Custom, Excise & Service Tax Tribunal
Shree Venkatesh Films Pvt Ltd vs Kolkata- Audit on 5 February, 2026
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
Service Tax Appeal No.75875 of 2017
(Arising out of Order-in-Original No.16/Commr./STA/Kol/16 dated 01.03.2017 passed
by Commissioner of CGST & Central Excise, Kolkata)
M/s Shree Venkatesh Films Pvt. Limited
(6, Waterloo Street, Kolkata-700069)
Appellant
VERSUS
Commissioner of CGST & Central Excise, Kolkata
(180, Shantipally, Rajdanga Main Road, Kolkata-700107)
Respondent
APPERANCE :
Shri Arvind Behati, Chartered Accountant for the Appellant
Shri R.K.Agarwal, Authorized Representative for the Respondent
CORAM:
HON'BLE MR.ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE MR.K.ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO.75167/2026
DATE OF HEARING : 20 JANUARY 2026
DATE OF PRONOUNCEMENT : 05 FEBRUARY 2026
Per Ashok Jindal :
The appellant is in appeal against the impugned order wherein the
demand of service tax has been confirmed under reverse charge
mechanism and the cenvat credit has been denied on various issues and
penalty was also imposed on the appellant.
2. The facts of the case are that the appellant is a media and
entertainment production and distribution company headquartered in
Kolkata, West Bengal. The appellant operates in 3 segments namely,
film division, television division and digital cinema division for, inter alia,
providing services, such as, copyright services, programme producer
services, video tape production services and business auxiliary services.
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The nature of incomes booked under each of the segments along with
their taxability under service tax is tabulated herein below :
Name of Nature of service Taxability under
Segment Service Tax
TV Division Upon the request of TV channels, the Taxable under the
Appellant records the episode into a category
magnetic tape which is handed over to "Programme
the TV Channels in physical form for Producer Service"
telecasting the programme
Film Division 1. Appellant assigns satellite television Taxable under the
broadcasting rights of its own copyright services
movie/s to the TV channels for a
fixed period for broadcasting the
movie in television. The same is
recorded as satellite telecast income
in the profit and loss account
2. Temporary transfer of copyright of Exempt from
cinematographic films for exhibition Service tax
in cinema hall or cinema theatre
3. Permanent transfer of copyright of Liable to VAT,
cinematographic films excluded from
Service Tax
Digital 1. Appellant earns a per show fees from Taxable under the
Cinema the distributors/ producers who category "Video
Division telecast the movie in the cinema Tape Production
halls wherein the projectors and
service"
other equipment of the Appellant are
installed.
2. Provides digital cinema mastering
services to the local producers of
West Bengal
2.1 The appellant maintains separate records for each division.
CENVAT credit pertaining to the Television Division and the Digital
Cinema Division is availed in full, as the output services under the said
divisions are entirely taxable. Whereas, in respect of the Film Division
and common input services used across divisions, the appellant avails
credit on a proportionate basis, applying the ratio of taxable to
exempted services for the company as a whole, and duly reverses credit
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attributable to exempted services in terms of Rule 6 of the CENVAT
Credit Rules, 2004.
2.3 During the course of audit, records for the period 2010-11 to
2013-14, were scrutinized and the appellant was served with a spot
audit memo dated 27 April 2015 demanding tax on account of seven
heads as set out in the table above. Out of the seven issues, the
appellant paid tax along with interest on account of availment of credit
of tax paid under reverse charge mechanism without any valid duty
paying document as required under Rule 9 of the Cenvat Credit Rules,
2004 and excess availment of credit on the capital goods.
2.4 Thereafter, by invoking extended period of limitation, a show
cause notice dated 16 October 2015 was issued to the appellant
demanding tax to the tune of Rs.2,18,77,956/- under five heads as
enlisted above along with interest and equivalent penalty. The show-
cause-notice also sought to demand penalty under Section 78 of the
Finance Act, 1994 in respect of the two issues for which tax had been
paid by the appellant before the issuance of Notice. The appellant
replied to the show-cause notice denying the allegations contained
therein.
2.5 The matter was adjudicated by the ld.Adjudicating Authority. The
demand of service tax was confirmed along with interest and penalty
was also imposed on the appellant.
2.6 Being aggrieved with the said order, the appellant is before us.
3. The ld.Counsel appearing on behalf of the appellant submits that
the demand of tax under Reverse Charge Mechanism (RCM) raised on
the payments made in foreign currency is liable to set aside in toto in so
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Service Tax Appeal No.75875 of 2017
far as the Revenue has raised the demand solely on the basis of figures
appearing in the Balance Sheet of the Appellant without
identifying/classifying the category of underlying services on which it is
taxable.
