excise duty/ service tax on input/input services used in or in relation to the provision of output service subject to providing necessary documents in respect of such credit and the penalty also was waived.