M/S MY CAR PVT LTD vs CGST Kanpur
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70213 of 2026
(Arising out of Order-in-Appeal No.59-ST/APPL/ALLD/2025 dated 19.03.2025
passed by Commissioner (Appeals) CGST & Central Excise, Allahabad)
M/s My Car Pvt. Ltd., …..Appellant
(123/810, Factory Area,
Fazal Ganj, Kanpur-208012)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ….Respondent
(117/7, Sarvodaya Nagar,
Kanpur-208005)
A PPEARANCE :
Shri Amit Awasthi, Advocate for the Appellant
Shri Surendra Ram, Authorized Representative for the Respondent
CORAM:
HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.- 70492/2026
DATE OF HEARING : 13.08.2026
DATE OF PRONOUNCEMENT : 29.10.2026
SANJIV SRIVASTAVA:
This appeal is directed against the Order-in-Appeal
No.59/ST/Appl/Alld/2025 dated 19.03.2025 of the Commissioner
(Appeal) Central Goods and Service Tax & Central Excise,
Allahabad. By the impugned order following has been held:
“In view of the discussion above I confirm the demand of
service tax amounting to Rs. 763984/- alongwith interest
u/s 75 and penalty under section 78 of the Act. I further
disallow the cenvat credit amounting to Rs. 1300287/- u/r
14 of the Cenvat Credit Rules 2004 r/w section 73 of the Act
and imposed penalty u/s 78 of the Act. I however, refrain
from imposing any other penalty u/s 77 as mandatory
penalty u/s 78 of the Act has already been imposed. The
Service Tax Appeal No.70213 of 2026
2
impugned order is modified to the above extent and the
appeal is disposed of accordingly.”
2.1 That the appellant having Service Tax Registration No.
AADCM4609FST001 is engaged in providing services of (a)
Servicing Motor Vehicles, (b) Business Auxiliary Services and (c)
Clearing and Forwarding Agency. The appellant was also availing
the facility of CENVAT credit under the provisions of CENVAT
Credit Rules, 2004.
2.2 The appellant is an authorized dealer of Maruti Udyog Ltd.
(in short 'MUL') with the rights to sell vehicles of MUL in Kanpur,
Unnao, Kannauj, Fatehpur, Auraiya, Farrukhabad, Hamirpur,
Banda and Jalaun etc. and provide after sale services from
workshops situated at:
(a) 84/54-C, Jarib Chowki, Kanpur and
(b) C:16, Panki, Kanpur etc.,
2.3 During the course of audit conducted by the officers of for
period from 2015-16 to 2017-18 (upto June 2017), it was found
that the appellant is providing taxable service classifiable under
the category "Repairing reconditioning" and "Business Auxiliary
Services" as defined under Section-65 (105) (zo) and Section 65
(105) (zzb) of Finance Act, 1994 and discharged their Service Tax
liability accordingly.
2.4 Consequent to audit, certain discrepancies were noticed.
The said discrepancies were communicated to the appellant
requesting them to deposit the short-paid/not paid government
dues along with applicable interest and penalty. The appellant vide
their letter dated 03.02.2020 submitted their reply along with
some supporting documents claiming that,-
(a) amount was inclusive of debit entry,
(b) S. Tax paid on legal fee but inadvertently deposited
under the head 'Authorized service station and BAS",
(c) S. Tax on security charges has been paid and
(d) ineligible credit taken through TRAN-1 has been
reversed.
Service Tax Appeal No.70213 of 2026
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2.5 As such the discrepancies raised in the letter dated
02.09.2019 referred above were re-examined and considering the
reply of the appellant, another letter dated 13.02.2020 was sent
to the appellant communicating the same. However the appellant
did not submit any reply to the letter. Accordingly, the Final Audit
Report bearing No.159/ST/MAR/Gr-VII/2016/218-222 dated
13.05.2020 was communicated to the appellant.
2.6 FAR mentioned above that the appellant have received
income under various heads of "Trade Incentive & Others" but
have not paid any service tax on such amounts received by them.
As per balance sheets/charts for the financial year 2015-16, 2016-
17 and 2017-18 (upto June 2017) of the appellant for various
receipts on which service tax was not been deposited.
2.7 That on enquiry regarding non/short payment of service tax,
the appellant informed verbally that the amount (income)
received under this head are Logistic/Handling Charges, Moss
charges, Booking cancellation charges, purchase of paints etc..
The appellant further informed that they have not undertaken any
activity which comes under the definition of service, thus, they
have not deposited service tax on such considerations received.
However, during the course of investigation it was found that the
activities carried out by the appellant for aforesaid receipts falls
under the definition of 'service' and service tax was payable on
such receipts. In terms of Section 65B (44) "service" means any
activity carried out by a person for another for consideration.
2.8 Quantification of the service tax on the amount received
during the financial year 2015-16, 2016-17 & 2017-18 (upto June
2017) by the appellant under the head "Trade Incentive & Others"
and service tax not paid by the appellant was determined as in
table below-
SN Period Taxable Value S. Tax Rate S. Tax not paid
01 2015-16 8749103 14.5% 1268620
02 2016-17 1272540 15.0% 190881
03 2017-18 (upto 06/2017) 217864 15.0% 32680
Total 10239507 1492181
Service Tax Appeal No.70213 of 2026
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2.9 Further during the course of audit of records vis-à-vis
balance sheets, calculation chart provided by the appellant and
ST-3 returns it was found that the appellant have received taxable
amount Rs.26,98,25,361/- during the period 2015-16, 2016-17
and 2017-18 (upto June 2017) and discharged their tax liability
through cash and Cenvat credit. It was observed that the
appellant have paid service tax through Cenvat credit (Instead of
paying the through cash) more than that they have taken as
shown in ST-3 of respective periods. The details are as under:-
S
N
Period Taxable
Value as per
B/Sheet
S Tax paid Credit
shown in
ST-3
Diff of
Cenvat and
Cash Credit
ST-3
01 2015-16 98635886 12558247 1462422 1012527 449895
02 2016-17 133083303 17990326 1864378 1433874 430504
03 2017-18 (upto 06/17) 38106172 5040674 675252 255364 419888
TOTAL 269825361 35589247 4002052 2701765 1300287
2.10 On being pointed out about the above difference, the
appellant informed that they have discharged their said tax
liability through Cenvat credit and produced a chart detailing the
payment of service tax. The appellant have also provided the
ledger account for taken & utilization of Cenvat credit for the
respective periods. However the appellant did not provide any
invoice on which the said credits were taken.
2.11 A show cause notice dated 08.09.2020 was issued to the
appellant calling them to show cause as to why:
(i) Service tax (including cess) amounting to Rs. 14,92,181/-
[Rupees Fourteen Lacs Ninety Two Thousand One Hundred
Eighty One Only] on taxable value of Rs. 1,02,39,507/-
received under the head "Trade Incentive & Other" not paid
by them during the period from 2015-16 to 2017-18 (upto
June, 2017) should not be demanded and recovered from
them by invoking extended period under proviso to Section
73 of the Finance Act, 1994;
(ii) Cenvat Credit amounting to Rs. 13,00,287/- [Rupees
Thirteen Lacs Two Hundred Eighty Seven Only] wrongly
availed and not paid during the period from 2015-16 to
Service Tax Appeal No.70213 of 2026
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2017-18 (upto June, 2017) should not be disallowed and
demanded/recovered from them under rule 14 of the
CENVAT Credit Rules, 2004 read with sections 73 of the
Finance Act, 1994.
(iii) Cenvat Credit wrongly carried forward in the electronic
credit ledger under GST through TRAN-1 statement
amounting to Rs. 2,59,879/- [Rupees Two Lacs Fifty Nine
Thousand Eight Hundred Seventy Nine Only] should not be
disallowed and demanded/recovered from them under Rule
73 of the Finance Act, 1944. Since the said amount has
already been deposited/reversed by the party vide debit
entry No. D10902200152555 dated 15.02.2020, the same
should not be confirmed and appropriated against the said
amount demanded from them.
(iv) Interest at the appropriate rate should not be charged and
recovered from them under Section 75 of the Finance Act,
1994 on the aforesaid amounts [sl. No. (i), (ii) and (iii)
above);
(v) Penalty under Section 78 of Finance Act, 1994 on the
aforesaid amounts [sl. No. (i), (ii) and (iii) above) should
not be imposed upon them for willful suppression of facts
and contravention of provisions made thereunder; and
(vi) Penalty should not be imposed upon them under Section
77(2) of the Finance Act, 1994 for the failure to self-assess
the correct taxable value for discharging the due service tax.
2.12 The show cause notice was adjudicated as per order in
original dated 20.03.2024 holding as follows:
ORDER
(i) I confirm the demand of Service Tax amounting to
Rs.14,41,906/- [Rupees Fourteen Lacs forty one Thousand
Nine Hundred and six Only] on taxable value of Rs.
99,04,337/- received under the head "Trade Incentive &
Other" not paid by them during the period from 2015-16 to
2017-18 (upto June, 2017) under the provisions of Section
Service Tax Appeal No.70213 of 2026
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73(1) of the Finance Act. 1994 against M/s My Car Pvt. Ltd.,
123/810 Factory Area, Fazalganj, Kanpur,
(ii) I disallow CENVAT Credit amounting to Rs. 13,00,287/-
[Rupees Thirteen Lacs Two Hundred Eighty Seven Only]
wrongly availed during the period from 2015-16 to 2017-18
(upto June, 2017) and order to recover the same under Rule
14 of the CENVAT Credit Rules, 2004 read with section 73
of Finance Act, 1994;
(i) (iii). I disallow CENVAT Credit wrongly carried forward in the
electronic credit ledger under GST through TRAN-1
statement amounting to Rs. 2,59,879/-. As the party has
already deposited/reversed the said amount of Rs.
2,59,879/- vide debit entry No. D10902200152555 Dt.
15.02.2020, the same is hereby appropriated.
(ii) (iv). I confirm demand of Interest at the appropriate rate till
the payment of the Service Tax confirmed in para (i) & (ii)
above to be demanded and recovered from M/s My Car Pvt.