3.1 He further submits that during the year 2010-11 to 2013-14, the
appellant had incurred certain expenses in foreign currency for shooting
of films outside India and other allied activities. The entire demand of
Rs.1,24,73,378/- has been raised by the Ld. Adjudicating Authority
solely on the basis of the figures reported in the balance sheet under
the heading "expenditure in foreign currency", without specifying the
nature of taxable service. In this regard, he submits that it is a settled
law that the onus of determining taxability of a service and its
classification is on the Department and demand cannot be raised merely
on the basis of difference in figures between the Balance Sheet and the
ST-3 returns without identifying the category of underlying service on
which service tax is payable. In support his contention, he relies on the
following judgements :
(i) M/s. Outotec India Private Limited vs. Principal Commissioner of
Service Tax-I, Kolkata [2026 (1) TMI 714 - CESTAT KOLKATA]
(ii) M/s.Nirman Construction vs. Commissioner of CX, ST and
Customs, Durgapur Commissionerate [2025 (8) TMI 6 - CESTAT
KOLKATA]
(iii) M/s R.K. Singh & Co. vs. Commissioner of Customs & CX [2023
(5) TMI 721 - CESTAT NEW DELHI]
3.2 He further submits that for the period prior to 01July 2012
(Positive List regime), the Department has failed to identify the specific
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Service Tax Appeal No.75875 of 2017
sub clause of Section 65(105) of the Finance Act under which the said
service is liable to be taxed. He submits that the Department has not
even specified the sub-rule of Rule 3 of the Taxation of Services
(Provided from outside India and received in India) Rules, 2006 under
which the said services can be said to have been received in India. It is
well settled principle of law that under the positive list regime, the onus
to determine taxability and appropriate classification of a service was
upon the Revenue. However, in the instant case, the said onus/burden
has not been discharged by the Revenue. Thus, in the absence of
identification/classification of the specific category under which the
alleged service fell and the sub-rule under which the services could
have been said to be received in India, no liability could be fastened
upon the appellant. Thus, the demand is liable to be set aside. In
support of his contention, he relies of the following judgements :
(i) M/s. India Steamship Versus Commissioner of Service Tax
Audit [2024 (6) TMI 448 - CESTAT KOLKATA]
(ii) M/s Hindustan Zinc Ltd. Versus Commissioner, Central
Excise, Udaipur [2021 (9) TMI 859 - CESTAT NEW DELHI]
3.3 Further, he submits that even for the period post 01.07.2012, tax
demand cannot sustainas the Department has without appreciating and
understanding the nature of the services received by the appellant,
invoked Rule 3 of the Place of Provision of Services Rules, 2012 to
demand tax under reverse charge. In this regard, the appellant
submits that the Ld.Adjudicating Authority has not rebutted the
contentions of the appellant and has arbitrarily confirmed the demand
merely by imposing Rule 3 of POPS, without ascertaining as to what
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Service Tax Appeal No.75875 of 2017
type of services were received by the appellant. It is a settled law that a
vague Notice and/or Order which is devoid of any grounds or reasons in
support of its claim violates the principles of natural justice and is bad
in law. Thus, in the absence of any specific taxable service being
pointed out in the Show Cause Notice and/or impugned Order, the
demand raised against the Appellant cannot sustain. Reference in this
regard is invited to the judgement of this Tribunal in the case of M/s.
Outotec India Private Limited vs. Principal Commissioner of Service Tax-
I, Kolkata (supra).
3.4 He submits that in any event and without prejudice to the
submissions made hereinabove, it is submitted that the appellant is not
liable to discharge taxes on the expenses incurred towards shooting and
allied activities outside India. Without prejudice to the submissions
made hereinabove, it is submitted that the expenses incurred by the
Appellant are majorly for the services in relation to immovable property
situated outside India, as clearly forthcoming from the Annexure-A to
the Notice. Even otherwise, the payments made by the Appellant to
overseas line producers for arranging shooting of films outside India
would not be liable to service tax under RCM as such services are
performed wholly outside India. The Appellant submits that for the
period prior to 01.07.2012, under Rule 3(ii) of the Import Rules, 2006,
only such services were taxable which were wholly or partly performed
in India. Since, the activities relating to film shooting and allied
arrangements were wholly performed outside India, the said services
cannot be said to have been received in India for the purpose of
charging tax under Section 66A of the said Act.
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Service Tax Appeal No.75875 of 2017
3.5 He further submits that for the period post 01.07.2012, the said
payments can at best be attributed to payment for provision of services
relating to events and thus place of provision of such services would be
governed by Rule 6 of the POPS Rules, 2012. The Appellant submits
that in terms of Rule 6 of POPS Rules, 2012, place of provision of
services provided for organization or admission of a cultural, artistic,
entertainment event or similar events is the place where such event has
been held.It is submitted that while the word "event" has not been
defined under Service Tax Law, the same has been defined under the
Cambridge Dictionary to mean as "An activity that is planned for a
special purpose and usually involves a lot of people, for example, a
meeting, party, tradeshow, or conference". Thus, the term event is
wide enough to include the activity of film shooting, being a planned
activity carried out for a specific purpose.This is also evident from
Regulation 2(c) of the Rajasthan Film Shooting Regulations, 2012,
which defines film shooting as an event recorded by camera for the
purpose of showing cinematographic films. Relevant extracts of the
definition are as follows:
"(c) "Film shooting" means making of cinematographic films of
motion pictures of a story or of an episode of a serial of motion
picture or event recorded by a camera for the purpose of showing
by cinematograph in a cinema, or on television or other electronic
media whether that being for a commercial cinema venture or
purely artistic creation for publicity and/or advertisement,
intended for public viewing or showing or exhibiting whereof
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would be governed by the Cinematograph Act, 1952 (Central Act
No. 37 of 1952) or any other law for the time being in force;
Thus, on a conjoint reading of the above stated definitions, it is amply
clear that the shooting of film has to be construed as an event and the
activities of line producers which are in the nature of organisation of
shooting of the film at a foreign location would fall within the scope of
Rule 6 of POPS Rules. Thus, the place of provision of such services
would be the foreign location where the event takes place i.e. the
shooting takes place and therefore, no service tax can be recovered
from the appellant.
3.6 He submits that the demand of Rs.30,58,083/- for short reversal
of cenvat credit suffers from inherent infirmities in as much as tax
amount discharged on advances received during the year have not been
considered in the value of output services and "permanent sale of
copyrights" has been held as service. He submits that the appellant has
pro rata reversed the credit of the input services used in relation to its
film division by computing the value of exempted and output services
on entity basis as a whole. The reversal for common credits has been
computed by the Revenue by just considering the revenues of film
division, which is objectionable, as it has to be a corporate/entity level.
During the relevant period, service tax registration was a centralized
registration at a corporate level, therefore, there was no basis for pro
rata reversal of common credit by excluding the revenues attributable
to TV and Digital Cinema division. On the basis of such, division level
computation, the Department has alleged short reversal of tax to the
tune of Rs.30,58,083/-.
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3.7 He submits that the said anomaly is on account of the following
computational infirmities made by the Revenue:
(i) Decreased the denominator (taxable + exempt services) by
not considering the advances of Rs.105,01,19,356/- received
during the FY 2013-14 on which tax has been discharged during
2013-14;
(ii) Increased the numerator by including the value of permanent
sale of copyrights amounting to Rs. 3,40,00,000/- in the value of
exempt services provided.
