TaxTMI 
TaxTMI 
2025 (6) TMI 121
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....vade payment of service tax, they have claimed their taxable income as Trade discounts but which were not passed on to the customers in as much as no expenses have been accounted as trade discounts in the P&L account; and demanding an amount of Rs.3,59,24,783/- for the period from Oct 2014 to June 2017 as they have failed to pay 6%/7% on the exempted value under Rule 6(3)(i) of CCR. The above demands were raised by invoking extended period and the notice proposed to demand interest and imposition of penalty. 2. The appellant contested the above Show Cause Notice vide reply dated 01.03.2021 on the ground that they have actually passed on the trade discount offered to their clients, but they have followed different procedures for accounting the same in their books of accounts and have explained the same with ledger copies and a Chartered Accountant Certificate. With regard to demand of amounts under Rule 6(3)(i) of CCR, they had contested on the ground that the advertisement through print media is exempted and no Cenvat credit has been availed by them on such purchase bills and while invoicing their client for such print media advertisement on cost plus service charge basis, they ....
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....988 9,66,21,256 Trade Discount allowed as per Ledger Difference Amount unexplained ST (Inclusive of Cesses) ST Liability E F=D-E G G=F&G 3,22,95,731 6,43,22,525 12.36% 79,50,264 5.1 He further submitted that entire trade discount allowed in their invoices during the year 2014-15 is Rs.6,06,01,566/- and it is fully captured in the trade discount ledger which is placed at page 59 to 69 of paper book Vol II. This has been certified by the CA also. (Ref para 13.1 of impugned order) Therefore, the appellant submits that after deducting the taxable turnover of Rs.47,61,55,975/- declared in the ST3 returns and the above discount allowed amount of Rs.6,06,01,566/- from the total income of Rs.67,69,63,785/- as per P&L account, the balance amount of Rs.14,02,06,244 represents exempted turnover. 5.2 The Commissioner in Para 13.2 of the impugned order has reckoned the said amount of Rs.6,06,01,566/- and apportioned it for both first and second half of the year of 2014-15 on pro rata basis as Rs.2,15,56,947/- and Rs.3,90,44,619/- respectively. After deducting discount of Rs.65,41,819/- on exempted print media sales from the said figure of Rs.3,90,44,....
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.... 263801235 187644688 54599600 21556947 Balance - correct value of 2nd half of the year 413162550 288511287 85606644 39044619 Values wrongly adopted in the SCN for the 2nd half of the year 485643531 288511287 100510988 96621256 Difference (excess income reckoned for 2nd half) 72480981 0 14906344 57576637 Financial year 2016-17 6. He further submitted that Commissioner proceeded to confirm the demand tax of Rs. 33,36,384/- for the FY 2016-17 as proposed in the SCN on the ground that there is difference, as mentioned below, between the turnover reflected in the ST3 returns and the Balance Sheet (tabulated) and the trade discount allowed of Rs.2,22,42,557/- has not been passed on to the Customers and tax was liable to be paid on such discount value. Income as per P&L Value declared in ST3 Advt Income for Print Media (exempted) Difference in Value claimed as Trade discount but not offered to clients A B C D=A-B-C 524681815 322953570 179485688 22242557 6.1 However, the appellant has reconciled the above figures and put up the actual figures relating to discount allowe....
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....y substantiation or finding in support. 6.4 He further submitted that the Commissioner has held that discounts for the year 2016-17 have been passed on and tax is not liable to be paid on the same and the Commissioner has only held that the appellant is liable to pay tax on unbilled revenue for the reason that the said revenue accounted for in 2016-17 has suffered tax in the year 2017-18 has not been corroborated in the CA Certificate and such payment of tax on unbilled revenue amount has not been proved with documentary evidence. 6.5 The advocate submitted that the demand was made out in the SCN on the ground that trade discount has not been passed on and the SCN did not propose to demand tax on such un-billed revenue included in the total income and hence, the finding of the Commissioner to the effect that tax is liable to be paid on such unbilled revenue is beyond the scope of the SCN and hence it is not tenable at all. Reliance is placed on the decision of R. Ramadas vs. The Joint Commissioner of Central Excise, [2020 (11) TMI 84-MADRAS HIGH COURT]. 6.6 Secondly, the appellant submitted the provision made towards unbilled revenue in order to recognize the expenses incu....