Ltd., 123/810, Factory Area, Fazalganj, Kanpur under the
provisions of Section 75 of the Act,
(iii) (v). I impose a penalty of Rs. 27,42,193/- (Rs. 14,41,906 +
Rs. 13,00,287) upon M/s My Car Pvt. Ltd., 123/810 Factory
Area, Fazalganj, Kanpur under Section 78 of the Finance
Act, 1994 for the reasons discussed above. Further, I give
an option to the party to pay a 25% penalty of demand
confirmed as provided in Section 78 of the Act, if Service
Tax and Interest is paid within a period of 30 days of the
date of receipt of this order. Further, the benefit of reduced
penalty shall be available only if the amount of such reduced
penalty is also paid within 30 days;
(iv) (vi). I impose a penalty of Rs. 10,000/- (Rupees Ten
Thousand only) on M/s My Car Pvt. Ltd., 123/810 Factory
Area, Fazalganj, Kanpur, under Section 77(2) of the Act ibid
upon the party for their failure to assess the Service tax
properly on the services provided by them;
Service Tax Appeal No.70213 of 2026
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2.13 Aggrieved appellant filed the appeal before Commissioner
(Appeal) which has been disposed of as per the impugned order
referred in Para 1 above.
2.14 Aggrieved appellant has filed this appeal.
3.1 I have heard Shri Amit Awasthi, Advocate for the appellant
and Shri Surendra Ram, Authorized Representative for the
revenue.
3.2 Arguing for the appellant learned counsel submitted that
➢ Among the various categories, falling under the permissible
deduction, nomenclated as Trade incentive & others, the
nature of the expense and not leviability to service tax is as
follows:
o Misc. Income & Misc. Income Others (reference to sl. No.2
& 3 of Table C of the Order in Appeal).
there is inevitable replacement of the parts, including under
warranty along with wear & tear, which always happens
along with draining of used oil/hydraulic oil/engine oil, which
is to some extent reused, for lubricating the vehicles which
is being serviced and the balance is sold to the outside
vendors purchasing the said used oil and warn
out/dilapidated / unusable parts and components of
vehicles, commonly known as "kabar / scrap" and other
material as specified above and hence subjected sale
pertains to sale of goods on discharge of levy of VAT and the
levy of VAT, being mutually exclusive, in view of the land
mark decision of Hon'ble Apex Court, there is no occasion to
demand the levy of Service Tax in respect of the said
miscellaneous income or charges, for the reason the same
does not have any element of taxable service and being the
sale of goods as a trading activity it falls under the Negative
List of Services and hence exempted from the levy.
o Moss Charges: Appellant is maintaining the Mobile Service
Van, to attend to the complaints of the customers, who have
purchased the Maruti Brand vehicles and are using the
same. In terms of the agreement with the MSIL, a Dealer is
Service Tax Appeal No.70213 of 2026
8
bound to provide service, which is his onerous duty towards
customer, it is in fact reimbursable expenses and does not
tantamount to the definition of service, which is in fact on
actual basis reimbursed by the MSIL to the dealers. It is well
settled, in the case of UOI v/s Intercontinental Consultants
& Technocrats Pvt. Ltd. reported in 2018 (10) GSTL 401
(S.C.), that reimbursable expenses cannot be the subject to
the levy of Service Tax.
o Billing cancellation and Booking cancellation charges: The
charges are structured in the form of reimbursable
expenses. At the outset, the Appellants beg to submit before
the Hon'ble Bench that Maruti Brand Vehicles are booked by
the Appellants, wherein upfront an amount is taken from the
customer, who ensures and freezes on booking of Maruti
Brand Vehicle and the cause of action arises when the
subjected booking is cancelled, all the bookings underlying
the process involving abundance of stationery, paper work,
supply of manpower etc. and all these expenses, which take
the form of structured reimbursable expenses are charged
from the customers, wherein mandatory amount balance
amount is deducted while the is reimbursed/repatriated to
the prospective customer, who had endeavored for the
booking of the vehicle and there is no touch of element of
any service and the subjected amount cannot take the
shape of consideration for any Taxable Service, for a
resounding reason that under the Indian Contract Act
booking of a vehicle, stands to be a contractual agreement
for sale of vehicle and if that particular customer
materializes its initial booking, the same would connote, the
raising of Taxable Invoice, wherein all the charges
subsuming the booking amount are raised on the structured
pricelist of M/s. Maruti Suzuki India Ltd. As such the billing
/ booking cancellation is neither covered under the residual
category of other transaction processing, as is carved out
under Section 65(104) (c) of the Finance Act and as such
does not involve any invocation of the levy of Service Tax
Service Tax Appeal No.70213 of 2026
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under the aforesaid category. CBEC circular 178/2014
(emphasis supplied), clarified that a declared service, agree
to do so abstain from, or tolerate an act is taxable only
where an expressed or implied agreement makes payment
consideration for that promise. Purely compensatory
payment, cannot be consideration and hence not taxable
and are enjoying the benefit of exemption.
o Income Insurance & Endorsement income(Sl. No.10 & 13 ):
These are the part of the commission paid by the insurance
company to MSIL, against the insurance policies executed
by them with the retail customers. A part of this amount is
forwarded by MSIL, to the Appellant. Here no service or any
definition of service is attracted, because the agreement is
between the insurance company and MSIL and if at all there
is any mischief of levy of Service Tax to be demanded, the
same could be only from MSIL, because it is a revenue
neutral matter and if the said demand is raised from the
Appellant then there is a benefit of CENVAT credit would be
available to MSIL. In this case the Appellant is acting more
as a pure agent, which is defined in Rule 5 of the erstwhile
Service Tax Rules and acting as a pure agent there is no
mischief of the levy of Service tax even otherwise and the
said demand is infructuous.
o Income pick up and drop: Income pick and drop, is expense
paid by MSIL, as reimbursable expenses, to the dealer,
incurred in maintaining Mobile Service Van, to attend to the
complaints of the customers, who have purchased the
vehicles and are using the same. In terms of the agreement
with MSIL, the dealer is bound to provide the service to the
customers on their request on the spot. The subjected
matter relating to reimbursable expenses from MSIL, are not
in the form of consideration to be invoked under the taxable
services rather appropriately, the same are branded as
reimbursable expenses and is squarely covered by the
Hon'ble Apex Court Judgment in the case of UOI Vs.
Intercontinental Consultants and Technocrats Pvt. Ltd.
Service Tax Appeal No.70213 of 2026
10
reported in 2018 (10) GSTL 401 (SC), wherein the law has
already been settled that the reimbursable expenses cannot
be the subject to levy of Service Tax.
o Logistic and handling charges, there is a lead judgment of
Hon'ble CESTAT in the case of Surjeet Auto Pvt. Ltd. Vs. CCE
Bhopal, reported in (2024) 24 Centax 115 (Tri. Delhi),
wherein the finding to the Hon'ble Tribunal, copy enclosed,
are elaborated as under:
o Other Income: Other Income, stands to be in parity with the
misc income, for which elaborate arguments have already
been made in the preceding para. They rely upon following
decisions:
▪ Wonder Cars Pvt. Ltd [2016 (42) S.T.R. 1055)Tri.-
Mumbai)]
▪ Dunac Automobiles Pvt. Ltd. [(2024) 23 Centax 379 (Tri.
Delhi.)]
➢ Reply Regarding The Demand For Rs. 13,00,287/-As
Mentioned Under Difference Of Cenvat And ST-3.
o The demand of Rs. 13,00,287/ appears to have been arrived
at primarily by comparing the figures reflected in the
Audited Financial Statements/Books of Accounts with the
figures declared in the corresponding ST-3 returns. The
figures reported in the ST-3 return were based on the books
and records available at the relevant time. Subsequently,
during the finalisation and Audit of the Annual Accounts,
various accounting entries, provisions, reconciliations,
adjustments and year-end entries may have been passed.
Consequently, the may differ from the figures reported
earlier in the statutory Return.
Financial Year [2015-2016)
Audited
Financial
Statement
ST-3 Difference
Taxable Value A 9,86,35,886 8,50,62,009 1,35,73,877
Service Tax
Payable
B 1,40,20,669 1,17,04,539 23,16,130
Tax paid through
Cash
C 1,25,58,247 1,06,94,740 18,63,507
Service Tax Appeal No.70213 of 2026
11
Tax paid through
CENVAT
D 14,62,422 10,12,527 4,49,895
Total Tax Paid E=C+D 1,40,20,669 1,17,07,267 23,13,402
Difference in
Payable and Paid
F=B-E 0 2,728 -2,728
Financial Year [2016-2017]
Taxable Value A 13,30,83,303 12,87,26,667 43,56,636
Service Tax
Payable
B 1,98,54,704 1,91,96,616 6,58,088
Tax paid through
Cash
C 1,79,90,326 1,77,41,748 2,48,578
Tax paid through
CENVAT
D 18,64,378 14,33,874 4,30,504
Total Tax Paid E=C+D 1,98,54,704 1,91,75,622 6,79,082
Difference in
Payable and Paid
F=B-E -20,994 20,994
Financial Year [Apr-2017 to Jun-2018]
Taxable Value A 3,81,06,172 2,24,30,541 1,56,75,631
Service Tax
Payable
B 57,15,926 33,64,581 23,51,345
Tax paid through
Cash
C 50,40,674 31,09,215 19,31,459
Tax paid through
CENVAT
D 6,75,252 2,55,364 4,19,888
Total Tax Paid E=C+D 57,15,926 33,64,579 23,51,347
Difference in
Payable and Paid
F=B-E -2 2
o
The above comparison clearly shows that there are
differences that is not limited to CENVAT Credit. There are
differences in taxable value, Service Tax payable/paid and
CENVAT figures between the books and ST-3. If the
difference in taxable value and Service Tax payable/paid is
a result of reconciliation and accounting entries, the
difference in CENVAT figures must also be examined in the
same complete reconciliation. It is not correct to pick up only
the CENVAT column and treat that difference of 13,00,287/-
as a separate liability.
o Balance Sheets, calculation charts, ST-3 returns, cash
ledgers and cash challans had already been verified, and
that demand was made after such verification.
o These findings are very important for deciding the present
issue. Once the records have been examined, the demand
should be based on the actual findings from those records
and not merely on a comparison of two figures.
