The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a service tax demand of ₹22.20 lakh against the assessee holding that the adjudicating authority travelled beyond the scope of an earlier remand order and relied solely on balance sheet figures without supporting evidence.
The bench of Dr. Rachna Gupta (Officiating President) and P.V. Subba Rao (Technical Member) has observed that books of account, balance sheets and Chartered Accountant certificates are admissible evidence of their contents. It faulted the authority for failing to address assessee’s explanation concerning differences in accounting figures and the earlier finding that service tax paid by the exhibition organiser could not be charged again on the same amount.
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The assessee is a society registered under the Societies Registration Act, 1860, with the objective of promoting and protecting Indian trade, commerce and industry, particularly the automobile industry.
The dispute arose from departmental proceedings concerning “Club or Association Service” and “Business Exhibition Service”. The department alleged that assessee had provided taxable services without paying the applicable service tax and issued several show cause notices.
The demands were initially confirmed through an adjudication order dated September 12, 2013. The assessee challenged that order through five appeals before the tribunal.
By a common final order, the tribunal set aside the demand and penalties relating to Club or Association Service. However, it remanded the Business Exhibition Service dispute to the adjudicating authority for a limited factual examination.
In its 2018 order, the tribunal observed that the material produced by assessee indicated that the Confederation of Indian Industry (CII), which had actually organised the Auto Expo, had fully discharged the service tax liability.
It accordingly recognised that the same amount could not be subjected to service tax twice.
However, differences existed between the revenue-sharing amounts certified by CII and the exhibition receipts reflected in assessee’s balance sheets. assessee had explained that these differences were primarily attributable to grants received directly from the Government of India for promoting trade and industry.
The tribunal therefore directed the original authority to verify the differences, taking into account CII’s certificates and the government grants claimed by assessee.
Following the remand, the adjudicating authority dropped the demands arising from the four earlier show cause notices. Nevertheless, it confirmed a demand of ₹22,20,086, together with interest and proportionate penalties, in relation to the show cause notice dated October 26, 2012.
The assessee challenged this surviving demand before the tribunal.
The assessee argued that the adjudicating authority had gone beyond both the scope of the remand order and the proposals in the show cause notice.
Its counsel submitted that the disputed calculation was based on a balance sheet surplus connected with Auto Expo 2012, which had been received at the time of Auto Expo 2010 and subsequently included in income for financial year 2011–12.
The assessee further maintained that CII had already discharged the service tax liability on Business Exhibition Service, making a further demand on the same amount unjustified.
It also argued that failure to comply with the tribunal’s remand directions amounted to a breach of judicial discipline.
The department defended the demand, submitting that the adjudicating authority had considered CII’s certificates, evidence of tax payment and the Chartered Accountant’s certificate while dropping the earlier demands.
However, according to the department, a substantial difference remained between the figures in the balance sheet for financial year 2011–12 and the Chartered Accountant’s certificate dated February 15, 2023.
The departmental representative argued that assessee had not explained this discrepancy and that the demand on the differential amount was therefore justified.
The tribunal noted that the original authority had declined to treat the Chartered Accountant’s certificate as cogent evidence because the assessee had not produced other documents, such as invoices, apart from its balance sheet.
The bench disagreed with that approach.
Relying on Akasaka Electronics Ltd., it held that books of account, balance sheets and Chartered Accountant certificates are admissible documents for proving their contents.
The tribunal found that the material explained the difference between the ₹7,67,82,684 recorded in the books of account and the ₹7,83,73,680 reflected in CII’s income certificate.
It also noted assessee’s explanation that the income certificate was prepared using the accrual method of accounting: amounts were booked when invoices were raised, whereas taxes were paid on amounts actually received.
The adjudicating authority, the tribunal observed, had remained silent on this explanation.
The bench further noted that its 2018 order had already observed that CII appeared to have fully discharged the service tax liability and that the same amount could not be taxed again.
The fresh adjudication order did not address this finding either.
This omission was significant because the remand required a focused examination of the differences in the financial records against the certificates and the explanation regarding government grants.
The tribunal accepted the assessee’s contention that the adjudicating authority had travelled beyond the terms of the June 4, 2018 remand order.
It held that the inquiry should have remained confined to the relevant Auto Expo 2010 figures and assessee’s explanation concerning government grants. By exceeding that scope, the authority failed to observe judicial discipline.
The bench relied on the Kerala High Court’s decision in P.K. Vijayan v. T.A. Jayaprabha in support of this conclusion.
Separately, relying on Synergy Audio Visual Workshop Pvt. Ltd. v. Commissioner of Service Tax, Bangalore, it held that sole reliance on balance sheet figures was unacceptable in the absence of supporting evidence.
CESTAT set aside the challenged order and allowed assessee’s appeal, overturning the surviving ₹22.20 lakh service tax demand along with the associated interest and proportionate penalties.
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