It is pertinent to note that for the purposes of computation of reversal
under Rule 6(3A) of the CCR, value of the "services provided during the
financial year" has to considered. In this regard, the Appellant submits
that in terms of Point of Taxation Rules, 2011, the services are deemed
to have been provided at the time the point of taxation it may be noted
that 2004 Rule 3 of the Point of Taxation Rules, 2011, point of taxation
is the point when the invoice for the service has been issued or when
the payment has been received, whichever is earlier. Ld. Adjudicating
Authority has rejected the inclusion of such advances in the value of
output services on the ground that no taxable service has been
provided by the Appellant during the FY 2013-14.
3.8 It is pertinent to note that Rule 6(3A) of the CCR, 2004 requires
computation based on the "value of services provided during the
financial year." In terms of Rule 2(e) Point of Taxation Rules, 2011, a
service is deemed to have been provided at the point of taxation.
Further, as per Rule 3(b) of the POT Rules, where any advance payment
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is received prior to issuance of invoice, the point of taxation is the date
of receipt of such payment. Since advance consideration of
Rs.105,01,19,356/- was received during FY 2013-14, the point of
taxation for such amount falls within the said financial year.Accordingly,
the Appellant submits that the said amount of Rs. 105.01 crores is
required to be included in the value of output services provided during
the financial year for the purposes of computation under Rule 6(3A) of
CCR. However, the Ld. Adjudicating Authority has rejected such
inclusion on a whimsical ground thatno taxable service has been
provided by the Appellant in respect of such advance.
3.9 Further, it is submitted that the value of "permanent sale/transfer
of copyrights" on which VAT has been discharged by the Appellant
cannot be included in the value of exempt services in so far as it is a
settled law that permanent transfer of copyright is outside the purview
of service tax. Reference in this regard is invited to the following
judgements:
(i) M/s Narne Networks Pvt Ltd. Versus Commissioner of Central
Excise and Service Tax Hyderabad [2025 (10) TMI 1132 - CESTAT
HYDERABAD]
(ii) Pr. Commissioner of CGST & Central Excise, Chennai Vs
Wunderbar Films Private Ltd [2024 (3) TMI 17 - MADRAS HC].
However, the Ld.Adjudicating Authority has disregarded the appellant's
contention on anerrroneous ground that discharge of VAT on a service
does not necessarily exclude its liability from service tax. In this regard,
the Appellant submits that it is a settled principle of law that service tax
cannot be levied on the same transaction on which VAT has been
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Service Tax Appeal No.75875 of 2017
discharged as VAT and service tax are mutually exclusive.The said
proposition has also been clarified by the CBIC vide Circular No.
334/1/2008-TRU dated 29.02.2008 (Para 4.4.3).Reliance in this regard
is placed on the following judgements:
(i) Imagic Creative Pvt Ltd. vs. Commissioner of Commercial
Taxes [2008 (9) S.T.R. 337 (S.C.)]
(ii) Commissioner of Service Tax-V, Mumbai vs. UFO Moviez India
Ltd [2022 (61) G.S.T.L. 4 (S.C.)]
In light of the submissions made hereinabove, the revised ratio for
reversal of CENVAT Credit would be computed as under:
Total Value of exempted services (film division) provided during the
financial year (i.e. M) as per the Notice = Rs. 28,88,44,244/-
Total value of output and exempted services (for film division)
provided during the financial year (i.e. N) is computed as under:
Particulars Amount (Rs)
Total Value of output services provided as per Notice 33,27,68,723/-
Less: Value of output services provided during the previous 31,32,47,100/-
years (i.e. advance amount on which tax paid during the last
year and income recognised in the current year)
Add: Value of output services provided during the financial 1,05,01,19,356/-
year 2013-14 (i.e. advance amount on which tax paid during
2013-14 and part of income to be recognised in the
subsequent years)
Add: Value of export service (as per Notice) 33,83,844/-
Total Value of Output Service Provided during 2013-14 1,07,30,24,823/-
Add: Total Value of exempted services (as per Notice) 28,88,44,244/-
Total value of output and exempted services provided during 1,36,18,69,067/-
the financial year (i.e. N)
Total CENVAT credit taken on input services (for film division) during
the financial year 2013-14 (i.e. P) as per the Notice -
Rs.2,18,43,449/-
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Therefore the ratio for reversal of CENVAT Credit pertaining to film
division is coming to approximately 21.21% (i.e.
28,88,44,244/1,36,18,69,067 x 100)
Hence, the CENVAT reversal should have been Rs. 46,32,864/- (i.e.
2,18,43,449 x 28,88,44,244/1,36,18,69,067). However, the Appellant
had inadvertently reversed a CENVAT credit of Rs. 76,45,207/- which is
not in dispute basis their understanding that the ratio is to be applied
for the entire company as a whole and not division wise.
3.10 Further, it is submitted that the demand of Rs.26,16,650/- is
wholly unwarranted, as the input services availed from RIMT Pvt. Ltd.
were exclusively used for rendering taxable output services and
therefore no reversal of CENVAT credit is required. The Revenue seeks
to recover Rs.26,16,650/- from the appellant against the cenvat credit
amounting to Rs.30,84,840/- availed on input services (digital
mastering services) received from RIMT Pvt. Ltd. on the purported
ground that the said services have been used by the Appellant for
rendering both taxable (video tape production services) as well as
exempt services (advertisement services and services by way of
temporary transfer of permitting the use or enjoyment of copyright of
cinematographic film or exhibition in a cinema hall). In this regard it
would be pertinent to note that "digital cinema mastering" refers to the
technical process of converting a film's digital intermediate outputs
(images) into a DCI/SMPTE-compliant Digital Cinema Package (DCP) by
compressing, encrypting and synchronising image, audio and subtitle
files for theatrical exhibition.