Service Tax Appeal No.70213 of 2026
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Cyber Group India Pvt. Ltd V Noida-II reported in (2025) 27
Centax 386 Tri Allahabad, (copy enclosed) wherein as per the law,
settled by the Hon'ble Tribunal, precedent has been given to the
figures declared in the Audited Financial Statement and in the
subjected matter, the Hon'ble Tribunal has gone to the extent of
holding that mere non-disclosure of Cenvat Credit in the ST-3
Return, cannot be the grounds of rejection of Refund Claim in that
particular case carving out that the Learned Appellate Authority
vide para 2.7, 2.8 & 2.9 internal page 2 & 3 of the OIA, running
page 50 & 51 of the paper book, the Appellate Authority, by means
of non-speaking Order had taken note of the fact of all the points
along with the tabulated chart relating to the alleged difference of
Cenvat and the ST3 Return, ironically has ignored the fact about
the disclosure made in the Audited Financial Statement and
already copies of Balance Sheet had been submitted along with
Cenvat Ledger, ST3 Return, Detailed Ledgers and in fact
endeavour was made for the reconciliation but in fact the Order
has been passed in an imbecilic manner, wherein the Learned
Appellate Authority, who was expected to appreciate the fact that
as per the settled law for the purpose of reconciliation, precedence
has to be given to the disclosure made in the Audited Financial
Statement and not in the ST-3 Return. The Appellants submit that
only on the limited issue of re-quantification, there is a palpable
error shown to have been committed by the Department itself and
stand-alone that cannot be the ground for the confirmation of
either the demand or raising of the charge of not only demanding
by means of disallowing of Cenvat Credit amounting to Rs.
13,00,287/- and demanding the same under Rule 14 of the CCR
and side by side invoking the Bar of Limitation under Section 73
and imposing penalty under Section 78 of the Act.
➢ Further how can the Authorities below disallow the Cenvat
Credit, when the same has not been availed nor declared in
the books, how can the Department have the audacity to
disallow the credit, which has never seen the light of the day
of any availment in the statutory Return. It is pertinent to note
that there was no occasion to any revision to the Return and
Service Tax Appeal No.70213 of 2026
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finally as a trite it has already been argued that the matter is
Barred by Limitation, with no vital ingredients to Section 73 of
the erstwhile Finance Act being applicable and in the absence
of any actus reus or attribution of malafide, on a mere
technical issue, Penal provisions as solicited to be invoked,
stands to be defenestrated from the proceeding.
➢ Invocation of extended period of demand raised under Section
73(1) of the Finance Act.
o Appellate Commissioner has indeed given partly relief
and partly being impugned, the Appeal has been
preferred by Appellants. Getting seized of the matter
and even on the factual matrix and on the question of
law, lead judgment cover up the issue in favour of the
Appellant, inter alia including the majority of them and
the Cenvat Credit amount to Rs.13,00,287/-, involves
proper accounting head for the availment qua the
submission of the documents, which have already
been discussed in the preceding para.
o issue involves not only being no more res integra, but
also covered by Rule of Stare Decisis, the matter
involves plain and simple interpretation of facts and
law and does not embark upon, producing any
corroborative evidence, to enable the Department for
charging the levy and demanding the same, invoking
the Bar of Limitation, involving past period of the levy
of Service Tax. There is no shred of evidence of any
intention to evade levy of Service Tax, albeit issue
being covered, there is also no charge with evidence
of any suppression of facts, willful misstatement,
collusion with the element of fraud and thereby the
impugned SCN, simply gets consigned to the bin, inter
alia the proceeding arising out of the same, only on
the statutory Bar of Limitation, when it is mandatory
for the Department to satisfy each and every vital
ingredient before piercing the veil of secrecy of
Section 63 of the erstwhile Finance Act.
Service Tax Appeal No.70213 of 2026
14
o Reliance is placed on the following decisions:
▪ HCL Infotech Limited [2024 (90) GSTL 233
(All)];
▪ Vadilal Enterprises Ltd. [2025 (32) Centax 90
All)];
▪ Ajnara Realtech Limited [(2025) 28 Centax 373
(All.)],
3.3 Authorized Representative for revenue reiterated the
findings recorded in the impugned order.
4.1 I have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows:
“5.2 After going carefully through the facts of the case on
the basis of documents/records available in the case file, I
proceed to decide the case on merit. There are three main
contentions in the instant appeal. One is the non-payment
of service tax on the receipt under the head 'trade incentives
& others' to the tune of Rs. 1492181/-, second is the
availment and utilization of ineligible cenvat credit to the
tune of Rs. 1300287/- and third is the forwarding of
ineligible cenvat credit in the electronic credit ledger under
GST through Tran-1 to the tune of Rs. 259879/-. The
appellant has willfully reversed the ineligible cenvat credit
forwarded in the electronic ledger through Tran-1, hence the
matter is settled at the adjudication stage. However the
appellant has vociferously contested the leviability of service
tax under the head 'trade incentive & other' and the issue
of ineligibility of cenvat credit.
5.3 I note that the Adjudicating Authority has mentioned
income under 15 various categories falling under trade
incentive and others. The same is reproduced as under-
Amt
during
04/2017
to
06/2017
Amt
during
2015-16
Amt
during
2016-17
SN Items
Total
Service Tax Appeal No.70213 of 2026
15
Incentive-Castrol
01 3107436 0 0 3107436
India Ltd.
02 Misc Income 98851 58566 25737 183154
Misc Income
03
0 3500 0 3500
others
Additional Claim
04
0 375700 0 375700
Loyalty
Incentive
Purchase Paint &
Consumables
05
1119982 0 0 1119982
Moss charges
06
4860 4700 6350 15910
received
07 Income RTO 0 12514 44758 57272
Billing
08 133311 0 33000 166311
Cancellation
Booking
Cancellation
Charges
09
81752 27750 26000 135502
10 Income Insurance 215775 257648 0 473423
Insurance Claim
11 0 335170 0 335170
Dzire
Income Pick &
12
33817 60850 0 94667
Drop
Endorsement
13
126176 136142 82019 344337
Income
Logistic/Handling
14
3823980 0 0 3823980
Charges
15 Other Income 3163 0 0 3163
TOTAL 8749103 1272540 217864 10239507
5.4 The appellant in his Grounds of Appeal has contended
that income from incentives, additional claim loyalty,
incentive purchase paint & consumables are trade incentive
and discount which is not taxable under service tax. Further
with regard to income from Moss charges it has been stated
that they are reimbursed from the company (Maruti Suzuki
India Ltd. in short 'MSIL'), hence they do not form the part
of service. Likewise Income RTO is the fallout of facilitating
RTO registration hence the same does not fall under the
purview of service tax. With regard to Billing Cancellation
and Booking Cancellation Charges the appellant has
submitted that they are compensatory in nature which is not
taxable. For the receipt under the head Income Insurance
and Endorsement Income it has been submitted that this is
a part of commission paid by the insurance companies to
Service Tax Appeal No.70213 of 2026
16
MSIL against insurance policies executed by them with the
retail customers of which a part is forwarded by MSIL to the
appellant, hence the same is not taxable under service tax.
The appellant has further submitted that for providing pick
and drop services the company reimburses the expenses
incurred for the activity. The same is also outside the
purview of service tax as there is no service tax on
reimbursement.
5.5 After going through the records and the relevant case
laws I agree with the contention of the appellant that the
service tax is not applicable on the income falling under
category Incentive Castrol India Ltd., Additional Claim
Loyalty, Incentive Purchase Paint & Consumables, Income
RTO, Insurance Claim Dzire. I am of the opinion that the
income from incentives, additional claim loyalty are a part
and parcel of trade discount which is not taxable under
service tax. The case of Dunac Automobiles Pvt. Ltd. v/s
Commissioner of CGST & Central Excise [(2024) 23 Centax
379 (Tri.-Del) [02-08-2024] is squarely applicable in the
instant case, wherein the Hon'ble Tribunal has held that
amounts received were trade discounts as part of sales
activity between dealer and manufacturer on principal-to-
principal basis, not consideration for any taxable service'.
Besides I also agree with the submission of the appellant
that the income RTO is the facilitation for vehicle registration
in RTO. The case titled 'Wonder Cars Pvt Ltd v/s
Commissionerate of Central Excise Pune I reported in 2016
(42) STR 1055 (Tri Mumbai) has settled the issue in favour
of the assessee. Further, the appellant has submitted that
one car viz Maruti Dzire was stolen enroute in the district of
Banda. Since the vehicle was insured hence the appellant
received the insurance claim. I find that the same insurance
claim of loss of vehicle is not subject to taxation under
service tax.
Service Tax Appeal No.70213 of 2026
17
5.6 I find that besides above, the income received under
various heads viz Misc Income, Misc Income others, Moss
charges received, Billing Cancellation, Booking Cancellation
Charges, Income Insurance, Income Pick & Drop,
Endorsement Income, Logistic /Handling Charges, Other
Income are fully taxable as being leaving aside the
nomenclature of receipt the spirit of all these services fall
under the category Business Auxiliary Services (in short
BAS). Since the services falling under BAS are fully taxable
without any exemption or abatement or part payment under
reverse charge hence the appellant is liable to pay service
tax at flat rate. Accordingly, the appellant is liable to
discharge full service tax on the income received under
these heads.
5.7 Now coming to the issue of ineligible availment and
utilization of cenvat credit, I note that the FAR reads as the
appellant has availed excess cenvat credit that as shown in
the respective ST-3 Returns. The appellant provided the
ledger account for taken and utilization of cenvat credit
however the source document viz the invoices on which the
cenvat credit was taken was not provided. The appellant
could not produce the same neither at the adjudication
stage nor before me. In view absence of requisite document
no benefit could be extended to the appellant. As such the
appellant is liable to reverse the ineligible cenvat credit. The
computation of service tax is given in the below mentioned
table-
SN Items Amt during
2015-16
Amt
during
2016-17
Amt during
04/2017 to
06/2017
1 Misc Income 98851 58566 25737
2 Misc Income others 0 3500 0
3 Moss charges received 4860 4700 6350
4 Billing Cancellation 133311 0 33000
5 Booking Cancellation
Charges
81752 27750 26000
6 Income Insurance 215775 257648 0
7 Income Pick & Drop 33817 60850 0
Service Tax Appeal No.70213 of 2026
18
8 Endorsement Income 126176 136142 82019
9 Logistic/Handling
Charges
3823980 0 0
10 Other Income 3163 0 0
TOTAL 4521685 549156 173106
Service tax rate 14.5% 15.0% 15.0%
Service tax short paid 655644 82373 25966
4.3 In the matter the impugned order has confirmed made
against the ten items of income detailed in table in 5.7 of
the impugned order. Appellant have in appeal challenged the
demand made in respect of each of items. I take up for
consideration each of item in paragraphs below.
4.4 Misc Income (S No 1), Misc Income Others (S No 2)
and Other Income (S No 10).
