CESTAT Kolkata Sets Aside ₹6.25 Lakh Service Tax, CENVAT Demand Against Advertising Company

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata, has recently set aside a demand of Rs. 6,25,706 against an advertising company, holding that the extended period of limitation was not invocable and that no excess CENVAT credit was availed.

The order was passed by a coram comprising Judicial Member Ashok Jindal and Technical Member K. Anpazhakan, which held that the demand raised by invoking the extended period was unsustainable as there was no suppression of facts with intent to evade tax and further found no merit in the allegation of excess CENVAT credit.

The case pertained to Radiant Advertising & Marketing (India) Pvt. Ltd., which was engaged in advertising and marketing services and was paying service tax on 15% of the total amount charged. Proceedings were initiated alleging non-payment of service tax of Rs. 1,83,666 on advances received between FY 2008-09 and 2011-12 and wrongful availment of CENVAT credit of Rs. 4,06,138 due to discrepancies in ST-3 returns.

The adjudicating authority confirmed a total demand of Rs. 6,25,706, comprising Rs. 1,83,666 towards service tax and Rs. 406,138 towards CENVAT credit, along with interest and penalty on the same. This was upheld on appeal.

Before the tribunal, the company argued that the advances were adjusted against services rendered, goods supplied on payment of VAT, refunded, or written off, and that any tax liability could arise only on the written-off portion.

It also contended that no excess CENVAT credit was availed and that all details were disclosed in statutory records.

The tribunal found that the advances had been adjusted or accounted for, with only a small portion written off. It held that service tax, if payable, would arise only on 15% of the written-off amount but concluded that even this demand was barred by limitation.

On the issue of CENVAT credit, the tribunal accepted the company's explanation holding that no excess credit had been availed.

It further held that since the demand arose from scrutiny of balance sheets, sales tax returns and bills already available with the department, there was no suppression of facts, and therefore the extended period of limitation could not be invoked.

The tribunal observed:

“Since the demand has been emanated from scrutiny of the Balance Sheet, ST-3 Returns and Bills etc. by the officers of the Department, we observe that the appellant has not suppressed any information from the department with an intent to evade payment of service tax. Hence, we hold that extended period cannot be invoked in this case.”

Accordingly, the tribunal set aside the entire demand of Rs. 6,25,706 along with interest and penalty and allowed the appeal.

For Appellant: Advocates N. K. Chowdhury

For Respondent: D. Sue, Authorized Representative