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3.11 He further submits that the findings of the Ld.Adjudicating
Authority that the mastering services formed an integral part of
exempted advertising services or temporary transfer of copyright for
exhibition is based on mere assumptions and presumptions without any
evidence of actual use. The Revenue has not adduced any evidence
whatsoever to prove that the services received from RIMT were availed
by the Appellant for rendering exempt services. Further, the allegation
that that without receiving such services, the assesses would not be in a
position to display their films or advertisement contents to the viewer is
completely erroneous and without any basis in so far as the films can be
exhibitedeven without receipt of the mastering services in cases where
the Appellant receives digitally mastered reel from the producers. It is a
settled law that the demand raised merely on the basis of presumptions
and assumptions without any concrete evidence is liable to be dismissed
and set aside In support of his contention, he relies on the following
judgements :
(i) M/s DLF Project Limited Versus C.C.E & S. T- Gurgaon I [2020
(38) G.S.T.L. 56 (Tri. - Chan.)]
(ii) M/s Bengal Beverages Private Limited vs. Commissioner of CGST
& Excise, Howrah [2022 (2) TMI 1125 - CESTAT KOLKATA]
3.12 It is further submitted that the digital cinema mastering services
availed from RIMT have been used exclusively for further providing
digital cinema mastering services to the producers, on which tax has
been discharged under the category "Video Tape Production services".In
this regard, sample copies of the input service invoices issue by RIMT
and the output service invoices raised by the appellant for provision of
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Service Tax Appeal No.75875 of 2017
such services were also produced before the Ld. Adjudicating
Authority.However, the Ld. Adjudicating Authority has rejected the
contention of the Appellant on flimsy ground that all the cinemas were
exhibited in digital form during the relevant period. Thus, the demand
raised merely on assumptions and presumptions is liable to be set
aside. He submits that in respect of the capital goods having been used
for provision of both taxable and exempt services, no credit reversal is
required in terms of Rule 6(4) of CCR.
3.13 He submits that out of the demand of Rs. 15,53,293/-, a sum of
Rs.14,95,054/- pertains to cenvat credit availed on imports of
projectors and parts thereof falling under Chapter 85 and 90, while the
balance Rs.58,239/- pertains to the cenvat credit of input services
availed in relation to maintenance of such projectors.The Revenue has
demanded the reversal of the credit availed on said goods and services
on the purported ground that they have been used by Appellant
exclusively for effectuating exempt supplies. In this regard, the
Appellant submits that the said allegation is unfounded and rendered
without proper appreciation of facts in so far as it was used for provision
of taxable services in the form of "distributor per show fees". The said
projectors were used for exhibiting films in cinema theatres by the film
distributor/exhibitor and the Appellant charged such distributor a pre-
agreed share of the revenue on per show basis, on which tax was duly
discharged by the Appellant under the category of "video tape
production service". The Ld. Adjudicating Authority brushed aside the
contentions of the Appellant by stating that video tape production
services ceases its operation after transfer of digital films to distributor
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Service Tax Appeal No.75875 of 2017
and that video production service (taxable) cannot be corelated with an
exempt service of transfer or enjoyment of copyright of
cinematographic film for exhibition in a cinema hall. In this regard, it
is submitted that in terms of Section 66F(1) of the said Act, it is not
necessary that a service used to provide an exempt service shall also be
an exempt service. Thus, the finding of the Adjudicating Authority that
there is no co-relation between a taxable service and exempt service is
completely misplaced. Moreover, even if it is assumed but not admitted
that the said services were not taxable under the category "video tape
production service", the same would not result in any material change
to the present proceedings. It is an undisputed fact that the Appellant
has duly discharged service tax on the consideration received from
distributor. Mere discharge of tax under an incorrect or alternative
taxable category would neither alter the taxability of the transaction nor
would render the payment otiose.
3.14 Further, he submits that in terms of Rule 6(4) of CCR, 2004,
cenvat credit on capital goods is restricted only if used for supplying
exclusive exempt services. Since, the projector and parts thereof have
been used for providing both taxable and exempt services, no reversal
is required. Thus, the demand of Rs.14,95,054/- is liable to be set
aside. Reference in this regard is invited to the judgement of this
Hon'ble Tribunal in the case of Commissioner of CX & ST, Kolkata vs.
Electrosteel Castings Ltd. [Excise Appeal No. 75827 of 2015 - CESTAT
KOLKATA]
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3.15 With regards to the balance demand of Rs.58,239/- pertaining to
input services, he submits that the said services were used for
rendering both taxable and exempt supplies and hence the Appellant
had already reversed the proportionate credit amounting to Rs. 17653/-
along with interest of Rs.6,354/-. However, the same has not been
appropriated. Thus, he prays that an amount of Rs.17,653/- be
appropriated and the balance demand of Rs.40,586/- be set aside.
3.16 It is further submitted that the demand of Rs.21,76,552/- is not
sustainable as it has already been reversed by the appellant. The
demand has been raised on the purported ground that the appellant has
availed excess credit in ST-3 returns vis-à-vis the cenvat credit register.
In this regard, he submits that the allegation of the Revenue is wholly
erroneous and devoid of merits as the entire amount of Rs.21,76,552/-
has been reversed by the appellant in its ST-3 returns for the period
October 2013 to March 2014.
3.17 He further submits that the penalty under Section 78 is not
imposable when tax has been paid even before the issuance of show-
cause notice. It is well settled that penalty under Section 78 and/or
under Rule 15 can only be imposed in a situation where Service Tax is
not paid by reason of fraud, collusion or wilful mis-statement or
suppression of facts or contravention of any provisions of the law, with
the intent to evade payment of Service Tax. However, in the present
case, the appellant has never suppressed any facts regarding the
activities undertaken by them. In fact, the entire demand has been
computed solely on the basis of the figures provided by the appellant,
sourced from its audited annual accounts and S.T.-3 Returns filed
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Service Tax Appeal No.75875 of 2017
during the relevant period. The Department has failed to adduce any
evidence to establish suppression of facts on the part of the appellant
with the intent to evade payment of Service Tax and hence penalty
under Section 78 is not imposable. In this regard, he relies on the
decision of this Tribunal in the case of M/s Outotec India Private Limited
vs. Principal Commissioner of Service Tax-I,Kolkata (supra). Further, he
submits that it is a well settled principle in law that penalty cannot be
demanded under Section 78 of the Act, when tax has been paid even
before the issuance of show cause notice. In this regard, he also relies
on the judgement of this Tribunal in case of M/s Reliable Industries
Versus Commissioner of CGST & Central Excise,Bhubaneswar [2023
(12) TMI 1065 - CESTAT KOLKATA].