Appellant had made specific submissions in relation to these
incomes stating that there operation involve the change of
defective, used and worn out parts of the motor vehicles serviced/
repaired. The replaced parts result in inventory of old and used
part with them which they classify as Kabad and dispose of them
Kabad in market. Income received against the sale of this Kabad,
against which they have paid VAT service tax could not be levied.
Although this submission was made before the Commissioner
(Appeal) [Para 3 (1) (5) of the impugned order], impugned order
do not record any finding on this submission but proceeds to hold
that these income is towards provision of service which have
nature of Business Auxiliary Service. The approach adopted by the
impugned order cannot be justified. The income earned by the
sale of goods – Kabad is subject to levy of VAT and cannot be
subjected to service tax and such trading/ activity of sale of goods
fall within the negative list of the services. Thus I do not find any
merits in impugned order holding that these incomes are in
respect of provision of taxable services under the category of
Business Auxiliary Services.
4.5 Moss Charges (S No 3) and Income Pick & Drop (S No.
7):
Service Tax Appeal No.70213 of 2026
19
Appellant has challenged the demand made on this income by
stating that this income is in nature of reimbursable expense
incurred by them towards maintenance of vehicle for providing
outdoor service facilities to the clients of their principals – Maruti
Suzuki India Limited (MSIL). Appellant has placed reliance on the
decision of Hon’ble Supreme Court in the case of Intercontinental
Consultants and Technocrats Pvt. Ltd. [2018 (10) GSTL 401 (SC)].
I find that the period in the present case is for the period 2015-
16, 2016-17 and 2017-18 (upto June 2017). Hon’ble Supreme
Court has itself in the same decision taken note of the amendment
made in the year 2015 and has observed as follows:
“29. In the present case, the aforesaid view gets
strengthened from the manner in which the Legislature itself
acted. Realising that Section 67, dealing with valuation of
taxable services, does not include reimbursable expenses
for providing such service, the Legislature amended by
Finance Act, 2015 with effect from May 14, 2015, whereby
Clause (a) which deals with ‘consideration’ is suitably
amended to include reimbursable expenditure or cost
incurred by the service provider and charged, in the course
of providing or agreeing to provide a taxable service. Thus,
only with effect from May 14, 2015, by virtue of provisions
of Section 67 itself, such reimbursable expenditure or cost
would also form part of valuation of taxable services for
charging service tax. Though, it was not argued by the
Learned Counsel for the Department that Section 67 is a
declaratory provision, nor could it be argued so, as we find
that this is a substantive change brought about with the
amendment to Section 67 and, therefore, has to be
prospective in nature. On this aspect of the matter, we may
usefully refer to the Constitution Bench judgment in the case
of Commissioner of Income Tax (Central)-I, New Delhi v.
Vatika Township Private Limited [(2015) 1 SCC 1] wherein
it was observed as under :
Service Tax Appeal No.70213 of 2026
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“27. A legislation, be it a statutory Act or a statutory
rule or a statutory notification, may physically consists
of words printed on papers. However, conceptually it
is a great deal more than an ordinary prose. There is
a special peculiarity in the mode of verbal
communication by a legislation. A legislation is not
just a series of statements, such as one finds in a work
of fiction/non-fiction or even in a judgment of a court
of law. There is a technique required to draft a
legislation as well as to understand a legislation.
Former technique is known as legislative drafting and
latter one is to be found in the various principles of
“interpretation of statutes”. Vis-a-vis ordinary prose,
a legislation differs in its provenance, layout and
features as also in the implication as to its meaning
that arise by presumptions as to the intent of the
maker thereof.
28. Of the various rules guiding how a legislation has
to be interpreted, one established rule is that unless
a contrary intention appears, a legislation is presumed
not to be intended to have a retrospective operation.
The idea behind the rule is that a current law should
govern current activities. Law passed today cannot
apply to the events of the past. If we do something
today, we do it keeping in view the law of today and
in force and not tomorrow’s backward adjustment of
it. Our belief in the nature of the law is founded on the
bedrock that every human being is entitled to arrange
his affairs by relying on the existing law and should
not find that his plans have been retrospectively
upset. This principle of law is known as lex prospicit
non respicit : law looks forward not backward. As was
observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a
retrospective legislation is contrary to the general
principle that legislation by which the conduct of
mankind is to be regulated when introduced for the
Service Tax Appeal No.70213 of 2026
21
first time to deal with future acts ought not to change
the character of past transactions carried on upon the
faith of the then existing law.
29. The obvious basis of the principle against
retrospectivity is the principle of “fairness”, which
must be the basis of every legal rule as was observed
in L'Office Cherifien des Phosphates v. Yamashita-
Shinnihon Steamship Co. Ltd. Thus, legislations which
modified accrued rights or which impose obligations
or impose new duties or attach a new disability have
to be treated as prospective unless the legislative
intent is clearly to give the enactment a retrospective
effect; unless the legislation is for purpose of
supplying an obvious omission in a former legislation
or to explain a former legislation. We need not note
the cornucopia of case law available on the subject
because aforesaid legal position clearly emerges from
the various decisions and this legal position was
conceded by the counsel for the parties. In any case,
we shall refer to few judgments containing this dicta,
a little later. ”
Thus in view of the amendments made in the in Section 67 with
th
effect from 14 May 2015 by the Finance Act, 2015 the
reimbursable expenses have been included in the definition of
consideration received against the service. Thus the argument
advanced by the appellant in this regard is to be rejected. Further
appellant do not qualify as pure agent for the reason that the pure
agent has been defined to be the intermediary in the tri-party
agreement wherein intermediary receives the amount for
provision of service by the service provider to service recipient
and passes the same to the service provider without any alteration
or modification. In the present case appellant has received this
income as per their submission from Maruti Udyog Limited for
provision of vehicle etc. to provide outdoor services to vehicle
owners. The income has been received in terms of bi-party
Service Tax Appeal No.70213 of 2026
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agreement and hence is income received against provision of
taxable service. Thus the arguments advanced by the appellant in
this respect needs to be rejected.
4.6 Billing Cancellation (S No.4) and Booking Cancellation
Charges (S No.5):
Impugned order classifies these income without assigning
any reason under the category of taxable services and determines
their nature to be of Business Auxiliary Services. Appellant has
contested this findings stating that this income is on account of
the cancelled booking and bills. Appellant contend that the
appellant incur certain expenses on account of booking of the
vehicle and preparation of the bills. On cancellation they recover
the same from the persons who had booked the vehicles etc. They
placed reliance on the board circular No 178/2014.
However by the Circular No 178/10/2022-GST dated 03.08.2022
Board has clarified as follows:
In certain cases/instances, questions have been raised
regarding taxability of an activity or transaction as the
supply of service of agreeing to the obligation to refrain from
an act or to tolerate an act or a situation, or to do an act.
Applicability of GST on payments in the nature of liquidated
damage, compensation, penalty, cancellation charges, late
payment surcharge etc. arising out of breach of contract or
otherwise and scope of the entry at para 5(e) of Schedule II
of Central Goods and Services Tax Act, 2017 (hereinafter
referred to as, “CGST Act”) in this context has been
examined in the following paragraphs.
2.“Agreeing to the obligation to refrain from an act or to
tolerate an act or a situation, or to do an act” has been
specifically declared to be a supply of service in para 5 (e)
of Schedule II of CGST Act if the same constitutes a “supply”
within the meaning of the Act. The said expression has
following three limbs :-
(a) Agreeing to the obligation to refrain from an act-
Service Tax Appeal No.70213 of 2026
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Example of activities that would be covered by this
part of the expression would include non-compete
agreements, where one party agrees not to compete with
the other party in a product, service or geographical area
against a consideration paid by the other party.
Another example of such activities would be a builder
refraining from constructing more than a certain number of
floors, even though permitted to do so by the municipal
authorities, against a compensation paid by the
neighbouring housing project, which wants to protect its
sunlight, or an industrial unit refraining from manufacturing
activity during certain hours against an agreed
compensation paid by a neighbouring school, which wants
to avoid noise during those hours.
(b) Agreeing to the obligation to tolerate an act or a
situation-
This would include activities such a shopkeeper
allowing a hawker to operate from the common pavement
in front of his shop against a monthly payment by the
hawker, or an RWA tolerating the use of loud speakers for
early morning prayers by a school located in the colony
subject to the school paying an agreed sum to the RWA as
compensation.
(c) Agreeing to the obligation to do an act-
This would include the case where an industrial unit
agrees to install equipment for zero emission/discharge at
the behest of the RWA of a neighbouring residential complex
against a consideration paid by such RWA, even though the
emission/discharge from the industrial unit was within
permissible limits and there was no legal obligation upon the
individual unit to do so.
The description 3. “agreeing to the obligation to refrain
from an act or to tolerate an act or a situation, or to do an
act” was intended to cover services such as described
Service Tax Appeal No.70213 of 2026
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above. However, over the years doubts have persisted
regarding various transactions being classified under the
said description.
Some of the important examples of such cases are Service
Tax/GST 3.1 demands on -
(i) Liquidated damages paid for breach of contract;
(ii) Compensation given to previous allottees of coal
blocks for cancellation of their licenses pursuant to Supreme
Court Order;
(iii) Cheque dishonour fine/penalty charged by a power
distribution company from the customers;
(iv) Penalty paid by a mining company to State
Government for unaccounted stock of river bed material;
(v) Bond amount recovered from an employee leaving the
employment before the agreed period;
(vi) Late payment charges collected by any service
provider for late payment of bills;
(vii) Fixed charges collected by a power generating
company from State Electricity Boards (SEBs) or by
SEBs/DISCOMs from individual customer for supply of
electricity;
(viii) Cancellation charges recovered by railways for
cancellation of tickets, etc.
In some of these cases, tax authorities have initiated
investigation and in some advance ruling authorities have
upheld taxability.
In Service Tax law, ‘Service’ was defined as any activity
carried 4. out by a person for another for consideration. As
discussed in service tax education guide, the concept
‘activity for a consideration’ involves an element of
contractual relationship wherein the person doing an activity
does so at the desire of the person for whom the activity is
done in exchange for a consideration. An activity done
Service Tax Appeal No.70213 of 2026
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without such a relationship i.e., without the express or
implied contractual reciprocity of a consideration would not
be an ‘activity for consideration’. The element of contractual
relationship, where one supplies goods or services at the
desire or another, is an essential element of supply.
