2026-VIL-261-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Expenditure in foreign currency, Demand under RCM - Service tax liability under Reverse Charge Mechanism on foreign currency expenses for film shooting and related activities - During the period 2010-11 to 2013-14, the appellant incurred certain expenses in foreign currency for shooting of films outside India and other allied activities - Whether the appellant is liable to pay service tax under RCM on the expenses incurred in foreign currency towards shooting of films and other related expenses - HELD - The Department failed to specify the nature of the taxable service and the relevant provision under which the services are liable to tax. Merely relying on the difference in figures between the balance sheet and ST-3 returns without identifying the category of underlying service is not sufficient to raise the demand - For the period prior to July 1, 2012, the onus is on the Department to establish the taxability and classification of the services under the relevant provisions of the Finance Act, 1994, which the department failed to discharge - For the period post July 1, 2012, the demand cannot be sustained as the department has invoked Rule 3 of the Place of Provision of Services Rules, 2012 without ascertaining the nature of services received by the appellant. The expenses incurred by the appellant are in the nature of services relating to immovable property situated outside India or for the organisation of film shooting event, which are not liable to service tax under RCM as per the provisions of the Place of Provision of Services Rules, 2012 - The demand of service tax under reverse charge mechanism on the expenses incurred by the appellant in foreign currency towards shooting of films and other related activities is set aside - There is no evidence brought on record by the department to establish that the appellant had availed CENVAT credit by way of fraud, collusion, or willful misstatement or suppression of facts with an intent to evade payment of service tax. In the absence of such evidence, penalties under Section 78 cannot be imposed - the impugned order is set aside and the appeal is allowed - Short reversal of CENVAT credit on common input services - Whether credit is required to be reversed on account of alleged short reversal of CENVAT credit on input services used commonly for making both taxable and exempt supplies – HELD - The appellant had pro rata reversed the CENVAT credit of the input services used in relation to its film division by computing the value of exempted and output services on an entity basis as a whole. The Department's demand by considering only the revenues of the film division is not correct, as the CENVAT credit registration was centralized at the corporate level. As per Rule 6(3A) of the CENVAT Credit Rules, 2004, the value of the services provided during the financial year is required to be considered, which the appellant has done - The demand for short reversal of CENVAT credit is set aside - Whether the appellant is required to reverse CENVAT credit used on input services received from RIMT Pvt. Ltd. used for providing both taxable and exempt supplies – HELD - The input services received from RIMT Pvt. Ltd. were exclusively used by the appellant for rendering taxable output services. The Tribunal observed that the department failed to prove that the services received from RIMT Pvt. Ltd. were used for providing exempt services. Based on the invoices produced by the appellant, the Tribunal found that the services received from RIMT Pvt. Ltd. were for digital cinema mastering, which were used by the appellant for providing taxable "video tape production services" - The demand for reversal of CENVAT credit on input services received from RIMT Pvt. Ltd is set aside - CENVAT credit on projectors and maintenance services - Department sought to deny CENVAT credit availed on projectors and their maintenance services, on the ground that these capital goods were used exclusively for providing exempt services – HELD - The capital goods (projectors) and the related maintenance services were used by the appellant for providing both taxable and exempt services. If the capital goods are not used exclusively for manufacturing exempt goods, the provisions of Rule 6(4) of the CENVAT Credit Rules would not apply, and the CENVAT credit cannot be denied – The demand for reversal of CENVAT credit on projectors and maintenance services is set aside.
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