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....rom print media and on any input or input service pertaining to such exempted service except in respect of common input services. Since service tax has been paid on such value addition/margin billed on the client, reversal of credit in terms of Rule 6(3) is not at all required. The value addition on which service tax has been paid is made up of such common input services, there is no wrong in taking credit on the same and therefore, the appellant is not liable to reverse any credit in terms of Rule 6(3). The Commissioner has not disputed the above facts in the order and has not recorded finding in this regard. Thus, the impugned order confirming the demand of Rs.3.59,24,783/-is not sustainable and liable to be set aside. 7.3 Alternatively, he submitted that, if the appellant is required to reverse the credit, it is submitted by the appellant that they may choose any of the following options as applicable to them under Rule 6(3): - a) either pay six percent of the value of exempted services or b) pay an amount determined under sub rule (3A) ог c) maintain separate accounts for receipt, consumption and inventory of inputs and pay an amount de....
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.... Structural Engineers [2017 (347) ELT 112] wherein it has been held that merely not following of the procedure prescribed under Rule 6(3A) will not take away the right to avail second option under Rule 6(3) to reverse proportionate credit. Similar view was taken in the following decisions: - i. Aster Pvt Ltd. [2016 (43) STR 411 (Tri. Hyderabad)] ii. Okay Glass Industries [2015 (9) TMI 776-ALLAHABAD HIGH COURT] iii. Schwing Stetter India Private Limited [2024 (4) TMI 559-CESTAT CHENNAI] iv. M/s. Meera Glass Industries [2024 (5) TMI 410-CESTAT ALLAHABAD] 7.9 He pointed out that the findings of the Learned Commissioner in para 14.2 of the impugned order clearly reveals that the option to reverse proportionate credit has been rejected merely on the ground that the appellant has submitted annual details but failed to submit month-wise details such as total cenvat credit availed, cenvat credit of inputs/input services exclusively used for taxable goods/services to arrive at the quantum of amount payable as per sub-rule 6(3AA). He submitted that, Rule 6 (3AA) has been introduced to enable the assessees to reverse proportionate credit at the adjudicat....
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....does not support the allegation with any evidence that the discount allowed in the invoice has not been passed on to the customers. No detailed verification conducted to ascertain whether the discounts in fact was passed on or not or whether only the net amount after discount have been paid for by the customers or whether they have paid the gross amount before discount. In the absence of any such concrete evidence, the impugned notice has made demand of service tax merely on the reason that the P&L account does not have an expenditure titled "trade discount allowed". 13. It is seen from the records, that the appellant has filed a detailed reply along with ledger copies and CA certificates to establish that they had in fact passed on the discount to the customers. The Commissioner in the impugned order has considered the said submissions and documents and have concluded that the discount allowed was passed on except for confirmation of demand of service tax of Rs. 79,50,264/-for the period Oct 14 to Mar 15 and Rs. 33,36,384/- for the year 2016-17. 14. We find that the demand of service tax in the impugned proceedings has been made for the period from Oct 14 to Mar 15, 2015-16 ....
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....ome reasonable means and not definitely on adhoc basis. 17. The appellant have provided the trade discount allowed ledger for the year 2014-15 in full and in terms of the same the total discount value passed on is Rs.6,06,01,566/-. As per the appellant, the said discount is the amount allowed in the invoice and same is the value captured in the ledger account also and there is no other discount which has been allowed in the invoice and which has not been captured in the ledger account. The Commissioner in the impugned order has accepted the said discount value as having been passed on to the customers but considering the erroneous discount value of Rs.9,66,21,256/- as the total discount allowed in the invoice and the amount of Rs.6,06,01,566/- as the amount of discount passed on to the customers as per the ledger, has proceeded to demand tax on the diff value of Rs.3,60,19,690/- which is otherwise erroneous. In the absence of any basis as to how such erroneous value of Rs.9,66,21,256/- has been arrived at and in the absence of any specific invoice or invoice wise working or customer wise working to establish that the appellant had indeed allowed discount in the invoice and has n....