The description of the declared service in quest 5.ion,
namely, agreeing to the obligation to refrain from an act or
to tolerate an act or a situation, or to do an act in para 5(e)
of Schedule II of CGST Act is strikingly similar to the
definition of contract in the Contract Act, 1872. The Contract
Act defines ‘Contract’ as a set of promises, forming
consideration for each other. ‘Promise’ has been defined as
willingness of the ‘promisor’ to do or to abstain from doing
anything. ‘Consideration’ has been defined in the Contract
Act as what the ‘promisee’ does or abstains from doing for
the promises made to him.
This goes to show that the service of agreeing to the
obligation 6. to refrain from an act or to tolerate an act or
a situation, or to do an act is nothing but a contractual
agreement. A contract to do something or to abstain from
doing something cannot be said to have taken place unless
there are two parties, one of which expressly or impliedly
agrees to do or abstain from doing something and the other
agrees to pay consideration to the first party for doing or
abstaining from such an act. There must be a necessary and
sufficient nexus between the supply (i.e. agreement to do
or to abstain from doing something) and the consideration.
Cancellation charges
11. A supply contracted for, such as booking of hotel
accommodation, an entertainment event or a journey, may
be cancelled by a customer or may not proceed as intended
due to his failure to show up for availing the same at the
designated place and time. The supplier may allow
cancelation of supply by the customer within a certain
specified time period on payment of cancellation fee as per
Service Tax Appeal No.70213 of 2026
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commercial terms of the contract. In case the customer
does not show up for availing the service, the supplier may
retain or forfeit part of the consideration or security deposit
or earnest money paid by the customer for the intended
supply.
11.1 It is a common business practice for suppliers of
services such as hotel accommodation, tour and travel,
transportation etc. to provide the facility of cancellation of
the intended supplies within a certain time period on
payment of cancellation fee. Cancellation fee can be
considered as the charges for the costs involved in making
arrangements for the intended supply and the costs
involved in cancellation of the supply, such as in cancellation
of reserved tickets by the Indian Railways.
11.2 Services such as transportation travel and tour
constitute a bundle of services. The transportation service,
for instance, starts with booking of the ticket for travel and
lasts at least till exit of the passenger from the destination
terminal. All services such as making available an online
portal or convenient booking counters with basic facilities at
the transportation terminal or in the city, to reserve the
seats and issue tickets for reserved seats much in advance
of the travel, giving preferred seats with or without extra
cost, lounge and waiting room facilities at airports, railway
stations and bus terminals, provision of basic necessities
such as soap and other toiletries in the wash rooms, clean
drinking water in the waiting area etc. form part and parcel
of the transportation service; they constitute the various
elements of passenger transportation service, a composite
supply.. The facilitation service of allowing cancellation
against payment of cancellation charges is also a natural
part of this bundle. It is invariably supplied by all suppliers
of passenger transportation service as naturally bundled
and in conjunction with the principal supply of
transportation in the ordinary course of business.
Service Tax Appeal No.70213 of 2026
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11.3 Therefore, facilitation supply of allowing cancellation
of an intended supply against payment of cancellation fee
or retention or forfeiture of a part or whole of the
consideration or security deposit in such cases should be
assessed as the principal supply. For example, cancellation
charges of railway tickets for a class would attract GST at
the same rate as applicable to the class of travel (i.e., 5%
GST on first class or air-conditioned coach ticket and nil for
other classes such as second sleeper class). Same is the
case for air travel.
11.4 Accordingly, the amount forfeited in the case of non-
refundable ticket for air travel or security deposit or earnest
money forfeited in case of the customer failing to avail the
travel, tour operator or hotel accommodation service or
such other intended supplies should be assessed at the
same rate as applicable to the service contract, say air
transport or tour operator service, or other such services.
The above Circular which has been issued under GST, has been
adopted by the Board for service tax vide Circular No 214/1/2023-
ST dated 28.02.2023. By this circular following was clarified:
“Subject: Leviability of Service Tax on the declared
service “Agreeing to the obligation to refrain from
an act, or to tolerate an act or a situation, or to do an
act" under clause (e) of section 66E of the Finance
Act, 1994 - reg.
An issue has arisen on the levy of service tax on
liquidated damages arising out of breach of contract,
forfeiture of salary or payment of bond amount in the event
of the employee leaving the employment before the
minimum agreed period and similar other issues arising
outof clause (e) of section 66E of the Finance Act,
1994. Reference has also been invited to Circular No.
178/10/2022-GST dated 3rd August, 2022 regarding
applicability of GST on liquidated damages, compensation
and penalty arising out of breach of contract or other
Service Tax Appeal No.70213 of 2026
28
provisions of law, and its applicability to service tax related
issues.
2. It may be seen that "Agreeing to the obligation to
refrain from an act, or to tolerate an actor a situation, or to
do an act" is a Declared Service as per clause (e) of
section 66E of the Finance Act, 1994. A service
conceived in an agreement where one person agrees
to an obligation to refrain from an act or to tolerate
an act or to do an act, would be a 'declared service'
under section 66E(e) read with section 65B(44) and would
be leviable to service tax.
3. The description of the declared service in question,
namely, agreeing to the obligation to refrain from an act
or to tolerate an act or a situation, or to do an act
is similar in GST.“Agreeing to the obligation to refrain from
an act or to tolerate an act or a situation, or to do an act”
has been specifically declared to be a supply of service in
para 5 (e) of Schedule II of the CGST Act, 2017.
4. As can be seen, the said expression has three
limbs: - i) Agreeing to the obligation to refrain from an
act, ii) Agreeing to the obligation to tolerate an act or a
situation, iii) Agreeing to the obligation to do an act.
Service of agreeing to the obligation to refrain from
an act or to tolerate an act or a situation, or to do an act
is nothing but a contractual agreement. A contract to do
something or to abstain from doing something cannot be
said to have taken place unless there are two parties, one
of which expressly or impliedly agrees to do or abstain
from doing something and the other agrees to pay
consideration to the first party for doing or abstaining
from such an act. Such contractual arrangement must
be an independent arrangement in own right. There must
be a necessary and sufficient nexus between the supply (i.e.
agreement to do or to abstain from doing something) and
the consideration.
Service Tax Appeal No.70213 of 2026
29
5. The issue also came up in the CESTAT in Appeal
No. ST/ 50080 of 2019 in the case of M/s Dy. GM
(Finance) Bharat Heavy Electricals Ltd in which the hon’ble
Tribunal relied on the judgement of divisional bench in
case of M/s South Eastern Coal Fields Ltd Vs. CCE
Raipur{2021(55) G.S.T.L 549(Tri-Del)}. Board has
decided not to file appeal against the CESTAT order
ST/A/50879/2022-CU[DB] dated 20.09.2022 in this
case and also against OrderA/85713/2022 dated
12.8.2022 in case of M/s Western Coalfields Ltd.
Further, Board has decided not to pursue the Civil
Appeals filed before the Apex Court in M/s South
Eastern Coalfields Ltd. supra (CA No. 2372/2021), M/s
Paradip Port Trust (Dy. No. 24419/2022 dated08-08-2022),
and M/s Neyveli Lignite Corporation Ltd (CA No. 0051-
0053/2022) on this ground.
In view of the specific clarifications issued by the Board on the
subject I do not find any merits in the submissions made by the
appellant by relying on the Circular No 178/2014-ST. Even said
circular is not on the subject in dispute. The said circular dated
11.07.2014 is on the “Subject: Manner of distribution of common
input service credit under rule 7(d) of the Cenvat Credit Rules,
2004—regarding”
4.7 Income Insurance (S No. 6) and Endorsement Income
(S No.8)
Impugned order without assigning any reason has held that the
income reflected against these heads also fall under the category
of Business Auxiliary Services. Appellant has contended that these
incomes are the part of commission paid by the insurance
company to MSIL, against the insurance policies executed by them
with the retail customers. A part of this commission is forwarded
by MSIL to the Appellant. These amounts are not received against
provision of any services and hence cannot be subjected to levy
of service tax. Further the entire levy of tax on this income will be
revenue neutral as the amount paid by them towards service tax
Service Tax Appeal No.70213 of 2026
30
will be available to MSIL as CENVAT credit. Section 65 B (44)
defines the service as follows:
“(44) “service” means any activity carried out by a person
for another for consideration, and includes a declared
service, but shall not include—
(a) an activity which constitutes merely,—
(i) a transfer of title in goods or immovable
property, by way of sale, gift or in any other
manner; or
(ii) such transfer, delivery or supply of any goods
which is deemed to be a sale within the meaning
of clause (29A) of article 366 of the Constitution;
or
(iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer
in the course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under
any law for the time being in;
As per the submissions of the appellant it is evident that they have
undertaken the activity of execution of insurance policies with
their retail customers on the behalf of insurance service provider/
MSIL. For this activity they have received certain consideration
which they have reflected in their book of accounts under head of
“Insurance Income”. This income as per the appellant is part of
the commission paid by the insurance company as commission to
MSIL. The amount received by the appellant is the consideration
received by the appellant for the activities undertaken by them.
Even if we consider that appellant acted as sub-broker, then also
the liability to pay service tax on this consideration cannot be
wiped in view of the decision of larger bench of CESTAT in case of
Melange Developers Pvt. Ltd. [2020 (33) G.S.T.L. 116 (Tri. - LB)].
Following this decision Mumbai Bench has in acse of Om Sai
Fabricators [(2023) 6 Centax 208 (Tri.-Bom)] has observed as
follows:
Service Tax Appeal No.70213 of 2026
31
“4.3 On merits we find that issue has been decided by larger
bench of tribunal in the case of Melange Developers Private
Limited [2020 (33) G.S.T.L. 116 (Tri. - LB) wherein larger
bench has held as follows:
"12. It is true that prior to 2007, various Service Tax,
Trade Notices/ Instructions/ Circulars/
Communications had been issued exempting certain
category of persons from payment of Service Tax. A
sub-contracting Customs House Agent was exempted
from payment of Service Tax on the bills raised on the
main Customs House Agent. When an architect or
interior decorator sub-contracted part/whole of its
work to another architect or interior decorator, then
no Service Tax was required to be paid by the sub-
contractor, provided the principal architect or interior
decorator had paid the Service Tax. However, all
these Trade
Notices/Instructions/Circulars/Communications were
superseded by the Master Circular dated 23 August,
2007 issued by the Government of India, Ministry of
Finance. The Circular noticed that when Service Tax
was introduced in the year 1994 there were only three
taxable services, but later 100 services had been
specified as taxable services and that since the
introduction of Service Tax, number of clarifications
had been issued, but it had become necessary to take
a comprehensive review of all the clarifications
keeping in view the changes that had been made in
the statutory provisions, judicial pronouncements and
other relevant factors. The relevant portion of the
Master Circular, insofar as it relates to sub-
contractors, is reproduced below:
999.03/
23-8-
2007
A taxable service
provider outsources a
part of the work by
engaging another
service provider,
generally known as sub-
A sub-contractor is
essentially a taxable
service provider. The
fact that services
provided by such sub-
contractors are used by
Service Tax Appeal No.70213 of 2026
32
contractor. Service tax is
paid by the service
provider for the total
work. In such cases,
whether service tax is
liable to be paid by the
service provider known
as subcontractor who
undertakes only part of
the whole work.
the main service
provider for completion
of his work does not in
any way alter the fact of
provision of taxable
service by the sub-
contractor.