3.18 Finally, he submits that the demand is barred by limitation. In
this case, he points out that the demand for the entire period (2010-11
to 2013-14) except for the period October 2013 to March 2014 is barred
by limitation. He further submits that it is a settled law that extended
period of limitation cannot be invoked in cases where the entire demand
has been raised solely on the basis of balance sheet and ST-3 returns of
the Company, which are public documents. Thus, the entire demand for
the period till September 2014 is liable to be set aside on this short
ground alone.
4. The ld.A.R. for the Revenue has justified the impugned order.
5. Heard both sides and considered the submissions.
6. We find that in this case, the following issues emerge :
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Service Tax Appeal No.75875 of 2017
(a) whether the appellant is liable to pay service tax under
reverse chance mechanism on the expenses incurred in foreign
currency towards shooting of films and other related expenses or not ?
(b) Whether an amount of Rs.30,58,083/-, is required to be
reversed on account of alleged short reversal of cenvat credit on input
services used commonly for making both taxable and exempt supply or
not ?
(c) Whether an amount of Rs.26,16,650/- is required to be
reversed on cenvat credit used on input services received from RIMT
Pvt. Ltd. used for providing both taxable and exempt supply or not ?
(d) Whether an amount of Rs.15,53,293/- is required to be
reversed to cenvat credit availed on projectors and its maintenance
related services purported used exclusively for providing exempt
services or not ?
(e) Whether an amount of Rs.21,76,552/- is required to be
reversed for excess availment of cenvat credit in ST-3 Returns Vis-à-vis
the cenvat credit register or not ?
(f) Whether penalty can be imposed under Section 78 of the
Finance Act, 1994 on the appellant, or not ?
7. It is undisputed facts that the appellant is providing taxable as
well as exempted services and on taxable services, the appellant is
paying service tax. Some services are exempted services, on which,
the appellant is not paying service tax. The appellant is not paying
service tax on permanent transfer of copyright of cinematographic films
and on that transfer of copyright, the appellant has paid VAT,
therefore, no service tax is payable.
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Service Tax Appeal No.75875 of 2017
Issue (a)
Whether the appellant is liable to pay service tax under
reverse chance mechanism on the expenses incurred in foreign
currency towards shooting of films and other related expenses
or not ?
8. The demand of service tax has been confirmed under reverse
charge mechanism on the expenses incurred in foreign currency
towards shooting of films and other related expenses for the period
2010-11 to 2013-14. In fact, the appellant incurred certain expenses in
foreign currency for shooting of films outside India and other allied
activities. The demand has been raised on the basis of figures shown in
the balance sheet under the Heading "expenditure in foreign currency"
without specifying the nature of the taxable service. It is not
mentioned in the show-cause notice. The contention of the appellant is
that the onus of determining taxability of a service and its classification
is on the department and the demand cannot be raised merely on the
basis of difference in figures between the Balance Sheet and the ST-3
Returns without identifying the category of underlying service, on
which service tax is payable. Admittedly, no description of service has
been identified by the Revenue while issuing the show-cause notice.
The demand has been raised merely on the basis of difference in figures
between the Balance Sheet and the ST-3 Returns. In that
circumstances itself, the demand is not sustainable as held by this
Tribunal in the case of Outotec India Private Ltd. (supra), wherein this
Tribunal has observed as under :
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Service Tax Appeal No.75875 of 2017
"6.1. From the above table, we find that this demand has been
raised simply on the basis of the difference between Profit & Loss
Accounts, Trial Balance and S.T.-3 Returns.
6.2. For the period prior to 01st July, 2012, the charge of Service
Tax under Section 66 of the Finance Act was on services falling
under the various sub-clauses of Section 65(105). It was
therefore necessary for the Department to establish that the
alleged differential income pertained to rendering of taxable
services falling under one of the sub-clauses of Section 65(105) of
the Act. The burden is cast upon the Department to prove that
Service Tax is leviable under the charging provision, which the
Department has failed to do in the instant case. Hence, the
demand of Service Tax confirmed cannot be sustained. In support
of this view, we rely upon the decision in the case of M/s
Hindustan Zinc Ltd. Versus Commissioner, Central Excise, Udaipur
[2021 (9) TMI 859]. The relevant portion of the said decision is
reproduced below: -
"10. To appreciate the aforesaid contention, it would be
necessary to examine the relevant provisions of section 66 and
66A of the Finance Act. Section 66 is the charging section and it
provides that there shall be levied service tax at the rate of 12
per cent of the value of taxable services referred to in various
clauses of section 65(105). Section 66A of the Finance Act relates
to charge of service tax on services received from outside India.
11. Neither is there any allegation in the two show cause notices
nor any finding has been recorded in the impugned order to
demonstrate how the provisions of 66 read with 66A of the
Finance Act and the Import Rules are attracted. In fact, neither
the show cause notices nor the impugned order specify the
category of service under which the demand has been confirmed
against the Appellant. The demand has been proposed and
confirmed merely because of difference between the figures in
the balance sheet of the Appellant and theST-3 Returns."
