Custom, Excise & Service Tax Tribunal
Ms Origin Advertising Private Limited vs Ce & Cgst Lucknow on 10 March, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70111 of 2021
(Arising out of Order-in-Appeal No. 04-PC-2020-21, dated-18/08/2020
passed by Principal Commissioner CGST & Central Excise, Lucknow)
M/s Origin Advertising Private Limited .....Appellant
(2nd Floor, 382-383, Akarshan Complex,
Vibhuti Khand, Gomtinagar,
Lucknow, Uttar Pradesh 226010)
VERSUS
Commissioner, CGST & Central Excise, Lucknow
....Respondent
(GST Bhawan, 7-A, Ashok Marg,
Lucknow)
APPEARANCE:
Shri Nishant Mishra, Advocate for the Appellant
Shri Santosh Kumar, Authorized Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. ANIL.G.SHAKKARWAR, MEMBER (TECHNICAL)
FINAL ORDER NO.-70123/2024
DATE OF HEARING : 03.12.2024
DATE OF DECISION : 10.03.2025
P. K. CHOUDHARY:
By the present appeal, the Appellant has challenged Order-
In-Original dated 18.08.2020 passed by the Ld. Principal
Commissioner, CGST & Central Excise, Lucknow, to the extent it
conforms demand of service tax of Rs 5,94,38,654/- along with
equivalent penalty and interest, disallows CENVAT credit of Rs
97,36,884/- and imposes equivalent penalty alongwith interest,
demands late fee of Rs 2,05,100/- and confirms imposition of
penalties of Rs 10,000/- each under Section 77(1)(c), 77(1)(d)
and 77(2) of the Finance Act, 1994.
2 Service Tax Appeal No.70111 of 2021
2. The facts of the case, as borne out from records, are such
that during the period from 2012-13 to 2016-17, the Appellant
provided 'Advertising Agency services', by advertisement in print
media, also by way of sale of space on hoardings/unipoles/roof
tops and also claimed CENVAT credit on input services used for
providing taxable services. The Appellant submitted ST-3 returns
discharging service tax liability on taxable services after availing
deduction in terms of Circular No. 341/43/96 TRU dated
31.10.1996. During the same period, the Appellant also supplied
goods such as flex material, boards etc., on which the Appellant
discharged VAT liability under the U.P VAT Act, 2008 and also
submitted returns under the said Act.
3. Acting on the basis of some intelligence that the Appellant
is providing advertising services but was not discharging
appropriate service tax liability, the Officers of preventive branch
of Central Excise & Service Tax Commissionerate, Lucknow,
visited the business premises of the Appellant on 28.09.2016.
On examination of documents produced, the Officers prima-facie
detected evasion of service tax on the ground of difference in
figures of Profit & Loss A/c and ST-3 returns. The Officers also
formed an opinion that CENVAT credit to the tune of Rs
9,06,89,426/- appears to be inadmissible as the Appellant could
not produce invoices during the visit of officers.
4. Based on above, a demand cum Show Cause Notice1 dated
27.11.2018 was issued alleging short payment of service tax,
wrong availment of CENVAT credit and delayed submissions of
returns and directing the Appellant to show cause as to why :-
(i) Service tax amounting to Rs 10,08,22,158/- should
not be demanded and recovered under Section 73(1)
of the Act along with due interest thereon as per
Section 75 of the Act;
1
SCN
3 Service Tax Appeal No.70111 of 2021
(ii) Service tax amounting to Rs 96,96,785/- should not
be demanded and recovered under Section 73(1) of
the Act along with due interest thereon as per
Section 75 of the Act;
(iii) Service tax amounting to Rs 1,54,88,847/- should
not be demanded and recovered under Section 73(1)
of the Act along with due interest thereon as per
Section 75 of the Act;
(iv) Service tax amounting to Rs 47,02,934/- should not
be demanded and recovered under Section 73(A) of
the Act along with due interest thereon as per
Section 73B r/w Section 75 of the Act;
(v) Cenvat credit availed and utilised amounting to Rs
9,06,89,426/- should not be demanded and
recovered along with due interest at the applicable
rate under Rule 14 of the CCR read with Section 73
& 75 of the Act;
(vi) The party should not be asked to reverse/pay an
amount equal to 7% of exempted service i.e. Rs
5,24,74,842/- as availed and utilised by them under
Rule 6 of CCE along with due interest at the
applicable rate under Rule 14 of CCR read with
Section 73 & 75 of the Act;
(vii) Penalty should not be imposed under Section 78 of
the Act for non-payment of due service tax by
suppressing the value of taxable services with intent
to evade the payment of service tax from the
department;
(viii) Penalty should not be imposed for taking
inadmissible CENVAT credit as per Rule 15 of the
CCR read with Section 78 of the Act;
(ix) Penalty should not be imposed under Section 70 of
the Act read with Rule 7C of the Rules;
(x) Penalty should not be imposed upon them under
Section 77(1) of the Act;
4 Service Tax Appeal No.70111 of 2021
(xi) Penalty should not be imposed upon them under
Section 77(1) of the Act;
(xii) Penalty should not be imposed upon them under
Section 77(2) of the Act;
5. The Appellant vide letters dated 27.02.2019, 17.07.2019,
13.02.2020 and 30.06.2020 submitted reply to SCN inter-alia
submitting that the total receipts during the period in question
includes the amounts received against sale of goods and also
against services falling under negative list and after applying
admissible deduction under Circular No. 341/43/96 TRU dated
31.10.1996, there is no difference in figures of Profit & Loss A/c
and ST-3 returns. The Appellant also submitted complete
invoices on the strength of which cenvat credit of Rs
9,06,89,426/- was claimed. The Appellant also contested the
demand of late fees and imposition of penalties.