Services provided by
sub-contractors are in
the nature of input
services. Service tax is,
therefore, leviable on
any taxable services
provided, whether or not
the services are provided
by a person in his
capacity as a
subcontractor and
whether or not such
services are used as
input services. The fact
that a given taxable
service is intended for
use as an input service
by another service
provider does not alter
the taxability of the
service provided.
13. The Master Circular clarifies that the services
provided by sub-contractors are in the nature of input
services and since a sub-contractor is a essentially
taxable service provider, Service Tax would be
leviable on the taxable services provided. It has also
been clarified that even if a taxable service is intended
for use as an input service by another service
provider, it would still continue to be a taxable service.
14. It can be used that if a main contractor has paid
Service Tax on the entire amount of the main contract
out of which a portion has been given to a sub-
contractor, then if a subcontractor is required to pay
Service Tax, it may amount to 'Double Taxation', but
this issue has to be examined in the light of the credit
mechanism earlier introduced through Service Tax
Credit Rules, 2002 granting benefit of tax paid on
input services if the input services and the output
services fell under the same taxable services and the
subsequent amendment made on 14 May, 2003
granting benefit of tax paid on input services even if
Service Tax Appeal No.70213 of 2026
33
the input service and the output service belonged to
different taxable categories. The aforesaid Service Tax
Credit Rules were later superseded on 10 September,
2004 by Cenvat Credit Rules, 2004. Rule 3 of these
Rules provides that a manufacturer or producer of
final product or a provider of output service shall be
allowed to take credit (known as 'Cenvat Credit') of
various duties under the Excise Act, including the
Service Tax leviable under sections 66, 66A and 66B
of the Act. Rule 3(4) further provides that Cenvat
credit may be utilized for payment of Service Tax on
any output service. It is for this reason that the Master
Circular dated 23 August, 2007 was issued
superseding all the earlier Circulars, Clarifications and
Communications.
15. It is not in dispute that a sub-contractor renders
a taxable service to a main contractor. Section 68 of
the Act provides that every person, which would
include a sub-contractor, providing taxable service to
any person shall pay Service Tax at the rate specified.
Therefore, in the absence of any exemption granted,
a sub-contractor has to discharge the tax liability. The
service recipient i.e. the main contractor can,
however, avail the benefit of the provisions of the
Cenvat Rules. When such a mechanism has been
provided under the Act and the Rules framed
thereunder, there is no reason as to why a sub-
contractor should not pay Service Tax merely because
the main contractor has discharged the tax liability.
As noticed above, there can be no possibility of double
taxation because the Cenvat Rules allow a provider of
output service to take credit of the Service Tax paid
at the preceding stage.
16. It is in this light that the main contention of
Learned Counsel for the Respondent that if a sub-
Service Tax Appeal No.70213 of 2026
34
contractor is required to pay Service Tax when the
main contractor has actually discharged Service Tax
liability, it would amount to 'Double Taxation', has to
be examined. For this contention, reliance has been
placed by the Learned Counsel for the Respondent on
the following decisions of this Tribunal :
(i) Urvi Construction v. Commissioner of Service
Tax, Ahmedabad, reported in 2010 (17) S.T.R.
302 (Tri. - Ahmd.);
(ii) BCC Developers and Promoters Pvt. Ltd. v.
Commissioner of Central Excise, Jaipur, reported
in 2017 (52) S.T.R. 22 (Tri. -Del.);
(iii) M/s. Dhaneshra Engineering Works v.
Commissioner of Central Excise, Allahabad,
reported in 2018 (2) TMI 788 -CESTAT -
Allahabad;
(iv) Power Mech Projects Ltd. v. Commissioner of
Customs, Guntur, reported in 2017 (48) S.T.R.
165 (Tri.- Hyd.); and
(v) M/s. Edac Engg. Ltd. v. CST, Chennai, reported in
2017 (6) TMI 685 CESTAT Chennai.
17. In Urvi Construction a Learned Member of the
Tribunal observed :
"2. . Further the learned advocate also submits
that in the Master Circular issued by the Board
vide Circular No. 96/7/2007-S.T., dated 23-8-
2007, a stand has been taken that there is no
exemption to a sub-contractor from payment of
service tax merely because the contractor pays
the tax. However, he submits that for the period
circular issued late by the Board in 1997 was
applicable and according to this Circular where
the services have been provided by the sub-
contractors such sub-contractors are not liable
Service Tax Appeal No.70213 of 2026
35
to pay service tax and service tax liability is on
the main contractor. Taking note of the fact of
the contention that main contractor has paid the
service tax and charging service tax on the sub-
contractor again would amount to taxing the
same service twice and also taking note of the
circular cited by the learned advocate and the
decisions of the Tribunal cited, I find that if the
appellant is required to pay the service tax it
would amount to taxing the same service twice
and the circular and the Tribunal's decision are
squarely applicable to the facts of this case and
accordingly appeal is allowed with consequential
relief to the appellant."
18. In BCC Developers and Promoters Pvt. Ltd. it was
observed :
"6.1 We agree with the submission of the Ld.
Counsel that no double taxation is permissible
under the law. The Constitution (Article 265)
provides to take the exact amount of tax i.e.
neither more nor less. In the instant case, if the
principal has already paid the Service Tax, then
the same cannot be demanded from the
appellant. As per the clarification of the Board's
Circular dated 23-8-2007 as well as dated 7-10-
1998, if the principal had not paid the Service
Tax then the same can be charged. If the
Service Tax has already been paid by the
principal, then the same cannot be demanded
again."
19. M/s. Dhaneshra Engineering Works followed the
aforesaid decision in BCC Developers and Promoters
Pvt. Ltd.
Service Tax Appeal No.70213 of 2026
36
20. In M/s. Edac Engg. Ltd., the Division Bench, after
placing reliance upon the decision of the Tribunal in
Urvi Construction, observed :
"6.2 We are therefore of the considered opinion
that these case laws are distinguishable from
the decision taken by this very Bench in the case
of the present appellants Edac Engineering Ltd.
in Final order dated 19-12-2016. We also find
that the very same Board's Circular No.
97/8/2007-S.T., dated 23-8-2007, relied upon
by the Ld. AR has been taken note of by the
Tribunal in Urvi Construction (supra). This being
so, we have no hesitation in ruling that when
Service Tax has been paid by the main
contractor, charging the subcontractor again
will amount to taxing the same service twice. In
the circumstances, the issue at hand also
requires to be remanded to the adjudicating
authority to verify whether the service rendered
by the appellant has suffered tax in the hands
of the principal contracts. If that aspect is able
to be proved by the appellants, no tax liability
will accrue to them. Towards this end, the
adjudicating authority will give suitable
opportunity to the appellants to present their
case. Appellants are also produce all evidence
and documents to establish their claim that the
tax liability required to be discharged by them
has already been paid up by the main
contractor. If that is provided, their will
obviously be no demand for interest unless such
demands have been made belatedly. Once this
aspect is also able to be proved by the
appellant, imposition of penalty will also not
arise."
Service Tax Appeal No.70213 of 2026
37
21. The aforesaid decisions do not take into
consideration the impact of the Cenvat Rules. It
would, therefore, not be correct to conclude that
double taxation would result if a sub-contractor is
required to discharge the Service Tax liability even if
the main contractor has discharged the tax liability.
22. The decisions of the Tribunal holding that double
taxation will not result if a sub-contractor discharges
the tax liability because of the Cenvat Rules, now need
to be referred to.
23. In Max Tech Oil & Gas Services Pvt. Ltd. v.
Commissioner of Service Tax, Delhi, reported in 2017
(52) S.T.R. 508 (Tri. - Del.), the Division Bench has
held :
"6. Regarding the contention of the appellant
that they have acted only as a sub-contractor
and demanding service tax from them will
amount to double taxation as the main
contractor also is rendering similar service to
ONGC, we find no legal basis for the contention
of the appellant. The service tax leviable at the
hands of each service provider is decided by
nature of activities undertaken by them. If the
same is covered by scope of the taxable entry
under Finance Act, 1994 tax liability arises. The
said service becomes part of final service
rendered by main contractor is of no
consequence to determine the tax liability of
each and every service provider. If at all, the
service tax paid by a sub-contractor which
becomes part of service further provided by the
main contractor, the scheme of credit as
envisaged by the Cenvat Credit Rules, 2004 will
come into play subject to fulfilment of conditions
therein. It is nobody's case that the sub
Service Tax Appeal No.70213 of 2026
38
contractors per se are not liable to service tax
even if they rendered taxable service "
[Emphasis Supplied]
24. The same view was taken by the Division Bench
of the Tribunal in CCE & S.T., Raipur v. M/s. J.K.
Transport, reported in 2017 (9) TMI 993 - CESTAT
New Delhi. The relevant paragraph is reproduced
below :
"5. We find that the CBEC vide Circular dated
23-8-2007 has clarified that the services
provided by the sub-contractor is a taxable
service, even if the same is used for completion
of the work by the main service provider. Thus,
for providing the taxable service, the sub-
contractor is liable for payment of service tax on
provision of such service........."
25. Similar views were taken by the Tribunal in (i) Max
Logistics Ltd. v. Commissioner of Central Excise,
Raipur, reported in 2017 (47) S.T.R. 41 (Tri. - Del.);
(ii) Hargovind Electric Decorators v. Commissioner of
Central Excise, Jaipur-I, reported in 2016 (43) S.T.R.
619 (Tri. - Del.); and (iii) Sew Construction Ltd. v.
Commissioner of Central Excise, Raipur, reported in
2011 (22) S.T.R. 666 (Tri. - Del.).