6.3.A similar view has also been taken by this Bench in the case
of M/s. Nirman Construction Versus Commissioner of Central
Excise, Service Tax and Customs, Durgapur Commissionerate,
21
Service Tax Appeal No.75875 of 2017
Burdwan (West Bengal) [2025 (8) TMI 6 - CESTAT Kolkata]
wherein it has been held that no Service Tax can be demanded
merely on the basis of difference between Balance Sheet and
S.T.-3 Returns. The relevant observation made by the Bench in
the aforesaid decision reads as under: -
"10.1. From the above, it is evident that Service Tax has
been demanded on the basis of the value of taxable services
as observed from the balance sheet / Profit & Loss Account
of the appellant and the value declared in their S.T.-3
Returns. No separate category-wise Service Tax has been
demanded. Therefore, we find force in the contention of the
Ld. Counsel for the appellant that the Show Cause Notice,
issued merely on the basis of difference observed between
the figures furnished in the balance-sheet and S.T.-3
Returns without specifying any particular category of service
for levy of Service Tax, is not sustainable."
6.4. Even for the period after 01st July, 2012, Service Tax can be
levied only when there is a clear identification of service provider,
service rendered, service recipient and consideration paid for the
same, to analyse the nature of service rendered and the liability
to Service Tax on the part of the appellant thereon. Since no such
exercise has been done in the Show Cause Notice, we agree with
the submission made by the appellant that the demand confirmed
in the impugned order cannot sustain. We observe that the same
view has been expressed by the CESTAT, Chandigarh in the case
of M/s. Indian Machine Tools Manufacturers Association vs The
Commissioner of Central Excise, Panchkula [2023 (9) TMI 815]
wherein it has been held as under: -
"11. Coming to third and final issue as to whether any
demand can be sustained on the basis of difference between
the figures of ST-3 Returns and the balance sheets, we find
that it is a settled principle of law that service tax can be
levied only when there is a clear identification of service
provider, service recipient and consideration paid for the
same. In the absence of any such evidence of the service
recipient and the service provided, service tax cannot be
demanded and confirmed. For this reason, we are of the
considered opinion that it is not open for the Department to
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Service Tax Appeal No.75875 of 2017
raise demands on the basis of other statutory returns like
Income Tax Returns or balance sheets without proving that
such service has been rendered by the assessee and
consideration thereof has been received. Similarly, no
service tax demand can be raised and confirmed on the
basis of notional income."
6.5. Similar views have also been taken in the following
decisions: -
(i) M/s. Sajma Enterprises Versus Commissioner of CGST &
CX, Kolkata [2025 (9) TMI 873 - CESTAT Kolkata]
(ii) M/s.GopiChenna and M/s SIS Teleservices Pvt Ltd vs
Commissioner of Central TaxMedchal - GST and
Commissioner of Central Tax Secunderabad - GST [2024
(3) TMI 11 - CESTAT Hyderabad]
(iii) M/s.Rishu Enterprise Versus Commissioner of CGST &
Excise, Dibrugarh [2024 (2) TMI 566 - CESTAT Kolkata]
6.6. Thus, we find merit in the submission made by the appellant
that the demand of Rs.4,28,99,373/- confirmed in the impugned
order merely on the basis of difference between Profit & Loss
Accounts, Balance Sheets and S.T.-3 Returns, is not sustainable.
Accordingly, the demand of Rs.4,28,99,373/- confirmed in the
impugned order is set aside.
7. Regarding the demand of Rs.1,65,03,949/- confirmed in the
impugned order, we find that the said demand has been raised on
the advances received, by taking into account the balance of
advances received as mentioned in the trial balance sheet of the
appellant for the respective Financial Years. However, we find that
the ld. adjudicating authority has not adduced any reasons to
justify the demand of Service Tax confirmed in this regard. For
levy of Service Tax, identification of the underlying service is the
mandatory requirement, which has not been done in the present
case. It was incumbent upon the Department to specify the
taxable service being provided by the appellant and in the
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Service Tax Appeal No.75875 of 2017
absence of any specific taxable service being pointed out in the
impugned Show Cause Notice, the demand raised against the
appellant cannot sustain.
7.1. We find that the same issue came up for consideration
before the Tribunal in the case of Commr. of Service Tax, Kolkata
Versus M/s. Haldia Logistics Pvt. Ltd and vice-versa [2025 (5) TMI
2187 - CESTAT Kolkata], wherein the appeal filed by the Revenue
has been dismissed, as service wise quantification was not done in
that case. The relevant paragraphs of the above decision are
reproduced below, for ease of reference: -
"7. In respect of the quantification of amounts realized
given under Page 49 of the Appeal Paper, it is seen that
there is no Service Tax reference. Coming to the Annexure-
III, there is reference of Cargo Handling Service and
Storage warehouse service without specific service-wise
quantification of Service Tax. On the other hand, we find
that the Adjudicating authority in the Discussions and
Findings portion of the impugned Order, has bifurcated the
demand under four different categories of services and has
dealt with the documentary evidence submitted in respect
of these services and he has come to a conclusion to drop
and confirm the demand under various categories.
8. We find that the Show Cause Notice has been issued in a
very casual manner without proper quantification of Service
Tax under various headings. This being so, we do not find
any error with the Adjudicating Authority who has bifurcated
the demand and come to conclusion. We do not find any
reason to interfere with the detailed findings of the
Adjudicating Authority. Since the matter pertains to the
year 2004-05 and 2005-06, we do not find any reason as to
why it should be remanded once again to the Adjudicating
Authority to undertake the entire exercise once again after
two decades. Accordingly, we dismiss the appeal filed by the
Revenue."
7.2. A similar issue has also been examined in the case of Star
Freight Pvt. Ltd. versus C.S.T. - Service Tax - Ahmedabad [2023
(9) TMI 71] wherein it has been held that it is imperative for the
department to specify the specific taxable service which is being
provided by the appellant for levy of Service Tax.
24
Service Tax Appeal No.75875 of 2017
7.3. We find that the ratio of the decisions cited supra are
squarely applicable to the facts and circumstances of this case.
thus, by relying on the decisions cited supra, we set aside the
demand of Rs.1,65,03,949/- confirmed in the impugned order."
In view of this, for the period prior to 1st July, 2012, the demand is not
sustainable as there is no specific clause of Section 65(105) of the
Finance Act, 1994, under which, the said service is liable to be taxed.