6. By the impugned Order-in-Original dated
18.08.2020/19.08.2020, the Ld. Principal Commissioner
confirmed part of the demands proposed in the SCN, as under :-
ORDER
(i) I confirm the demand of service tax amounting to Rs 5,94,38,654/-. I drop the demand amounting to Rs 4,13,83,504/- against the noticee under the proviso to sub-section (1) of Section 73 of the Act;
(ii) I drop the demand of service tax amounting to Rs 96,96,785/- against the noticee under the proviso to sub-section (1) of Section 73 of the Act;
(iii) I drop the demand of service tax amounting to Rs 1,54,88,847/- against the noticee under the proviso to sub-section (1) of Section 73 of the Act;
(iv) I confirm the demand of service tax amounting to Rs 47,02,934/- on the noticee, under the proviso to sub-section (1) of Section 73(A) of the Act. I also 5 Service Tax Appeal No.70111 of 2021 order for appropriation of already paid service tax of Rs 47,02,934/-;
(v) I disallow the availed & utilized CENVAT credit of Rs 97,36,884/- and recovery of the same alongwith interest from the noticee under the proviso to Rule 14 of the CCR read with Rule 6 of the Rules;
(vi) I drop the demand of service tax amounting to Rs 5,24,74,842/- on the noticee under the proviso to Rule 6 of the CCR;
(vii) I confirm the demand of interest at the appropriate rate on the service tax amount confirmed in point (i) above under Section 75 of the Act on the noticee;
(viii) I impose penalty of Rs 5,94,38,654/- upon the noticee under Section 78 of the Act. The noticee has an option to pay penalty @ 25% of the amount of service tax as determined above, if the confirmed service tax alongwith interest and reduced penalty is paid within a period of 30 days of the date of receipt of this order;
(ix) I impose penalty of Rs 97,36,884/- upon the noticee under Rule 15 of the CCR. The noticee has an option to pay penalty @ 25% of the amount of service tax as determined above, if the confirmed service tax alongwith interest and reduced penalty is paid within a period of 30 days of the date of receipt of this order;
(x) I also impose late fee of Rs 2,05,100/- upon the noticee for late filing of ST-3 returns under Section 70 of the Act read with Rule 7(C) of the Rules;
(xi) I impose penalty of Rs 10,000/- on the noticee under Section 77(1)(c) of the Act for not furnishing the information sought by the department;
(xii) I impose penalty of Rs 10,000/- on the noticee under Section 77(1)(d) of the Act for failure to pay tax electronically;
6 Service Tax Appeal No.70111 of 2021
(xiii) I impose penalty of Rs 10,000/- on the noticee under Section 77(2) of the Act.
7. Aggrieved with the impugned order, to the extent it confirms the aforesaid demands, the Appellant has preferred the present appeal.
8. We have heard Shri Nishant Mishra, Advocate appearing on behalf of the Appellant and Shri Santosh Kumar, Authorized Representative appearing on behalf of the Revenue.
