KAPS ADVERTISING vs Delhi East

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.

PRINCIPAL BENCH,
COURT NO. IV

SERVICE TAX APPEAL NO. 51741 OF 2025 (SM)

[Arising out of the Order-in-Appeal No. 147-149/ST/DLH/2024 dated
16/10/2024 passed by The Commissioner (Appeals-I), Central Tax, CGST &
Central Excise, Delhi, New Delhi.]

M/s Kaps Advertising, ……Appellant
nd
30, Community Centre, 2 Floor,
East of Kailash, New Delhi – 110 065.

Versus

Joint Commissioner, Central Tax, ….Respondent
Delhi East,
Office of the Commissioner of
Central Tax – GST Delhi East,
C.R. Building, I.P. Estate,
New Delhi – 110 002.

APPEARANCE:

Shri Shaubhik Gupta, Advocate for the appellant.
Shri Rohit Issar, Authorized Representative for the Department

CORAM:
HON’BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)



FINAL ORDER NO. 51423/2026

DATE OF HEARING : 14.08.2026
DATE OF DECISION: 03.09.2026


P.V. SUBBA RAO


1
M/s Kaps Advertising filed this appeal to assail the order
dated 16.10.2024 passed by the Commissioner (Appeals – I),
New Delhi in which he decided the appeal against the order
dated 14.03.2024 passed by the Joint Commissioner and set
aside the demand of service tax of Rs. 1,76,28,906/- of the

1. the appellant

2 ST/51741 OF 2025



total Rs. 2,03,56,222/- but upheld the demand of service tax
of Rs. 27,27,316/-. There is no appeal by the Revenue against
that part of the order which set aside the demand of service
tax by the Revenue. Therefore, the dispute attained finality to
that extent.

2. The appellant was registered with the service tax
department for providing advertising agency services exigible
2
to service tax under the Finance Act, 1994 . Gathering
intelligence, the officers of the Anti Evasion Branch of the
service tax Commissionerate invested the appellant and found
that it had incurred various expenses for services received by
it which, as per Notification No. 30/2012-ST dated 20.06.2012
as amended, were exigible to service tax under reverse charge
mechanism. Accordingly, the show cause notice dated
3
24.04.2019 was issued to the appellant covering the period
2012-2013 to 2016-2017. A statement of demand dated
17.06.2020 was issued for the subsequent period 2017-2018.

3. Both SCNs were decided by the Joint Commissioner
through a common order-in-original dated 14.03.2024.

4. Aggrieved, the appellant appealed before the
Commissioner (Appeals) who, by the impugned order, set
aside the major portion of the demand, but only upheld service

2. the Act
3. SCN

3 ST/51741 OF 2025



tax demand of Rs. 27,27,316/- along with interest and
penalties. Aggrieved, the appellant filed this appeal.

Submissions of the appellant
5. Learned counsel for the appellant submits that the
demand has been raised solely on the basis of the figures
appearing with balance sheet of the appellant without
identifying or classifying the category of services said to have
been received. Without such a classification, it cannot be said
with certainty that the service tax was chargeable under
reverse charge at the hands of the appellant. The impugned
order merely rubber stamped the findings of the order-in-
original and, therefore, deserves to be set aside.

6. The onus of determining the taxability of 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 Form 26AS/Income Tax Returns.

7. In view of the above, the impugned order may be set
aside and the appeal may be allowed.

Submissions of the Revenue
8. Learned Authorized Representative for the Revenue
vehemently supported the impugned order and asserted that
as is evident from the impugned order as well as the synopsis
submitted by the appellant in which the portions of the
impugned order are reproduced, not only has the nature of

4 ST/51741 OF 2025



service been determined, but it was classified and it was
explained how it was chargeable to service tax under reverse
charge mechanism under Notification No. 30/2012-ST.

9. The demand has been confirmed under reverse charge
mechanism on the following expenses :-

(a) Business promotion expenses incurred by the
appellant;
(b) Conveyance expense ;
(c) Legal expense;
(d) Insurance expense and
(e) Freight.

10. The findings of the Commissioner (Appeals) with respect
to these were as follows :-

“Business Promotion Expense :-The appellant, vide
their submission had informed that the expenses incurred
by partners, employees of the appellant which can never
be subject to service tax. As per their submission the
expenses under Sponsorship Fees is actually amount
incurred towards promotion of sales and not towards
sponsorship of events. It mainly includes amounts
incurred towards meeting with clients for obtaining
contracts and development of business. In support of their
claim, they have enclosed the copy of ledgers. I find that
the appellant has not enclosed the copies of bills/
vouchers/journals in this regard. Therefore, it cannot be
ascertained whether the expenses incurred under
Business Promotion Expenses are towards sponsorship
fees or promotion of sales. Hence, the AA has rightly
confirmed the service tax of Rs. 19,68,024/- for the
subject period.

Conveyance Expense :- The appellant has submitted
that they have paid to employees for commuting from
office for the purpose of business. It does no include

5 ST/51741 OF 2025



hiring of motor vehicles on contract basis. No supporting
documents have been submitted in this regard. Therefore,
the appellant is liable to pay service tax of Rs. 6,89,363/-
confirmed on this account.