Even it is specified the sub-rule of Rule 3 of the Taxation of Services
(Provided from outside India and received in India) Rules, 2006, under
which the said services can be said to have been received in India. As
it is settled law that prior to 1st July, 2012, the onus to determine the
taxability and classification, was on the Revenue, which the Revenue
has failed to discharge. Therefore, the demand of service tax is not
sustainable for the period prior to 1st July, 2012. The said view has
been affirmed by this Tribunal in the case of M/s India Streamship
(supra), wherein this Tribunal has observed as under :
"8.1. in the case of United Telecoms Limited Vs.
Commissioner of Service Tax [2011 (22) S.T.R. 571 (Tri. -Bang),
it has been observed as under:
"6. We find that no demand can be confirmed against any person
towards service tax liability unless helt is put on notice as to its
exact liability under the statute. In the show-cause notice basic to
the proceedings, the impugned activities were proposed to be
classified under BAS and BSS This proposal was confirmed by the
Original Authority. We find that this order is not in accordance
with the law. The impugned order held that UTL provided services
on behalf of the client le Director, e-Seva and sustained the
demand. We find that under BAS, there are seven sub-clauses.
Demand under sub-clause (vii) could be on activities relatable to
either one of the preceding six sub-clauses. Therefore, if a notice
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Service Tax Appeal No.75875 of 2017
issued proposing demand under BAS, the noticee will not be
aware as to the precise ground on which tax is proposed to be
demanded from him unless the sub-clause is specified. In the
instant case, service tax was proposed to be demanded for an
activity under BAS and BSS. Under BSS also several activities are
listed as exigible under that head. In the absence of proposal in
the show-cause notice as to the liability of the assessee under the
precise provision in the Act, we find the demand to be not
sustainable."
8.2. In the present case, we observe that the Notice failed to
classify the specific category under which service tax is to be paid
by the appellant. Accordingly, we hold that the demands of
service tax confirmed in the impugned order is not sustainable on
this count alone."
9. We further take note of the fact that for the period post
01.07.2012, the demand has been raised by invoking Rule 3 of the
Place of Provision of Services Rules, 2012, under reverse charge
mechanism. The contention of the appellant is that the said demand
has been confirmed without ascertaining as to what type of service has
been received by the appellant as the show cause notice is vague.
Therefore, the said demand is not sustainable.
10. We further take note of the fact that the show-cause notice does
not specify for what purpose the demand has been raised under reverse
charge mechanism by invoking Rule 3 of the Place of Provision of
Services Rules, 2012.
11. We further take note of the fact that the expenses which have
been incurred by the appellant, are majority for the services in relation
to immovable property situated outside India and the payments were
made by the appellant to overseas line producers for arranging
26
Service Tax Appeal No.75875 of 2017
shooting of films outside India, therefore, the same are not liable to
pay service tax under reverse charge mechanism. As such, such
services are performed wholly outside in India. For better appreciation,
the provisions of law of Place of Provision of Services Rules, 2012, are
extracted herein below :
"4. Place of provision of performance based services
The place of provision of following services shall be the location
where the services are actually performed, namely:-
(a) services provided in respect of goods that are required
to be made physically available by the recipient of service to
the provider of service, or to a person acting on behalf of
the provider of service, in order to provide the service:
PROVIDED that when such services are provided from a
remote location by way of electronic means the place of
provision shall be the location where goods are situated at
the time of provision of service:
PROVIDED FURTHER that this sub-rule shall not apply in the
case of a service provided in respect of goods that are
temporarily imported into India for repairs, reconditioning or
re-engineering for re-export, subject to conditions as may
be specified in this regard.
(b) services provided to an individual, represented either as
the recipient of service or a person acting on behalf of the
recipient, which require the physical presence of the
receiver or the person acting on behalf of the receiver, with
the provider for the provision of the service.
5. Place of provision of services relating to immovable
property
The place of provision of services provided directly in relation to
an immovable property, including services provided in this regard
by experts and estate agents, provision of hotel accommodation
by a hotel, inn, guest house, club or campsite, by whatever, name
called, grant of rights to use immovable property, services for
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Service Tax Appeal No.75875 of 2017
carrying out or coordination of construction work, including
architects or interior decorators, shall be the place where the
igumovable property is located or intended to be located.
6. Place of provision of services relating to events
The place of provision of services provided by way of admission
to, or organization of, a cultural, artistic, sporting, scientific,
educational, or entertainment, event, or a celebration,
conference, fair, exhibition, or similar events, and of services
ancillary to such admission, shall be the place where the event is
actually held."
On going through the said provisions, we find that Rule 6 of Place of
Provision of Services Rules, 2012, is more appropriate as the said
provision provides that the place of provision of services for
entertainment event or similar events and of services ancillary to such
admission, shall be the place where the event is actually held.
Admittedly, the shooting films were held outside India and whether the
shooting films is an event that has been dealing by the Regulation 2(c)
of The Rajasthan Film Shooting Regulations, 2012, which is extracted
below :
"THE RAJASTHAN FILM SHOOTING REGULATIONS, 2012
.
.
.
Regulation 2. Definitions ....
(c) "Film shooting" means making of cinematographic films of motion pictures of a story or of an episode of a serial of motion picture or event recorded by a camera for the purpose of showing by cinematograph in a cinema, or on television or other electronic media whether that being for al commercial cinema venture or purely artistic creation for publicity and/or advertisement, 28 Service Tax Appeal No.75875 of 2017 intended for public viewing or showing or exhibiting whereof would be governed by the Cinematograph Act. 1952 (Central Act No.37 of 1952) or any other law for the time being in force;"
Therefore, shooting of films outside India do qualify under Rule 6 of Place of Provision of Services Rules, 2012 and the place of service is to be held where the service has been performed. In this case, the shooting of films have performed outside in India. In that circumstances, no service tax is payable by the appellant.