9. By way of oral and written submissions, ld. counsel for the Appellant has made the following submissions:-
(i) Demand of service tax only on the basis of difference of figures in Balance Sheet and ST-3 returns is contrary to law laid down by this Tribunal. At any rate, once the amounts representing sale of goods and services falling under negative list are reduced from the total receipts and deduction under Circular No. 341/43/96 TRU dated 31.10.1996 is applied, the taxable value of Rs 8,25,85,408/- has been correctly disclosed in the ST-3 returns and therefore, demand of service tax of Rs 5,94,38,654/- is not sustainable in law;
(ii) CENVAT credit of Rs 97,36,884/- has been denied on the basis of some verification report mentioned in the impugned order, which was neither confronted to the Appellant nor provided to the Appellant and at any rate, paragraph 20 of the show cause notice contains grounds on which denial of entire cenvat credit of Rs 9,06,89,426/- was proposed and none of such grounds are legally sustainable to justify denial of credit;
(iii) Late fee of Rs 2,05,100/- has been wrongly demanded on the ground that the Appellant has not 7 Service Tax Appeal No.70111 of 2021 averred anything in defence reply, which finding is incorrect and perverse, as the Appellant in its reply dated 13.02.2020 has clearly stated that delay in submission of ST-3 return was on account of delayed collection of dues and the Appellant has filed returns by paying tax from its own pocket and therefore there was a reasonable ground for delay in submission of ST-3 returns, which fact has been completely over-looked;
(iv) Imposition of penalties is also unjustified when the demand itself is not sustainable in law.
10. Ld. Authorized Representative for the Revenue has reiterated the findings recorded in the impugned order and has submitted that the appeal lack merits and is liable to be rejected.
11. Heard both the sides and perused the appeal records. We find that the following issues arise for determination in the present appeal:-
A- Demand of service tax of Rs 5,98,38,654/- based on difference in figures of P & L A/c and ST-3 returns and whether the Appellant has correctly disclosed the value of taxable services in ST-3 returns; B- Denial of cenvat credit of Rs 97,36,884/- is sustainable on the grounds stated in the impugned order?
C- Whether late fees can be demanded and penalties u/s 78, 77(1)(c), 77(1)(d) & 77(2) can be imposed?
12. Issue A: Demand of Service Tax of Rs 5,94,38,654/- :
12.1 From perusal of records, we find that in paragraph 15 of the show cause notice, demand of Rs 10,08,22,158/- was proposed based on the ground that there is difference in figures 8 Service Tax Appeal No.70111 of 2021 disclosed in ST-3 returns and Balance Sheet and out of the said proposed demand of Rs 10,08,22,158/-, the impugned order confirms demand of Rs 5,94,38,654/- by extending benefit of deduction in terms of Circular No. 341/43/96 TRU dated 31.10.1996 but by holding that the value of goods sold are integral part of the service contract.
12.2 We also find that the Appellant in its reply dated 13.02.2020 has stated that the amount in Profit & Loss A/c includes receipts arising from sale of goods and receipts arising from services specified in negative list and in the same reply the Appellant also submitted reconciliation between the figures of Balance Sheet and ST-3 returns by way of chart contained in paragraph 2 of the reply mainly on account of amounts representing sale of goods not leviable to service tax, amounts representing services falling under negative list and value of credit notes. In support of its contention, the Appellant submitted copies of contracts/purchase orders along with additional reply dated 13.02.2020 along with corresponding purchase and sale invoices wherein VAT was also charged along with the copies of VAT returns under the U.P VAT Act, 2008.
12.3 While dealing with the aforesaid contentions, the impugned order in paragraph 16.1 records that the Appellant has entered into contracts with clients for providing advertisement services on unipole/rooftop, the Appellant has failed to provide any contract/purchase order made exclusively for supply of flex material and sale of goods is nothing but supply of goods in the execution of service contract of advertisement. The impugned order then proceeds to quantify the service tax liability amounting to Rs 5,94,38,654/- and drops remaining demand of 4,13,83,504/-, after allowing deduction in terms of Circular No. 341/43/96 TRU dated 31.10.1996 but without considering the amounts representing services falling under negative list.
9 Service Tax Appeal No.70111 of 2021 12.4 A perusal of the two invoices reproduced in the impugned order also shows that the Appellant has separately charged for advertisement services and sale of goods along with service tax and VAT on respective components of invoices. The consideration for the two being identified and charged separately, the contract is clearly a composite contract for providing advertisement services and sale of goods and not an indivisible contract, which is also accepted in paragraph 16.6 of the impugned order. Therefore, in our considered view, the Appellant has rightly paid service tax and VAT on respective components, which is in consonance with the law laid down in Imagic Creative (P) Ltd. v. CCT (2008) 2 SCC 614 where while considering the composite contract relating to advertisement services, the Hon'ble Supreme Court held as under:-
29. If the submission of Mr Hegde is accepted in its entirety, whereas on the one hand, the Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. A distinction must be borne in mind between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and Clause (29-A) had to be inserted in Article 366, must be kept in mind.