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....re no service tax is leviable on them. (iii) The difference on account of 'unbilled revenue' booked in 2016-17 and offered for service tax in 2017-18 as per assessee's admission is not corroborated in the CA certificate. The assessee has also not provided any reconciliation or ledger accounts as proof that service tax has been discharged on these amounts. Therefore, I hold that it is liable to service tax." 21. Before recording the above findings, the said para 13.6 starts as "On perusal of the above certificate and ledger accounts furnished by the assessee, I find the following:". It is clear from the above clause (ii) that the said clause is applicable for both the years namely, 2015-16 and 2016-17 as the Commissioner has recorded a finding that the assessee is maintaining individual client ledger (from 2015-16 onwards) and the invoices mentioned there are net of discount only, thereby indicating that these discounts have indeed been passed on to their clients. Otherwise there is no finding on the discount pertaining to the year 2016-17 separately against the appellant and clause (iii) above also deals with un-billed revenue and not discounts. 22. As pe....
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....the same, the appellants also have furnished a CA certificate dated 01.07.2024 during the final hearing before this Tribunal, in continuation of the earlier certificate dated 20.02.2021, wherein they have provided the details of invoices raised on the 4 customers as against the provision for un-billed revenue made during 2016-17 and they have also certified that applicable service tax has been remitted in respect of such invoices by the appellant. For ease of reference, the Chartered Accountant's Certificate is extracted below which clearly certifies that the discount shown in the invoices have in fact have been passed on to their customers. The figures as reflected in the Service Tax returns and Financial Statements have been duly reconciled. 24. As rightly contended by the appellant, the demand of service tax, though on the difference between P&L account and ST3 return, is only on the ground that the trade discount reflected in the invoices have not been actually passed on to the customers. From the findings recorded herein above, and in view of the fact that the Commissioner himself have agreed that the discounts in question have been passed on to the customers, the entire pr....
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.... though records this plea of the appellant in Para 14.1 of the impugned order, but has neither considered the same nor recorded any finding for it. The claim of the appellant appears to be reasonable atleast to the extent that the revenue cannot pocket the tax in one hand and ask for reversal of credit on the other. 28. Secondly, the appellant has put forth that as per Rule 6(3) of Cenvat Credit Rules, the provider of output service opting not to maintain separate accounts shall follow any one of the three options provided for therein which are: - i. pay six percent of the value of exempted services or ii. pay an amount determined under sub rule (3A) or iii. maintain separate accounts for receipt, consumption and inventory of inputs and pay an amount determined under sub rule (3A) in respect of input services. 29. The appellant has contended that the power to exercise the option is only with the assessee and the dept cannot exercise such option on behalf of the assessee and in this regard, they have placed reliance on the decision of the Hon'ble High Court of Telangana in the case of Tiara Advertising as reported in 2019 (30) GSTL 474 (Telangana....
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....tio laid down by the aforesaid High Court decisions and the above rule 6(3AA), we hold that the option to reverse the credit proportionately is available to the appellant. The appellant has provided the details of common credit of Rs.7,75,471/-availed by them before the adjudicating authority in Para 10.10 of the reply with the connected workings and the Commissioner has not raised any objection with regard to the same. According to the appellant, the proportionate reversal to be made is only Rs.2,05,639/- as put forth by them before the adjudicating authority in Para 11.2 of the reply and the Commissioner has not objected to this working also. On the other hand, the appellant has paid service tax of Rs. 22,97,828/- on the service charges added to the exempted purchase value in respect of such exempted advertising through print media. As already held by us in the earlier paragraphs, since the appellant has paid service tax on value addition, it cannot be construed as fully exempted at all calling for reversal of credit under Rule 6(3) or in the contrary, if the output service provided through print media is to be reckoned as exempted then, the service tax paid on the value addition....
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....ies, ete and passed on a portion of Trade discount to their clients. The manner of passing on the discount to their clients and the reconciliation of income during the period covered in the show cause notice are reported below . ADV / AR 2014-15 I hereby certify that during the year 2014-1S. the trade discount has been passed on to the customers by allowing it in the sale invoice itself. Payments have also been received from the Customers for the net amount after discount. Such discounts have been duly accounted for in the ledger account titled "Trade Discount Allowed". At the year end, the aggregate of "Trade Discount allowed "reflected as debit balance in the said ledger account has been transferred to Purchase account by way of journal voucher for the purpose of grouping. Both 'Trade Discount allowed' and 'Purchases" are expenditure items only. In view of the above, there is no balance reflected in "Trade discount allowed" ledger account at the year end. 2015-16 We hereby certify that sales invoices to customers have been raised during 2015-16 for net value after allowing the trade discount. Since such practice would underrate the gross sales value and in order to....