12. Further, we take note of the fact that the services are in the nature of services relating to immovable property location selection, which are outside India. For better appreciation of facts, the details are extracted below :29
Service Tax Appeal No.75875 of 2017 Admittedly, all these expenses have been incurred by the appellant outside India for reference of services relating to immovable property- location or shooting services, which are performed based on the services relating to immovable property-location and the same shall be place of providing services. Admittedly, all the services have been performed by the appellant outside India. Therefore, the same will be treated as availed outside India. Therefore, no service tax is payable by the appellant. In view of this, the demand of Rs.1,24,73,378/- is set aside.
Issue (b) Whether an amount of Rs.30,58,083/-, is required to be reversed on account of alleged short reversal of cenvat credit on input services used commonly for making both taxable and exempt supply or not ?
13. We find that the appellant has pro rata reversed the cenvat credit of the input services used in relation to its film division by computing the value of exempted and output services on entity basis as a whole and the Revenue is seeking reversal by considering the revenues of film division, which is not correct proposition. In terms of Rule 6(3A) of the Cenvat Credit Rules, 2004, the value of the services provided during the financial year, is required to be considered and the appellant has reversed the cenvat credit proportionately. If the same is taken up as service during the financial year, then, there is no shortage of reversal of cenvat credit by the appellant. In view of this, the said demand of Rs.30,58,083/- is set aside.30
Service Tax Appeal No.75875 of 2017 Issue (c) Whether an amount of Rs.26,16,650/- is required to be reversed on cenvat credit used on input services received from RIMT Pvt. Ltd. used for providing both taxable and exempt supply or not ?
14. The Revenue is seeking to recover the said amount against the cenvat credit amounting to Rs.30,84,840/- availed on input services received from RIMT Pvt. Ltd. on the ground that the said service has been used for rendering both taxable as well as exempted services. In fact, the said services received by the appellant, were exclusively used for rendering taxable output services. Further, the Revenue has failed to prove that the services received from RIMT Pvt. Ltd., have been used for providing exempted services. It is evident from the invoices used by RIMT Pvt. Ltd. and the corresponding invoices issued by the appellant, for better appreciation of facts, the said invoices are extracted below : 31
Service Tax Appeal No.75875 of 2017 From the invoices produced before us, we find that the invoice raised by RIMT Pvt.Limited on the appellant, is for content mastering charges 32 Service Tax Appeal No.75875 of 2017 and the appellant has raised invoices for D5 processing and digitisation charges. The digital cinema refers to the technical process of converting a film's digital intermediate outputs into a DCI/SMPTE- Complaint Digital Cinema Package by compressing, encrypting and synchronising image, audia and subtitle files for theatrical exhibition. As the appellant is engaged a sub-contractor by providing services i.e. RIMT Pvt. Ltd. and provided the service to the service recipient . As the appellant paid service tax on the said service, in that circumstances, the appellant is entitled to take the cenvat credit in full for the services received from RIMT Pvt. Ltd..
Issue (d) Whether an amount of Rs.15,53,293/- is required to be reversed to cenvat credit availed on projectors and its maintenance related services purported used exclusively for providing exempt services or not ?
15. The cenvat credit sought to be denied on projector and the related services to the projector for their maintenance etc. on the ground that the said projector has been used for providing exempted services. In fact, the said capital goods have been used by the appellant for providing exempted as well as taxable services. In that circumstances, the cenvat credit on the capital goods cannot be denied to the appellant as in respect of the said capital goods have been used by the appellant for providing taxable as well as exempted services, this 33 Service Tax Appeal No.75875 of 2017 Tribunal in the case of Electro Casting Ltd. vide Final Order No.77612/2024 dated 21.11.2024, has observed as under :
"6. We find that in this case it is a fact on record that Respondent is manufacturing captively consume goods i.e. coke which have been ultimately used in manufacturing of final dutiable goods. In that circumstances, the provision of Rules 6(4) are not applicable to the facts of this case. As these capital goods received have not been used exclusively for fabrication for manufacturing of final exempted goods.
7. In that circumstances, we do not find any infirmative with the impugned order. The same is upheld and the appeal filed by the Revenue is dismissed."
Therefore, the denial of cenvat credit of Rs.15,53,293/-, is not sustainable.
Issue (e) Whether an amount of Rs.21,76,552/- is required to be reversed for excess availment of cenvat credit in ST-3 Returns Vis-à-vis the cenvat credit register or not ?
16. The cenvat credit of Rs.21,76,552/- sought to be denied to the appellant on account of the appellants have availed excess cenvat credit in their ST-3 Returns as compared to cenvat credit register. The contention of the appellant is that the said amount has already been reversed by the appellant, which has been shown in their ST-3 Returns for the period October, 2013 to March, 2014. For better appreciation of facts, the reversal of the said amount is extracted herein below : 34
Service Tax Appeal No.75875 of 2017 35 Service Tax Appeal No.75875 of 2017 which clearly shows that the appellant has reversed the said amount during the period October, 2013 to March, 2014. As the appellant has 36 Service Tax Appeal No.75875 of 2017 already reversed the said amount, therefore, the said demand is set aside.
Issue (f) Whether penalty can be imposed under Section 78 of the Finance Act, 1994 on the appellant, or not ?
17. The penalties have been imposed on the appellant for availment of cenvat credit paid under reverse charge mechanism without any duty paying documents in terms of Rule 8 & 9 of the Cenvat Credit Rules, 2004. As there is no evidence brought on record that the appellant has availed cenvat credit by way of fraud, collusion or willful mis-statement or suppression of facts or contravention of any provisions of law with intent to evade payment of service tax, therefore, no penalties can be imposed on the appellant under Section 78 of the Finance Act, 1994 on account of availment of cenvat credit paid under reverse charge mechanism without any valid documents and excess availment of cenvat credit on the capital goods. Therefore, the penalties imposed on the appellant under Section 78 of the Finance Act, 1994, are set aside.
18. In view of the above observations, the impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Pronounced in the open court on 05.02.2026) (Ashok Jindal) Member (Judicial) (K.Anpazhakan) mm Member (Technical)