32. Payments of service tax as also VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract, irrespective of the element of service provided. The approach of the assessing authority, to us, thus, appears to be correct.
10 Service Tax Appeal No.70111 of 2021 12.5 As regards non-submission of exclusive contracts of sale, we find that along with defense reply dated 13.02.2020, the Appellant had enclosed copies of purchase bills, sale bills of goods and VAT returns were enclosed as Annexure-B and the fact of filing of defense reply dated 13.02.2020 has also been taken note of in paragraph 13 of the impugned order. We have also gone through the invoices annexed as Annexure-B and found that the same were issued for sale of goods where applicable VAT was charged. The said Annexure-B also contains VAT returns filed by the Appellant for the period in question and therefore there was enough evidence on record to show that the Appellant had also sold goods simpliciter. Thus, the amounts representing sale of goods cannot be subjected to service tax.
12.6 This takes us to the next submission of the Appellant that the amount of Rs 30,42,96,081/- represents consideration received for sale of space on hoarding/unipoles/roof tops, which falls under the negative list and hence not liable to tax. In this regard, we find that the impugned order does not dispute the nature of services and also records examination of the contracts for providing services of advertisement on hoarding/unipole/roof top, but the impugned order fails to take note of the specific case set up by the Appellant. As the nature of services provided is not in dispute and is rather admitted in the impugned order and also by the Ld. AR, we proceed to examine the matter on merits. On perusal of the contracts on record, we find that the same are for advertisement on hoarding/unipoles/roof tops. The issue as to whether sale of space on hoardings/unipoles/rooftops is covered by Section 66D(g) 'selling of space or time slots for advertisements, other than advertisements broadcast by radio or television', is no more res-integra and has been decided by the Tribunal in Shah Publicity v. CCE (2023) 11 Centax 6 (Tri-Ahmd), Noida Publicity Agency v. Principal Commissioner of Central Tax (2024) 17 Centax 333 (Tri- All) and M/s Anu Image Makers Advertising Co. Pvt. Ltd. v.
11 Service Tax Appeal No.70111 of 2021 Commissioner of Central Excise & Service Tax (S.T Appeal No. 70083 of 2017 decided on 12.03.2024).
12.7 We further find that once the amounts representing sale of goods i.e. Rs 13,35,68,175/- and amounts representing value of services falling under negative list i.e. Rs 30,42,96,081/- are adjusted and deduction in terms of Circular No. 341/43/96 dated 31.10.1996 is applied which has also been allowed in the impugned order, there is no difference in figures appearing in Balance Sheet and ST-3 returns and therefore, the demand of service tax of Rs. 5,94,38,654/- cannot be sustained.
13. Issue B : Denial of CENVAT credit of Rs 97,36,884/- :
13.1 We find that in paragraph 20 of the show cause notice, CENVAT credit of Rs 9,06,89,426/- was proposed to be denied on the following grounds:-
(i) The Appellant has taken cenvat credit on subscriptions to Lucknow Golf Club, Indian Industries Association etc., which is not an input service;
(ii) The Appellant is providing services using the materials which fall under the category of Transfer of Property in Goods, leviable to tax as Sale of Goods and Rule 2A of the Service Tax (Determination of Value) Rules, 2006 prescribes the manner of valuation of such transactions;
(iii) The Appellant has not produced invoices of CENVAT credit and in absence of cenvatable invoices, admissible credit cannot be ascertained;
(iv) The Appellant is also availing abatement in taxable value.
Additionally, paragraph 21 of the show cause notice proposed reversal of CENVAT credit on the ground that the Appellant has failed to maintain separate accounts for exempted and taxable services as per Rule 6 of CCR.
12 Service Tax Appeal No.70111 of 2021 13.2 We find that in paragraph 6 of the defense reply dated 13.02.2020, taken note of in paragraph 13 of the impugned order, the Appellant submitted as under:-
(i) The Appellant takes space of lease from various individuals and institutions including Lucknow Golf Club, India Industries Association and others for installation of bill boards, LED signage etc. Since the institutions charge service tax on lease rentals, the Appellant provides advertisement services through such bill boards, LED signage etc., hence the payment of service tax is clearly an input service used for providing output service;
(ii) The Appellant has not availed any credit on any input in relation to services used for providing output services which are exempt from tax or are non- taxable;
(iii) Detailed list of CENVAT invoices alongwith copy of CENVAT invoices on which the Appellant had taken credit was also submitted;
In reply to the allegation made in paragraph 21 of the show cause notice, the Appellant in paragraph 7 of the very same reply submitted that the Appellant has maintained proper and separate accounts for exempted and taxable services and that the Appellant has availed CENVAT credit on services used for providing taxable services only, for which copy of ledger account was also submitted.