Legal Expense :- The appellant has submitted that the
expenses incurred under Legal Expenses includes
Advocate charges and Professional Fees, I find that the
appellant has submitted copy of ledgers along with invoice
/vouchers/bills in respect of professional charges which is
not taxable under RCM. Only advocate fee amounting to
Rs. 1,70,500/- is taxable under RCM. Hence, I hold that
the appellant is liable to pay service tax of Rs. 21,074/-
only under RCM on above said Legal expenses.

Insurance :- The appellant has submitted that the
expense incurred by them is the payment made to
insurance company for insurance of office and motor
vehicle. The appellant has enclosed copy of Motor
insurance cover Note in support of their claim. Since the
expense incurred on insurance paid to insurance company
by the appellant does not cover under RCM, I hold that
the appellant is not liable to pay service tax on this
account.

Freight :- The appellant submitted that expense includes
amount charged by vendor for delivering the goods at the
premises of assessee by private conveyance. The
appellant has enclosed copy of invoice of the goods
purchased. From the documents submitted it is not clear
whether the goods were delivered through transport
agency or private vehicle. Therefore, the appellant is
liable to pay service tax of Rs. 48,855/- confirmed on this
account”.


11. As far as the question of limitation is concerned, the
appellant failed to furnish the details of the services provided
by them and received by them by not filing the correct returns
during Financial Year 2012-2013 to 2016-2017. When the
department found the details by issuing several letters and
summons, the appellant never responded properly. This shows
that the appellant had deliberately suppressed facts on the
department with an intent to evade payment of service tax.

6 ST/51741 OF 2025




12. However, to the extent the appellant was entitled to
relief, it has already been granted and the major portion of the
service tax confirmed by the original authority has already
been dropped by the Commissioner (Appeals).

13. In view of the above, the impugned order is correct and
proper and calls for no interference. The appeal may,
therefore, be dismissed.

Findings
14. I have considered the submissions advanced by both
sides and perused the records.

15. The submission of the learned counsel for the appellant
that the nature of services was not examined or classified by
the Commissioner (Appeals) is factually wrong as is evident
from the extract of the impugned order reproduced by the
appellant in its own submissions. These pertain to business
promotion expenses, conveyance expenses, legal expenses
and freight expenses. The amount of service tax payable under
each of these heads for each financial year was also computed
as is evident from the impugned order, the order of the
original authority, as well as the synopsis submitted by the
appellant itself. The second argument of the appellant is that
demand cannot be confirmed merely because there is a
difference between the figures in its own balance sheets and
Form 26AS and the figures reported in its ST-3 returns. This

7 ST/51741 OF 2025



submission deserves to be rejected. When the department has
to examine if the appellant had paid service tax correctly, it
can be done by checking the returns and comparing them with
the books of accounts. The books of accounts in this case are
the appellant’s own balance sheets and Form 26AS generated
by the Income tax based on the TDS returns filed by the
persons who paid amounts to the appellant. I do not see how
these figures can be doubted. If the ST-3 returns filed by the
appellant do not correctly reflect and reconcile with its own
accounts, the department is entitled to call for information and
if despite several letters and summons, the appellant fails to
respond or submit the details, it is for the department to make
a judgment based on the available records.

16. Both the show cause notices were issued accordingly.

17. After adjudication, when the appellant appealed before
the Commissioner (Appeals), he examined the issue at length
and dropped the major portion of demand (to Rs.
1,76,28,906/- from Rs. 2,03,56,222/-). On merits, I do not
find any case in favour of the appellant. The appellant has not
put forth any findings to show any findings of the
Commissioner (Appeals) has not classified the services.

18. However, I find the appellant was a service tax payer.
Any amount paid by it as service tax under reverse charge
mechanism would have been available to the appellant as
Cenvat credit. Therefore, it was a case where the appellant

8 ST/51741 OF 2025



had to pay with one hand and could take credit with the other.
The net effect of this would have been that the appellant’s
service tax liability under reverse charge mechanism would
have increased and the appellant’s liability under forward
charge in cash would have reduced as part of the amount
would have been paid through the Cenvat credit availed on the
service tax paid under reverse charge. Therefore, the appellant
could not have had an intent to evade payment of service tax.
Extended period of limitation under the proviso to section 73
(1) of the Act can be invoked only if the non-payment or short
payment of service tax is by reason of fraud or collusion or
willful statement or suppression of facts or violation of the Act
or rules with an intent to evade. If the appellant is required to
pay with one hand and could take credit with the other, he
could not have an intent to evade. For this reason, the demand
for the extended period of limitation deserves to be set aside.

19. The ingredients necessary to impose penalty under
section 78 of the Act are also the same as those for invoking
extended period of limitation under the proviso to section 73
(1) of the Act. Therefore, the penalty under section 78 also
deserves to be set aside.

20. In view of the above, I uphold the demand of service tax
confirmed in the impugned order but only for the normal

9 ST/51741 OF 2025



period of limitation. I also uphold the penalty imposed except
the penalty under section 78.

21. The impugned order is modified as above and the matter
is remanded to the original authority only for the purpose of
calculation of demand of service tax for the normal period and
interest.

22. The appeal is partly allowed and the impugned order is
modified as above.

(Order pronounced in open court on 03/09/2026.)




(P.V. SUBBA RAO)
MEMBER (TECHNICAL)
PK