26. At this stage, it would also be useful to refer to a
Larger Bench decision of the Tribunal in Vijay Sharma
& Company v. CCE, Chandigarh, reported in 2010 (20)
S.T.R. 309 (Tri. - LB). The issue that arose before the
Larger Bench was as to whether service provided by a
sub-broker are covered under the ambit of Service
Tax and taxable or not. After noticing that a
subcontractor is liable to pay Service Tax, the Larger
Bench examined as to whether this would result in
double taxation if the main contractor has also paid
Service Tax and observed that if service tax is paid by
Service Tax Appeal No.70213 of 2026
39
a sub-broker in respect of same taxable service
provided by the stock broker, the stock broker is
entitled to the credit of the tax so paid in view of the
provisions of the Cenvat Credit Rules. The relevant
paragraph 9 is reproduced below :
"9. It is true that there is no provision under
Finance Act, 1994 for double taxation. The
scheme of service tax law suggest that it is a
single point tax law without being a multiple
taxation legislation. In absence of any statutory
provision to the contrary, providing of service
being event of levy, self same service provided
shall not be doubly taxable. If Service tax is paid
by a sub-broker in respect of same taxable
service provided by the stock-broker, the stock
broker is entitled to the credit of the tax so paid
on such service if entire chain of identity of sub-
broker and stock broker is established and
transactions are provided to be one and the
same. In other words, if the main stock broker
is subjected to levy of service tax on the self
same taxable service provided by sub-broker to
the stock broker and the sub-broker has paid
service tax on such service, the stock broker
shall be entitled to the credit of service tax.
Such a proposition finds support from the basic
rule of Cenvat credit and service of a sub-broker
may be input service provided for a stock-
broker if there is integrity between the services.
Therefore, tax paid by a sub-broker may not be
denied to be set off against ultimate service tax
liability of the stock broker if the stock broker is
made liable to service tax for the self same
transaction. Such set off depends on the facts
and circumstances of each case and subject to
verification of evidence as well as rules made
Service Tax Appeal No.70213 of 2026
40
under the law w.e.f. 10-9-2004. No set off is
permissible prior to this date when sub-broker
was not within the fold of law during that
period."
27. The Commissioner did express in the impugned
order that under the Cenvat Scheme every stage of
provision of service is required to be taxed and if a
sub-contractor discharges the Service Tax liability, it
will not result in double taxable even if the main
contractor discharges the Service Tax liability because
the credit of the earlier tax paid is available at a
subsequent stage, but it is because of the decision of
the Tribunal in Urvi Construction, that the
Commissioner held that double taxation would result
if a sub-contractor is also required to discharge
Service Tax liability when the main contractor has
discharged the entire liability.
28. Learned Counsel for the Respondent has,
however, relied upon the decision of the Supreme
Court in Larsen and Toubro Ltd. v. Additional Deputy
Commissioner of Commercial Taxes and Anr.,
reported in 2016-TIOL-155-SC-VAT. In this case, the
contracts which were secured by the Appellant therein
were works contract and a part thereof was assigned
to the subcontractor who had submitted returns and
paid taxes for the execution of the works contract.
During the course of the assessment, the Appellant
submitted that the sub-contractors had already been
taxed and, therefore, the Appellant cannot be taxed
again under section 6B of the Karnataka Sales Tax
Act. The submission, therefore, was that the value of
the work entrusted to the sub-contractors could not
be taken into account while computing the total
turnover of the Appellant for the purpose of taxation
under the Karnataka Sales Tax Act. It is in view of the
Service Tax Appeal No.70213 of 2026
41
provisions of the Karnataka Sales Tax Act that the
Supreme Court observed that the value of the work
entrusted to the sub-contractors or payments made
to them shall not be taken into consideration while
computing total turnover for the purposes of Section
6B of the Karnataka Sales Tax Act. This decision of the
Supreme Court will not come to the aid of the
Respondent in this case in view of the specific
provisions of Section 66 and 68 of the Act as also the
Cenvat Rules discussed in the foregoing paragraphs of
this order. It also needs to be noted that there is no
provision for input tax credit on deemed sales in levy
of VAT.
29. The submission of the Learned Counsel for the
Respondent regarding 'revenue neutrality' cannot also
be accepted in view of the specific provisions of
Section 66 and 68 of the Act. A subcontractor has to
discharge the Service Tax liability when he renders
taxable service. The contractor can, as noticed above,
take credit in the manner provided for in the Cenvat
Credit Rules of 2004.
30. Thus, for all the reasons stated above, it is not
possible to accept the contention of the Learned
Counsel for the Respondent that a sub-contractor is
not required to discharge Service Tax liability if the
main contractor has discharged liability on the work
assigned to the sub-contractor. All decisions, including
those referred to in this order, taking a contrary view
stand overruled.
31. The reference is, accordingly, answered in the
following terms :
"A sub-contractor would be liable to pay Service
Tax even if the main contractor has discharged
Service Tax liability on the activity undertaken
Service Tax Appeal No.70213 of 2026
42
by the sub-contractor in pursuance of the
contract."
4.8 To argue on the limitation appellant have pressed the
ground of bonafide belief and for that reason they rely upon
the certificate issued to them by M/s Gammon. They also
submit that there were conflicting views in the matter.
However on query from the bench the counsel for appellant
was unable to point out to a single decision available during
the relevant period giving a contrary view. Further the
submission to the effect that there were conflicting circulars
is also not borne out by any evidence. Larger bench has in
case of Melange Developer Pvt Ltd. clearly in para 12 noted
that all Trade
Notices/Instructions/Circulars/Communications were
superseded by the Master Circular dated 23 August, 2007,
and this circular had clarified the liability of sub contractor
to pay the service tax. It is settled law that bona fide belief
is not the blind belief and needs to be established. Hon'ble
Bombay High Court has in case of Responsive Industries Ltd.
[2019 (26) G.S.T.L. 457 (Bom.)] held as follows:
"9. The contention that there was a bona fide belief
that the Appellant are not liable to pay the service tax
on outward transportation of goods and the GTA is not
supported by any reasonable explanation. The bona
fide belief that one is not liable to pay the tax has to
be based on some facts on record which led to the
belief. It is not the Appellant's case that the belief
based on a ruling of the some authority that it not
liable to pay service tax on outward transportation. A
mere statement to the effect that the Appellant was
under a bona fide belief of non liability of paying tax
cannot be accepted in the face of clear provision of
law. Thus, it is not possible to accept the contention
that the Appellant had bona fide belief of for non-
payment of tax, so as to invoke Section 80 of the Act."
Service Tax Appeal No.70213 of 2026
43
4.12 The Appellant concealed the correct taxable amount
with the service tax department, until the Departmental
officers initiated an inquiry in this regard. These facts were
suppressed with intent to evade the payment of service tax
due on various taxable services provided by them thereby
facilitating the evasion of service tax payable on the said
services so rendered by them. Thus it the extended period,
as provided for under the proviso to sub-section (1) of
section 73 ibid for recovery of such service tax not paid
and/or short paid by Appellant has been correctly invoked
by the revenue authorities.
The decision of the Mumbai Bench has been affirmed by the
Hon’ble Supreme Court as reported at [(2023) 6 Centax 210
(S.C.)]”. Thus I do not find any merits in the submissions made
by the appellant in respect of incomes under this head and uphold
the demand of service tax made.
4.8 Logistic/ Handling Charges (S No.9)
In respect of the incomes reported under this head appellant
have contended that the issue has been settled in the favour of
the assessee by various decisions of CESTAT. In case of Surjeet
Auto Pvt. Ltd. [2024 (24) CENTAX 115 (T)] following was held:
“9. Post 01.07.2012, in order to qualify as a 'service', the
activity has to satisfy three limbs of the definition of service
viz., there has to be a service provided by a provider to a
recipient, there has to be a monetary consideration and the
service has to be provided in the taxable territory of India.
Logistics/Handling charges are collected while selling of cars
to the customers and not otherwise. Therefore, even if one
has to consider the logistics/handling charges to be a
consideration for a service, it is imperative to note that this
handling activity is coupled with sale of car and would be
called as bundled service as defined under section 66F of
Finance Act, 1994. In this context as well, we observe that
receipt of logistics/handling charges is naturally bundled
with sale of cars since majority of similar service providers
Service Tax Appeal No.70213 of 2026
44
in the industry would receive the said amounts. Accordingly,
provision of above activities and sale of vehicles has to be
treated as provision of single service which gives such
bundle its essential character. And in the present case, the
activity of selling of cars is essential and undertaking of
above activities is incidental to the sale. Therefore, above
activities has to be bundled with sale of cars and it should
be treated as sale of cars only. That being a case, service
tax is not leviable on logistics/handling charges, since sale
of cars is covered under the exclusion part of service
definition given under section 65B (44) of Finance Act, 1994
i.e. transfer of title in goods. Consequently, they will
obviously form part of the value of the goods when they are
subsequently sold and consequently sales tax/VAT would
apply and not service tax.
10. In this context we note that CBEC vide its Circular No.
699/15/2003-CX., dated 5-3-2003 clarified that "it is
envisaged appears that any activity of sales dealer at the
pre-sale stage or at the time of sale will not come under the
purview of service tax." We are of the opinion that this
circular has clearly clarified that such pre-sale charges are
not leviable to service tax, and the logistics/handling
activities are all pre-sale activities and hence are not
leviable to service tax.
11. In this context, we also observe that the Tribunal in
Indian Oil Corporation Ltd v. CCE [2015 (38) S.T.R. 501 (Tri.
- Bom)] held that "whatever expenses have been incurred
before transfer of the goods, form part of the sale price of
goods". Similar view was held by the coordinate bench of
this Tribunal in M/S Premier Car Sales Ltd., v. Commissioner
(Audit), CGST & Central Excise, Lucknow [2024 (6) TMI 1 -
CESTAT ALLAHABAD = (2024) 18 Centax 480 (Tri. - All.)]
has held as follows:-
"15. Appellants had been recovering logistic charges
from the buyers of the car. It is the case of the
Service Tax Appeal No.70213 of 2026
45
Department that the Appellants had not deposited
service tax on such logistic charges. The learned
Commissioner has held that the Appellants have
charged the logistics charges over and above the ex-
showroom price of car. If logistic charges were part of
the transaction value, then it could have been
included in the sale value and mentioned in the sale
invoice but Appellants had separately charged logistic
charges and issued separate invoice in this regard. It
has therefore been held that it is a pure service
taxable under the provisions of Finance Act, 1994 and
these logistics charges are not the part of
transaction/sale value, rather logistics charges are the
amount charged from the customers in view of
services related to logistics charges. Appellants have
submitted that they have collected logistics charges
as part of transaction value at the time of sale of
vehicle. These charges are part of sale invoice and
VAT is collected on the same. They also submitted that
there can be no service till the goods are sold to
another person.