13.3 The impugned order also shows that the invoices produced by the Appellant were also got verified from the jurisdictional office, whereupon verification report dated 12.06.2020 was issued to the effect that credit of Rs 97,36,884/- was found ineligible as per Rule 3 of the CCR. Thus, the dispute is restricted to CENVAT credit of Rs 97,36,884/- only.
13 Service Tax Appeal No.70111 of 2021 13.4 On perusing the order, we find that the order makes a vague mention that the credit of Rs 97,36,884/- was found ineligible as per Rule 3 of CCR , without disclosing the reasons and without recording any finding as to how the credit is ineligible. On a pointed query being made from the Ld. A.R, he submitted that though the reasons are not mentioned in the order but detailed reasons have been given in the show cause notice. We find this completely unacceptable as the adjudicating authority is expected to give reasons in support of the order, so as to enable this Tribunal to understand the reasons for denial of credit. In these circumstances, we have no option but to accept the submission of Ld. A.R that the credit has been denied on the reasons stated in the show cause notice, as in any case the order cannot travel beyond the show cause notice and consequently credit cannot be denied on grounds, not alleged in the show cause notice.
13.5 Having considered the allegations in the show cause notice and the reply of the Appellant, we find that the impugned order does not dispute the explanation that the Appellant has taken space on lease from institutions including Lucknow Golf Club, India Industries Association and others for installation of bill boards, LED signage etc. and used such space for providing advertisement services through such bill boards, LED signage etc.. This activity of taking space on lease is clearly an input service used for providing output service and therefore the Appellant is entitled to credit of service tax charged on lease rentals and hence credit cannot be denied on this ground. In respect of the allegation that the Appellant has provided services using material which fall under the category of transfer of property in goods, we find that the provision of Works Contract Service has not been alleged in the show cause notice or in the impugned order and therefore credit cannot be denied on this ground. So far as the ground that the Appellant is also availing exemption in the form of abatement, we find that paragraph 14 Service Tax Appeal No.70111 of 2021 13.6 of the impugned order clearly records that print media deduction is not an exemption and therefore it has been concluded that the Appellant has not provided any exempted services. The last allegation of non-submission of invoices also does not survive, as the order records that the invoices were subsequently produced by the Appellant, which were verified and after verification credit of only Rs 97,36,884/- has been denied, the merits of which has already been discussed in this order. Thus, we find that the denial of credit in the present case is not warranted.
14. Issue C : Imposition of penalties and demand of late fee :
14.1 Once it has been held that the demand of service tax and denial of CENVAT credit cannot be sustained, then the imposition of penalties under Section 78 also cannot be sustained.
14.2 As regards other penalties, the show cause notice proposed imposition of penalty u/s 77 (1)(c) for failure to furnish information, u/s 77(1)(d) for failure to pay tax electronically and Section 77(2) for contravention of the provisions, without alleging anything as to when and what information was not furnished by the Appellant, when and what amount of tax was not paid electronically and which provisions have been contravened by the Appellant. It is a settled law that show cause notice is the foundation of the case set up by the Revenue and once the show cause notice lacks necessary particulars, we find it difficult to uphold imposition of penalties under these provisions.
14.3 As regards late fee, paragraph 16.11 of the impugned order, the demand of late fee has been confirmed under Section 70 read with Rule 7(C) on the ground that the Appellant has not averred anything in the defence reply or at the time of personal hearing. This finding appears to be perverse and contrary to
15 Service Tax Appeal No.70111 of 2021 record, as in paragraph 8 of reply dated 13.02.2020, the Appellant has clearly stated that delay in submission of ST-3 return was on account of delayed collection of dues and the Appellant has filed the service tax returns by paying tax from his own pocket. We find that delayed submission of return on account of delayed collection of tax and payment of service tax from own pocket, which otherwise is to be charged and deposited, is a reasonable ground for belated submission of ST-3 returns and therefore the late fee imposed cannot be sustained.
15. In view of the above discussion, the appeal is liable to be allowed and the impugned order, to the extent challenged, is set-aside, with consequential reliefs to the Appellant.
(Pronounced in open court on 10.03.2025) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(ANIL.G.SHAKKARWAR) MEMBER (TECHNICAL) Nihal