Fox Mandal & Company Takes ₹3.9 Crore Service Tax Dispute To Supreme Court

The dispute arose from service tax proceedings initiated against the law firm under the pre-GST regime. During an audit conducted on March 20, 2014, the department examined the firm's records for the period 2010-11 to 2014-15 and identified several discrepancies relating to service tax payments and availment of CENVAT credit.

The department alleged that the firm had wrongly availed and utilised CENVAT credit of Rs 89.63 lakh without producing valid documentary evidence. It further alleged short payment of service tax on certain transactions, including reconciliation differences between ST-3 returns and financial statements amounting to about Rs 1 crore, and non-payment of tax on services claimed to be exported, involving Rs 1.80 crore.

Additional demands were raised on expenses such as sponsorship services and reverse charge liabilities. A show cause notice dated December 19, 2016, proposed recovery of about Rs 6 crore in service tax, along with interest and penalties under the Finance Act, 1994.

On December 20, 2018, the Principal Commissioner of Central GST, Noida confirmed service tax demands of about Rs 2.99 crore, disallowed the CENVAT credit of Rs 89.63 lakh, and imposed interest and penalties while dropping part of the proposed demand.

On Fox Mandal's appeal, the CESTAT, Allahabad, partly allowed the appeal. The tribunal held that denial of CENVAT credit and export benefits required fresh verification of documents and remanded those issues to the adjudicating authority. However, it upheld the demand relating to sponsorship services, noting that the appellant had failed to produce evidence to show that the payment was merely a donation.

Aggrieved by the CESTAT order partly remanding the matter while upholding certain demands, Fox Mandal & Co has now approached the Supreme Court.