16. We have perused the copy of invoice for sale of
car as well as invoice for logistic charges. Both these
invoices have been raised simultaneously at the time
of sale of vehicle. We also note that the VAT Tribunal
vide order dt. 25-01-2014, in their own case for A/Y
2009-10, had held that the logistic charges recovered
at the time of sale of car is liable to be included in the
sale price of vehicle. It therefore held that VAT was
payable on logistic charges. It is the settled principal
of law that service tax and VAT are mutually exclusive
and a transaction can either be taxed under service
tax or under VAT. Once VAT has been paid, service
tax cannot be demanded.
Service Tax Appeal No.70213 of 2026
46
17. The Hon'ble Delhi High Court in the case of Tim
Delhi Airport Advertising Pvt. Ltd. v. Special Commr -
II [2016 (44) S.T.R 399 (Del.)] held that levy of
service tax and VAT are mutually exclusive. The
intention of the party to the transaction would be
material. If a transaction has been held to be one of
providing services, then the same was not chargeable
to VAT.
....................................
.............
20. In view of above, we hold that service tax could
not have been demanded on logistic charges;
particularly when Appellants have paid VAT on the
same, Department has not been able to specify the
nature of service provided and the order of
Commissioner (Appeals) in another case has been
accepted by the Department."
12. We also note that the impugned order has observed that
the said charges did not form a part of sale value of the
vehicle and were collected separately. However, in this
context, we note that the said charges are incurred in
respect of all cars which are to be sold by the dealer. The
expenses incurred in this regard are passed by the original
authority to the customer and collected as part of the sale
value of the car. The bifurcation of the expenses and its
separate accounting in the books of accounts does not
amount to provision of service.”
Since I find that the issue is squarely covered in favour of the
appellant by this decision, I do not find any merits in the impugned
order upholding the demand in respect of these incomes.
4.9 Thus in view of the discussions as above, the table in Para
5.7 of the impugned order is modified as follow:
SN Items Amt
during
2015-16
Amt
during
2016-17
Amt during
04/2017 to
06/2017
Service Tax Appeal No.70213 of 2026
47
1 Moss charges received 4860 4700 6350
2 Billing Cancellation 133311 0 33000
3 Booking Cancellation
Charges
81752 27750 26000
4 Income Insurance 215775 257648 0
5 Income Pick & Drop 33817 60850 0
6 Endorsement Income 126176 136142 82019
TOTAL 595691 487090 147369
Service tax rate 14.5% 15.0% 15.0%
Service tax short paid 86,375 73,064 22,105
4.10 Payment of the Service Tax from CENVAT Credit:
The next demand which has been confirmed by the impugned
order is in respect of the amounts of service tax paid by the
appellant from the CENVAT Credit account as per their audited
books of account. The demand has been made by comparison of
figures indicated in the Audited Financial Statement with the
figures of CENVAT Credit reflected in the ST-3 return. Appellant
have sought to explain the difference by providing the exact figure
of tax payable for the disputed period and the tax paid through
cash and CENVAT as reflected in the Audited Financial Statements.
I find that the difference is there in the figures reported in these
Financial Statements and ST-3 returns. The difference is not only
in respect of the figures of CENVAT Credit but also in the figures
of the Tax Payable and Tax Paid thorough cash. As per the
submissions of the appellant the difference is reflected in the table
below:
2015-16 2016-17 04/17 to 06/17
Audited
Financial
Statemen
t
ST-3 Audited
Financial
Statement
ST-3 Audited
Financial
Statemen
t
ST-3
Taxable
Value
9863588
8506200
13308330
12872666
3810617
2243054
6
9
3
7
2
1
Service
Tax
Payable
1402066
1170453
19854704 19196616 5715926 3364581
9
9
Tax paid
through
Cash
1255824
1069474
17990326 17741748 5040674 3109215
7
0
Tax paid
through
CENVAT
1462422 1012527 1864378 1433874 675252 255364
Service Tax Appeal No.70213 of 2026
48
Total Tax
Paid
1402066
1170726
19854704 19175622 5715926 3364579
9
7
Differenc
e in
Payable
and Paid
0 2728 0 -20994 0 2
From the perusal of the above it is quite evident that appellant
has as per their audited financial statements shown a higher tax
liability and payment of tax then that reflected in the ST-3 return.
Demand has been made only by comparing the figures of the
CENVAT Credit utilization reflected in the Audited Financial
Statements and ST-3 returns. No enquiry or investigation has
been made in respect of the other differences observed. Is it true
that revenue officers have shut their eyes to the difference in
figures of the tax liability reflected in the Audited financial
Statements and ST-3 return. Why no demand has been made for
the difference in tax liability itself. It would be that the figures
reported in the Audited Financial Statements were the true
reflection of the operations of the appellant. If that is so than if
the appellant has paid the tax higher than reflected in the ST-
returns the same should have been also reflected in the
comparison charts. The demand made without proper verification
and complete comparison of the Audited Financial Statements and
ST-3 returns is obnoxious and bad in law. If the Financial
Statements reflected higher credit utilization, then they also
reflected higher tax liability and higher payment of tax in cash.
Impugned order has simply stated that appellant have failed to
produce the relevant CENVAT Credit documents. Even otherwise I
agree with the contention of the appellant that impugned order
seeks to deny that credit which was never taken by them by
making relevant declaration on the ST-3 return. In the case of
Cyber Group India Pvt Ltd. [2025 (27) Centax 386 9T-All)]
following has been held:
“17. As regards finding in the adjudication order regarding
taking credit within a period of one year, I find that the said
finding has been recorded only on the ground that the
amount of credit was not disclosed by the Appellant in ST-3
return for the period April'2015 to Sep'2015. The
Service Tax Appeal No.70213 of 2026
49
adjudicating authority appears to have misguided himself by
taking a view that credit is taken by declaring the amount
of credit in ST-3 return. On the contrary, credit is always
taken in account books and/or other statutory records. The
disclosure of opening/closing balance of credit and utilised
amount of credit in ST-3 may be a condition required to be
complied by a taxpayer, but the same by itself is not a
condition to claim credit.”
4.11 Appellant has challenged the invocation of extended period
of limitation for making the demand. However the emphasis of
their submission is only in respect of the demand made in respect
of CENVAT Credit. As the I have set aside this demand in totality
on the facts and merit I do not find relevant to discuss this issue
in respect of CENVAT credit. In respect of the services on which I
have upheld the liability to pay service tax (para 4.9) I find that
issue is purely the issue of interpretation of the provisions of the
statute. It has been constantly held that extended period of
limitation could not have been invoked for making the demand.
Reliance is placed on the decision of Hon’ble Supreme Court in the
case of International Merchandising Company, LLC [2022 (67)
G.S.T.L. 129 (S.C.)]. Following this judgement Hon’ble Jharkhand
High Court has in the case of Central Coalfields Ltd [(2024) 14
Centax 307 (Jhar.)] held as follows:
“21. The show cause issued by the Respondent in the
instant case is dated 15th March 2019 taking recourse of 1st
proviso to Section 11A(1) of the Central Excise Act, 1944.
The reply to Show Cause notice was submitted on 29th April
2019 and the Adjudication Order has been passed on 29th
February 2020.
Since, the present case is an interpretational issue and
petitioner was paying GST Compensation Cess with a bona-
fide belief that Clean Energy Cess was not payable. Further,
the petitioner has been filing regular returns under GST law
for all the supplies of coal made after introduction of GST.
Petitioner was not filing returns under Clean Energy Cess
Service Tax Appeal No.70213 of 2026
50
Rules with a bona fide belief that Clean Energy Cess was not
payable. Further, these facts were in the knowledge of the
respondents; however, despite said facts being in the
knowledge of the respondents, show cause notice was
issued almost after two years from the date Clean Energy
Cess was repealed. Thus, as aforesaid, since the instant
case involves an interpretational issue, therefore in such
circumstances, no penalty under section 11AC can be levied
as demand of Cess under the extended period of limitation
is unsustainable.
Further, as the allegation of suppression and wilful intent to
evade tax is baseless and incorrect, penalty under Section
11AC(1)(c) of the Central Excise Act, 1944 cannot be
imposed. Reference in this regard may be made to the
judgment rendered in the case of International
Merchandising Company, LLC (Earlier known as
International Merchandising Corporation) v. CST, New Delhi
reported in 2022 (12) TMI 556 SC/[2022] 145 taxmann.com
247 (SC) wherein the Hon'ble Apex Court has held in 24 &
25 as under:-
"24. We are of the considered view that the Tribunal
having come to the conclusion that the issue turned
upon an interpretation of the provisions of Section
65(68) and Section 65(86b) of the Finance Act 1994,
there was no warrant to allow the invocation of the
extended period of limitation and to direct the
determination of the penalty following the re-
quantification of the demand. The extended period of
limitation would clearly not stand attracted in respect
of the first show cause notice dated 20 October 2009.
The show cause notice shall hence have to be confined
to the normal period of limitation excluding the
extended period.
25. As far as the penalty is concerned, we are of the
considered view that there was no warrant for the
Service Tax Appeal No.70213 of 2026
51
imposition of the penalty as the dispute in the present
case essentially turned on the interpretation of the
statutory provisions and their inter play with the
circular issued by the CBEC. Finally, we also order and
direct that the view of the Tribunal on the applicability
of the provisions of Section 65(86b) of the Finance Act
1994 as amended has been reversed by this Curt. On
remand in pursuance of the impugned order of the
Tribunal, the adjudicating officer shall abide by the
above directions.”
22. In view of the aforesaid discussions, Issue no. (ii) and
Issue No. (iii) (part) is decided in favour of Assessee,
inasmuch as, no penalty under section 11AC can be levied
as demand of Cess and further extended period of limitation
cannot be invoked. However, the Assessee is liable to pay
Cess for the normal period including interest over the
same.”
4.12 As the demand could not have been made by invoking the
extended period of limitation penalties imposed under Section 78
are also set aside.
4.13 I do not find merits in the impugned order.
5.1 Appeal is allowed.
(Order pronounced in open court on - 29.10.2026 )
Sd/-
(SANJIV SRIVASTAVA)
MEMBER (TECHNICAL)
LKS